Private Companies

The Limited Company has been the principal means of conducting business for the last two hundred years. Its enduring success is the result of its ability to ring-fence liability and thereby protect the assets of owners and managers by limiting their liability for the company's activities. This characteristic is referred to as “limited liability” and can also be used to, for example, separate assets between a high business risk activity and a lower risk area. This is the main distinction between an incorporated entity such as a company and a sole trader. This page concerns Private Limited Companies which in the US are generally referred to as corporations to distinguish them from US-style Limited Liability Companies (LLCs) (which are not separate from their owners for tax purposes).

Separate Legal Personality
Limited companies have their own identity: they can own property in their own name, open bank accounts, conduct business, sue and be sued and, (provided they are operated legally) the liability of the company will remain limited to its own assets. Thus the assets of owners and managers will not be forfeit in the event of the company being sued. They are also taxed as a legal person. This feature means that they will continue to exist indefinitely notwithstanding the death or insolvency of a directors or shareholders.​

Ownership and Management
Limited companies are owned by one or more shareholders and operated by a board of one or more directors who are appointed by the shareholders to deal with day to day business for the benefit of the shareholders. Limited companies sometimes also have a company secretary who assists the directors with legal and administrative matters. Some countries use other titles such as ‘president’, ‘CEO’, ‘Chairman’ etc. though the concept remains the same. The directors of a company will often delegate some of their authority to managers or committees. The shareholders are not involved in the operation of the company except at the Annual General Meeting (AGM) to approve the actions of the directors or at Extraordinary General Meetings (EGMs) on exceptional matters which could adversely affect their ownership and fall outside of normal day to day trading (such as the issuing of new shares or stock or the change of the purpose of the company). Shares can be separated into classes affording different rights to different types of investors (such as rights to dividend, rights to capital on liquidation and voting rights). In this way founders can raise finance and delegate operation whilst maintaining control. This feature of companies gives flexibility in ownership and in the distribution of their profits.

Limited companies pay corporation tax. The rate  varies from country to country. A company will generally be required to pay tax in the country where it is registered as well as the country where the directors operate the company (if different). It is for this reason that many clients using low tax or no tax companies appoint directors who are either nominees without any discretion following instructions or who may have discretion in the operation of the company. Many countries tax different types of income at different rates (trading income may differ from income from underlying investments for example) but the main characteristic of companies in countries with developed financial service industries is the favourable rate of tax which may be 0%. This may either be a national rate of 0% in all cases or it may be that companies with foreign owners or non-local operation (often called International Business Companies or IBCs) may be taxed at a preferential rate. A difference in tax treatment for local and foreign companies is the defining characteristic of an offshore centre.

Limit on Number of Shareholders and Flotation
Private limited companies generally have a restriction on their maximum number of shareholders and cannot be listed (or floated) on a stock market. In the case that a higher number of shareholders (say over fifty) or flotation is desired the appropriate vehicle is a Public Limited Company (Plc).

Share Capital
In some countries a private company must demonstrate a minimum amount of capital and in some few cases it must be paid into a designated account. Where such requirements exist they are usually very low or notional amounts for private companies and such matters are dealt with in the country specific company pages.

Bearer Shares (Ownership)
In some countries it is possible to register companies with bearer shares. This means that the shareholders of the company are whoever holds the paper share certificates. Bearer share companies are used when a very high degree of privacy is required since it is effectively not possible to determine who owns the company. Whilst these type of companies have enjoyed historical popularity nowadays modern Know Your Client (KYC) requirements have effectively outlawed them in almost all cases and very few countries still allow new bearer share companies to be formed. Additionally bearer share companies generally cannot deal with reputable banks without some sort of undertaking that the shares cannot be transferred and a deceleration as the identity of the current bearer share holder as well as a disclosure of their diligence which is likely to defeat the purpose for which a bearer share company was chosen. Finally, in many countries bearer share companies are not permitted as shareholders (and some countries require a clause specifically prohibiting the use of bearer shares) which greatly curtailed their use as holding vehicles. It is generally possible to convert bearer share companies to having registered shares but not vice-versa.


Avoidance of Controlled Foreign Corporation (CFC) Rules
Most countries attempt to some degree to tax and regulate foreign companies which they feel are being used to avoid tax due to them or which they feel falls within their remit due to being operated within their borders. The principle basis for these rules is the location of the management; specifically where the directors spend the majority of their time. Therefore a company incorporated in country A may also be taxable in country B if the directors spend most of their time there. Where companies are taxable in more than one country there may be dual taxation arrangements in place however if one of the countries is a low or no tax area this is likely to defeat the tax planning reasons for which the company was established. Various methods have been used to attempt to avoid this situation with different degrees of success. The method of simply holding board meetings in the country of incorporation is, for example, likely to be ineffective in almost all cases. The method of appointing local directors may, if the company is operated properly, be effective in avoiding CFC rules based on management alone. More sophisticated anti-avoidance rules may seek to attack a foreign company by claiming it lacks substance and is wholly or mainly artificial and therefore should be ignored for tax purposes. In such cases it is beneficial to ensure a high level of substance, please see our business incubation article for suggestions on how to achieve this. These sophisticated systems may also base taxation of foreign companies not simply on their management but also on their ownership and voting rights on the basis that the shareholders having the right to appoint and remove the board of directors are effectively in control of the company, in these cases a Foundation or Company Limited by Guarantee may be considered.


Administrative Differences Between Countries
Limited companies do not differ significantly from one country to the next (since most financial services countries have legal systems stemming from English law) except in respect of the rate of tax and also in respect of administrative and technical matters such as the number of shareholders required, how much information is available to the public, the format of the constituting documents, the timescale to formation, the amount of capital required to be deposited etc. These matters are addressed in detail on the company pages for each country where we operate.

Companies usually have to file an annual return to the registrar of companies. What is contained in this return, whether or not it is public record and what other changes in the life of the company require filing varies from country to country. Companies also generally have to prepare accounts, or at least keep accounting records. The standard to which these accounts must be prepared, whether or not they must be filed and whether or not they must be audited varies from country to country.

Depending on the country of incorporation limited companies may be used to afford some level of privacy ranging from protection against idle curiosity to the effective complete obscuring of ownership and management however if taken to extremes this may make dealing with reputable institutions and banks difficult or impossible. Privacy is achieved in a variety of ways such as the appointing of licensed nominees to hold shares on behalf of the owners (the same arrangement is used when a stock broker holds shares on behalf of its clients), the use of trusts, the use of foundations without identifiable owners and the holding of bearer shares etc.

Factors Concerning Choice of Country
Although conceptually identical from one country to the next in matters of substance there are considerable differences with regard to the level of regulation required to operate from one country to another as well as an associated difference in reputation. For example companies from some countries are treated with suspicion and may attract unwanted attention from tax authorities or even social stigma. For this reason many clients prefer to pay some tax rather than opt for a 0% regime and the decision of which country is appropriate may be based on a mixture of tax rate, regulatory infrastructure and international reputation as well as the variance in cost. For most clients forming private companies the reduced tax rate will be the primary motivator. Tax planning falls broadly into two groups: firstly those based on the non-disclosure and concealing of the existence and operation of the company; and, secondly, planning based upon attempts to legally provide structuring solutions which are, in theory at least, fully disclosable. The extent to which clients will be successful in the reduction of tax will depend on a number of factors including the ongoing operation of the company, the level of substance the company has as well as the attitude and sophistication of the tax authorities in the client’s home country amongst many others. However, it is important to note that short of the establishment of an autonomously operating company with a genuine presence in its country of incorporation no solution will afford perfect protection from tax issues. Other factors affecting the choice of country may include the  regulatory infrastructure, time zone, languages and availability and skill of human resources (if applicable). Although the above factors will always be to some extent a matter of opinion we endeavour to provide an objective review of the various pros and cons of the countries listed on our site by first differentiating between companies used for trading and for holding.



Foundations like companies have their own legal personality but have beneficiaries instead of shareholders so they can be seen as some way between a trust and a company, they may be established for a purpose or the benefit of a defined group of individuals. Whilst they cannot generally be used for commercial trading purposes they may be suitable in place of a holding company and they may enjoy a more favourable treatment in Civil Law countries where trusts are not recognised, not fully understood or strongly associated with tax avoidance. Also they may afford a greater degree of privacy and anonymity than a holding company if correctly structured. Finally they are also useful for benefiting charitable purposes and for estate planning. 


Collective Investment Schemes (CISs) are often structured as companies. Funds are used to raise money or pool resources to carry out a particular project or to invest. They may be professional (open to high value or experienced investors only) or retail (open to anyone to invest, even small amounts) and the level of regulatory requirements will vary accordingly as smaller investors are afforded greater protection than experienced investors. Funds may be open (where shares in the company are freely tradable) or closed (where funds are locked in for a given time period) and this too will affect the level of regulation. Investors are generally presented with offering documentation which requires pre-launch regulatory approval.


Companies Limited by Guarantee have their own legal identity. They have members who instead of holding an asset (such as shares) hold an obligation to provide funds to the company in the future if requested. This obligation extinguishes on death so the ownership of the company may not form part of the shareholders estate on death, making them useful as an alternative to trusts and foundations as an inheritance tool. Sometimes these companies are structured with both shares and guarantee members (sometimes referred to as ‘Hybrid Companies’) with the intention of sidestepping Controlled Foreign Corporation (CFC) rules in countries which seek to tax foreign companies based on their ownership.


Limited Liability Companies are a US-style entity having a legal personality distinct from its member (or members) in the same way as limited companies however they have fewer formalities to establish and operate and are generally see-through for tax purposes; they afford separation of assets for trading purposes but are not taxed, instead their income is taxed on the members directly. They are often used to present a shop-front presence in the US.


Private companies differ from public companies in that they are usually significantly cheaper to form, have much lower capitalisation and regulatory requirements and generally have a restriction on the number of owners and the transmission of shares. As such they may not be suitable for public offerings or flotation on a stock market and in this case a public limited company (or PLC) may be the appropriate vehicle.


A trust is a legal arrangement whereby one person (the trustee) holds assets for the benefit of others (the beneficiaries). Trusts (unlike companies) have no legal identity of their own and the assets are the absolute property of the trustee subject only to the terms of the trust instrument. In legal theory assets under trust are held separately from the trustees’ other assets but this can be problematic if the trust is operating in a country which does not correctly apply trust law. They come out of Common Law countries and are not fully compatible with Civil Law systems. Trusts can be used for trading but are generally restricted to holding given the extremely high and legally enforceable fiduciary responsibility of the trustee to the beneficiary (much higher than the obligation of a director to shareholders), the lack of legal identity and the legal complication when dealing with Civil Law countries. Properly operated trusts should generally preclude the person establishing the trust (the settlor) from having an ongoing involvement in their operation which may render them unattractive to some clients. Since the 1970s and 1980s trusts are strongly associated with tax avoidance and have been the target of a barrage of legal cases and anti-avoidance legislation meaning that they are now less relevant than the more progressive private foundation for straightforward holding but may have other uses in respect of asset protection and estate planning.

Sole Trader

Operating a sole trader affords none of the benefits of a company but it has almost no associated costs. Sole traders operate in their own name and risk losing all their assets (including non-trade assets ) if they are sued. Sole traders pay relevant taxes in their country of residence but the use of a  bank account in their own name elsewhere may help them avoid or at least delay payment of tax depending on the rules of the country where they are resident.