Business

Calculators

Rework your Budget Calculator

Subscribe to Money Matters

Receive for free the latest financial tips, updates and our monthly eNewsletter by subscribing to Money Matters BVI.

Advantages & Disadvantages of Incorporating a Company

Incorporating your business as a company offers several advantages and protections that a simple trade license does not. You should examine the pros and cons of company incorporation.

Advantages of Incorporating a Company

Incorporating your company can offer certain benefits, these include:

Creating a separate legal identity - A limited company has a legal existence separate from management and its members (the shareholders).
Members' liability is limited ("limited liability") – As a separate legal entity, the company can sue and be sued but the personal assets of its owners and managers are not put at risk. In the case of a lawsuit or judgment against your business, no one can seize your personal assets unless they are pledged as collateral.
Continuity – Once formed, the company can remain in existence forever. A company can continue even if shareholders, managers and officers leave, retire or die. A company can only be terminated by winding up, liquidation or other order of the courts or Registrar of Companies.
Protection of company name - The choice of company names is restricted and, once a chosen name complies with the rules, no-one else can use it. The only protection for sole traders and partnerships is trademark legislation.

Disadvantages of Incorporating a Company

While there are some major advantages to incorporating your company, you should note that these come with costs.

Fees - It costs money to incorporate. Incorporation fees in the BVI are based on the number of shares your company has issued. In addition to the incorporation fee, you will also have to pay annual fees. As the Companies Act requires that you incorporate your company through a registered agent, you will also have to take the agent’s fees into consideration.
Formalities - The proper corporate formalities of organizing and running a corporation must be followed in order to receive the benefits of being a corporation. This includes employing a registered agent.
Paperwork - There is a lot of paperwork involved in incorporating your company. These include developing your company’s memorandum and articles of association. The Registered Agent will assist you in preparing the necessary documents, but it can be burdensome.