Starting a business provides opportunities for personal and financial growth. But where and how is a matter of utmost concern. In this article, we’ll talk about how to set up a company in Bermuda.
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Establishing a company in Bermuda provides a favorable taxation environment for investors. This is because no taxes are applied to profits, income, or dividends that are paid to the company and its shareholders. Not only that, withholding tax, capital gains tax, inheritance tax, estate duty, and death duty are not collected by the government. The payment of dividends is also not mandatory.
Furthermore, the process of doing so can be easily completed. Incorporation only requires one director and one shareholder. And, applications are often processed within a day or a week by the relevant institutions.
How to Set Up a Company in Bermuda
There are different companies that can be established in the country. Specifically, they are as follows: local limited company, exempted limited company, local limited liability company, and exempted limited liability company.
Categories of Companies in Bermuda
All companies in Bermuda are under the umbrella of two principal categories, namely, local companies and exempted companies.
Local companies refer to institutions that are incorporated by Bermuda nationals to conduct business in the country. Conversely, exempted companies are incorporated by foreign nationals to conduct business outside the country. They are not bound by the regulations of the Companies Act, which state that Bermuda nationals must own a minimum of 60% of the equity.
Overseas companies, or permit companies, can also seek approval from the government. They can do so to conduct business activities in or from within the country.
Types of Companies in Bermuda
The aforementioned categories can be further classified into limited or limited liability companies.
A limited company is a type of business wherein the company is considered a separate legal entity from the owner. This means that all the assets and liabilities of the company belong to itself. Similarly, the assets and liabilities of the owners are distinct from those of the company.
Establishing a limited company comes with the advantage of protecting personal assets should the company incur debt, losses, or legal cases. It also provides a more professional image to clients and investors. This is because more stringent requirements and standards have to be complied with.
The Companies Act 1981 stipulates the regulations in which limited companies must be established.
Limited Liability Companies (LLCs)
A limited liability company is a hybrid entity between a partnership and a corporation. Owners can operate and manage the company based on the agreement among them. This provides them with the flexibility to institute the terms and conditions by which they conduct their business.
But the finances of the company and the owners are separate from each other. Because of this, personal finances will remain untouched should the company incur debts and liabilities. The liabilities of the company will be limited to itself without putting at risk the assets of the owners.
The Limited Liability Company Act 2016 stipulates the regulations in which LLCs can be established.
The Process of Setting Up a Company in Bermuda
Those interested in establishing a company in Bermuda, either a limited company or an LLC, will need the services and expertise of the following: a local law firm, an accounting firm, or a corporate service provider (CSP). In general, setting up a company will require undertaking the following steps:
1. Reserve the name of the company.
2. Disclosure and examination of the proposed beneficial owners of the company. If relevant, personal declarations may be necessary.
3. Draft the Memorandum of Association and bye-laws of a limited company or the agreement of an LLC.
4. Apply for a license or permit, depending on the nature of the intended business activity.
5. Select a registered office in Bermuda.
6. Select the directors, officers, and secretary of a limited company. Or select the Bermuda resident representative, if needed for an LLC.
7. Pay the required government fees.
It is important to note that a limited company and an LLC must be registered with the Registrar of Companies.
Other Types of Businesses in Bermuda
Apart from those mentioned above, there are two more types of businesses that can be established in the country.
A sole proprietorship is an unincorporated business that is owned and controlled by one person. The individual is not considered a separate legal entity from the business. Because of this, the owner is responsible for all the assets and liabilities of the business. There is also no separation between personal assets and liabilities from those of the business.
This type of business comes with the advantage of being easy and inexpensive to establish. At the same time, the owner has full control over how the business is managed. However, the liabilities and debts of the business are carried by the owner. And it may be more difficult to build capital because stocks can’t be sold and banks may be hesitant to approve loans.
Owners must register with the Office of the Tax Commissioner and the Department of Social Insurance. Although not mandatory, the government also promotes registration at the Bermuda Economic Development Corporation (BEDC).
A partnership is an agreement between two or more parties created for the purpose of conducting business and sharing profits generated from it.
A local partnership refers to those that only involve Bermuda nationals. They are allowed to carry out their business activities both domestically and internationally. On the other hand, an exempted partnership refers to those that involve at least one foreign national. They can only perform business activities internationally from a principal place of business in Bermuda.
Furthermore, partnerships may be general or limited. Each has its own specifics regarding the extent of the involvement of the partners, among other things. The Partnership Act 1902, the Limited Partnership Act 1883, the Exempted Partnerships Act 1992, and the Overseas Partnerships Act 1995 stipulate the regulations for their establishment.
The amount to be invested by the partners in a partnership must be at least $12,000 BMD, or its equivalent. This should be clearly documented in the partnership agreement, along with the nature of the business to be conducted.
How long will it take to set up a business in Bermuda?
When consent from the Minister of Finance is not necessary, the process will be completed a day after the submission of the application. On the other hand, it often takes one week when the consent of the Minister is necessary.
With this, the political, social, and economic situation in Bermuda may provide a suitable environment to establish a business. At the same time, those undertaking this venture will often not be met with insurmountable mountains. The process is relatively simple and requirements can easily be met. Because of this, lucrative returns may be expected.
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