A Comprehensive Guide to BVI Company Limited by Shares

The British Virgin Islands are one of those jurisdictions that became a favorite in incorporation, primarily among international businesses desiring to receive the advantages resulting from such a tax-neutral environment, privacy, and a wide range of corporate structures. Among business entities that exist in this country, the most popular is the company limited by shares. Below, we are going to shed light on the legal framework, tax benefits, and costs associated with setting up a BVI company limited by shares.

Read more: BVI Offshore Company Formation

What is a BVI Company Limited by Shares?

A BVI company limited by shares means such a form of business organization whereby the shareholders of the company bear an amount of liability limited to the nominal value of the unpaid share capital contributed by them. Therefore, this means that the shareholders of the company are not liable to pay the debts and liabilities, if any, and whatever amount is paid as share capital to the company is sufficient.

This is also the type of structure that foreign investors and businesses are fond of, when they look at minimizing their liability but at the same time taking advantage of favorable corporate regulations available in the BVI. A BVI Company limited by shares can conduct an active international business, passively held assets, be used for investment, among many other uses.

What is a BVI Company Limited by Shares?

BVI Legal Forms: Company Limited by Shares

The legal framework governing the BVI companies is based on the BVI Business Companies Act, 2004. The act is highly flexible and simple, thus easy for international businesses to operate with it. The main legal form in the BVI for conducting business is a company limited by shares. This legal form enjoys several advantages from the following:

1. The Liability is Limited: The liability of the shareholders is limited to the extent of their share capital, as identified. This is quite an important degree of protection enjoyed by those investing in the company.
2. Separate Legal Entity: A BVI Company Limited by Shares is a different legal entity distinct from its owners. It can enter into contracts, own assets, and sue or be sued under its own name.
3. Minimum capital requirement does not exist: There is no minimum capital requirement with the companies in BVI; thus allowing flexibility for start-up businesses or international investors who want to establish holding companies.
4. Directors and Shareholders: A BVI company limited by shares at least has one director and one shareholder. The directors may be natural or legal persons without any requirement of residence in the BVI. Shareholders also have no such requirement to be resident in the BVI.
5. No Public Disclosure of Ownership: As indicated above BVI companies are not required to file the names of their directors or shareholders in public, hence a very private alternative.

BVI Legal Forms: Company Limited by Shares

BVI Company Tax

One of the major reasons why businesses incorporate in the BVI company tax advantages. The BVI is considered a tax-neutral jurisdiction, whereby BVI companies are not subjected to most of the taxes imposed on companies in other jurisdictions. Here are the key tax benefits available for a BVI company limited by shares:

1. There is no corporate income tax for companies in the BVI on income accrued outside of the jurisdiction. This is one good reason it remains an attractive option for international business. 
2. No Capital Gains Tax: There is no capital gains tax within the BVI, thus far, on the profits from the sale of shares or other assets.
3. No Withholding Tax: There is no withholding tax in the BVI payable on dividends, interest, or royalties paid to foreign entities, and hence it is efficient from a profit repatriation perspective to overseas shareholders.
4. No Inheritance or Estate Tax: The BVI doesn't charge any inheritance or estate taxes and therefore has turned into another attractive feature for high-net-worth individuals to use a BVI company as part of their estate planning.
5. Annual License Fees: Companies in the BVI are obliged to pay an annual license fee to the government of the BVI instead of paying taxes. The amount will be determined by the share capital of the company. Where a company has normal share capital, that is, up to 50,000 shares, the annual license fee can be generally $450. Thus, the companies having higher share capital will be obliged to pay higher fees.

As such, although a BVI company limited by shares enjoys the tax-neutral environment of BVI, such a company may be liable to tax in the jurisdiction where the business is conducted or where the shareholders are resident.

Benefits available for a BVI company limited by shares

BVI Company Setup Cost

The costs of the incorporation of the BVI company limited by shares would normally be determined by many factors, such as the complexity of the proposed structure of the company, the level of services required, and/or the individual provider of those specific services. Herein are the normal BVI Company setup costs:

1. Incorporation Fees: Minimum incorporation cost for an BVI company limited by shares normally ranges between $1,000 to $2,000. This covers the filing fees with the Registry of Corporate Affairs and the preparation of incorporation documents.
2. Registered Agent and Office Fees: By law, the BVI requires that every registered company should have a registered agent and a registered office in the BVI. Fees for this type of service vary according to the registered agent, amounting up to $500-$1,200 annually.
3. Annual License Fee: As mentioned above, BVI companies are required to pay the annual license fee to the government. In the case of companies having authorized share capital up to 50,000 shares, such a license will be charged at $450. Companies having higher authorized share capital will have to pay $1,200 or even more every year.

The costs of the incorporation of the BVI

4. Legal and Professional Fees: While it is certainly possible to incorporate a BVI company yourself, most people either retain the services of legal or professional service providers not only to ensure compliance with local legislation and regulations of BVI but also for this reason. Such fees can be from $1,000 to $5,000 or more depending on the complexity of the business structure and level of ongoing support required.
5. Bank Account Opening: A lot of BVI companies would want to open an international bank account. Some providers include in their services the opening of this account at an additional cost from $500 up to $1,000.
6. Additional Fees: If the structuring of the company is more complicated, the establishment fee could increase correspondingly.

Conclusion

A BVI company limited by shares offers numerous benefits for businesses, including flexibility, privacy, and tax neutrality. This type of company structure allows shareholders to limit their liability to the amount of unpaid shares they hold, making it a popular choice for international entrepreneurs and investors. BVI companies are also not subject to local taxes on income or capital gains, making them a cost-effective option for global operations. Additionally, the ease of incorporation, minimal reporting requirements, and strong legal framework make a BVI company limited by shares an ideal solution for asset protection and business expansion.