Malta Company Formation

What does it take to set up a company in Malta? What documentation is required? What are the prerequisites and what is actually needed? The process is pretty straightforward and easy. The hard part is making sure you have all the necessary documentation and paperwork in hand. Once this is achieved the actual registration process is manageable and swift. Of course it helps if you have a qualified professional or company to assist with this. It takes away the headache and speeds up the process even further. Planning and forward thinking will save time and ensure there are no last minute hiccups. Setting up a company in Malta offers many opportunities and possibilities located on the doorstep of the E.U. and North Africa. There are tax advantages and benefits to setting up a company in Malta. Tax rates are amongst the lowest in the E.U. and there are subsidies, government and E.U. grants that can be taken advantage of.

There are so many pitfalls that can occur that one wants to minimize problems as much as possible. So many things that need to be considered such as…

Your Idea. Yes, is it actually a good idea or just pie in the sky. Research your idea. Research your idea. Research your idea. First and foremost it must be viable, possible to achieve and profitable.

Market Research your idea. On your own if necessary. If your business is a restaurant; go and check out your competitors menus, prices and specialities. Is there demand for your product or service? Is there a niche in the market? Is there space for another competitor in the market? All these questions need to be examined and researched. You need to be completely familiar with the market before investing money and time. You may even want to conduct surveys or questionnaires to find out people’s preferences and fine tune your product or service accordingly.

A business plan is a very useful tool. Not only for your own business but also if you need to open a bank account and possibly get funding or financing. Make sure it is as detailed as possible, leaving nothing to chance and no last minute surprises. The business plan with provide you with an outlook of your future plans for the business. It will help you project costs (and income). The business plan is a powerful tool that allows you to show third parties (and yourself) the viability and sustainability of your idea.

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When starting a business and setting up a company, you need to have a name, and an alternative name in case the one you select is already registered and in operation. This can be a tricky process as many names will come to mind at first, but must be whittled down to a short list of more relevant names. You might want to get advice from relatives or friends as this will give extra impetus. Once the name is chosen and it is not already in use (by checking the company name register in Malta), you are set to go with a new business name. A company structure also needs to be decided on according to your business’s specific operation and set up. The most commonly used is a Limited Liability Company. There is also a Sole Trader and Limited Liability Partnership.

Sole Trader
A Sole Trader, also known as self employed, is the most simple and cheapest (to set up) type of
business. One needs to register as a Self Employed person with the Inland Revenue
Department, pay income tax and national insurance contributions as a self employed person.
You will be responsible for preparing annual profit and loss accounts along with a balance sheet
to determine your earnings and tax liability. Furthermore, one needs to register with the Value
Added Tax (VAT) department as well in order to produce VAT receipts for any goods and/or
services your business will provide.

Limited Liability Company
In Malta, Limited Liability Companies need to be registered with the MFSA (Malta Financial Services Authority), whereupon a Company Registration Certificate is issued. The company can be owned by one or several shareholders (owners). This is the most flexible and common business type as it offers flexibility. The liability is limited to the amount of Share Capital, therefore excluding personal liability. The company itself becomes a legal entity (person) with all the advantages and responsibilities that comes with it. This form of business set up is more tax efficient than a sole trader but needs more accounting and reporting work. A Limited Liability Company can operate by guarantee rather than shares. This set up is better suited to nonprofit organizations and charitable enterprises.

Limited Liability Partnership
This structure is very much suited to firms of accountants or lawyers. It allows two (or more) individuals to set up a partnership business together. This type of business structure is similar to a normal partnership regarding ownership structure and taxation, however, it provides limited liability to all partners.

Bank Account & Financing
Any business needs a bank account in order to operate smoothly. Particularly with the increase in globalization and foreign trade necessitating transfer of funds to/from other countries. These days, opening a bank account is a more rigorous process than years gone by. Maltese banks are well known for their conservatism, which is a good thing as it limits cowboy operators and keeps a tight lid on money laundering. You will need the Certificate of Incorporation, VAT Certificate and the bank conducts Due Diligence on all shareholders who own more than 10% of the total share capital. Certified passport copies, utility bills and proof of funds need to be provided. More so if the company has foreign shareholders. Furthermore, the bank forms need to be signed in person (or sent by courier, signed and notarized) then returned to the bank. Finally, the local bank will ask for account details of foreign owners in order to contact their bank and ask for a personal Recommendation.

Financing
Once the bank account is opened you may want to get financing from the bank to create cashflow for your business operations. This is where the Business Plan comes in again. It will help you explain your business idea in realistic terms with income and outflow projections – the bank manager will surely ask for this – so be prepared. Once you’ve decided (calculated) what the start up costs will be, and how long it will take till you start to see income from the business, you need to have enough money to sustain yourself during this set up period. Then you need to plan for running costs and personal income (to live on) until the ball starts rolling. Here are some of the most common forms of financing available for new start ups: personal savings, loans from friends/family, small business loans, overdrafts or 0% credit cards, investors or business angels, government loans or grants, crowdfunding.

Business Address & Premises
In order to register the company in Malta, a physical address must be submitted. This will be your business address (office). Whilst there is the option of working from home and using this as the company address, this is not always practical or possible. Several alternatives exist such as renting office space (pay as you use), renting or buying an office or even having a retail outlet, depending on the nature of the business. Several factors need to be taken into consideration. Such as the size of premises you require. How much you can afford to pay? Which location is best suited to your business needs and budget? Finding a physical office does not have to be a complicated process. Either do your own research by checking the multitude of real estate websites to determine average rental or purchase prices. One can contact an agency, provide your requirements and let them source an office or commercial outlet for you. Physically visiting different locations will also give you a clue and a good idea about the different towns and cities around Malta enabling you to make a more valued decision.

If your business involves working with suppliers, distributors, agents and buyers, you will definitely need to be registered with the VAT department in Malta in order to charge VAT when selling, and deducting the VAT element when paying. You also need to check up on duties, documentation, quotas & tariffs as well as an Import License. You will need to familiarize yourself with shipping costs and procedures, minimum order quantities and such issues.

Branding Marketing Logo
As they say, your company image projects your company’s values. The branding and logo need to be attractive and relevant to your target customers. Everything needs to be planned out and thought out well. The colour scheme, size, image and design. This will be present on your products’ labels (if any) and your branding and advertising. Once again, some basic research can offer a wealth of information. A google search of competing products or services can give you an idea. By all means, if budget permits, engage a professional firm to come up with a branding plan and logo but a more realistic option, and cheaper one is to do the basic research yourself and get a clear idea of how you want your logo to look.

 

Online Presence
A website is a must. Social Media is a must. For virtually any business these days. A budget website reflects a budget mentality and projects a negative effect. Can’t this business afford to pay for a professional website? This is what your customers will think. So invest in the best possible website that your budget allows as this is the primary face of your business. Likewise for email. Ditch the @gmail.com or @hotmail.com and invest in a company email address. It looks much more professional and projects a better image for the business. There are many social media platforms that can actively promote your business. It may not be Facebook but it might be Twitter or LinkedIn. Choose the right platform as your primary one, but also keep a presence on the lesser ones. You never know where an enquiry may come from. The same goes for messaging Apps. If used correctly they can be a source of business and communications with clients and customers. Engaging your customers should be a priority seeing as businesses are moving in that direction more and more. Allowing complaints to fester without addressing them on social media creates more bad publicity for a business than engaging with the customer and trying to solve the problem or issue.

Business Insurance
It is always a good idea to have a safety net. This is exactly what business insurance can do for you. If something unexpected goes wrong, your insurance may take on the liability and cost of the loss you incur providing your insurance covers it. You may need more than one insurance to cover different areas of your business such as; employer’s liability, industry-specific insurance, product or public liability, income protection, professional Indemnity, health insurance, building & contents, director’s/officer’s Insurance, commercial vehicle, landlord, business interruption or continuation, goods in transit or money insurance.

Due Diligence
Most business are obliged to prove the source of funds. Businesses who sell on goods or services are also obliged to check up on the legitimacy of client’s funds when purchasing from them. Particularly if large sums are involved as is the case with real estate or international trade. This means that you will need accurate reporting and record keeping of every sale, purchase, receipt, expense or income received. This becomes particularly crucial for the following types of businesses; financial and credit businesses, estate agency businesses, accountants, auditors, tax advisors, legal professionals, casinos (physical & online), insolvency practitioners and company formation agents.

Business Stationery
You may need company letterheads, envelopes and business cards printed but these days most business correspondence is done online. So it is more important that you design your email signature properly as this will likely be the first impression of your business unless you are meeting clients in person. However, depending on the type of business, you may need printed material such as receipt books, purchase orders, invoices and leaflets or flyers. Once again, the design for these can be done cheaply and efficiently online. Then sending them on for printing. You will also need pens, paper, pencils, erasers, staplers & staples, pencil sharpeners and the like. These can be bought off the shelf or made to order with your business logo printed on them. They can also been given out to clients as a gift or token of the business, thus serving as
branding as well.

Employing Staff
Although you may start the business without employees, sooner or later you will need to decide on whether to employ anyone. Assuming the business is growing as it should. You would need to register the employees with the Employment and Training Corporation in Malta. An element of National Insurance must be paid on the employees behalf and there are other obligations and responsibilities to content with. There may be health and safety requirements, pension schemes and statutory benefits to consider and you may even decide to take out employee liability insurance.

Reporting Duties
Detailed financial records need to be kept at all times. It is advisable to engage an accountant to prepare these records and it is also necessary for the accounts to be audited by a third party. Records must be kept for; corporation tax, payroll, VAT, PAYE etc. Accurate bookkeeping is therefore imperative.

Checklist of Documents Required to Set Up a Company in Malta
Documents to be submitted
1 – Memorandum & Articles of Association signed by shareholders or proxies.
2 – Cheque or Credit Card details for registration fee according to schedule.
3 – Copy of bank advice, as evidence of paid up share capital. Bank advice should show the name of the company in formation.
4 – In the case of non Maltese directors or shareholders, a copy of identification document (ID Card or Passport). If a body corporate is involved, a document confirming its existence (good standing certificate).
5 – In the case of shareholders who are not EEA residents, a bank reference (or other appropriate reference).

The Memorandum of every company shall state:
1 – Whether the company is public or private.
2 – The name and residence of each of the subscribers.
3 – The name of the company.
4 – The registered office in Malta of the company.
5 – The objects of the company.
6 – The authorized share capital of the company, the division thereof into shares of a fixed amount.

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