There are many legitimate reasons to set up an offshore company but for many companies the main reason is to take advantage of tax laws that are more partisan than those in the United States. Setting up a legal offshore company is a good way to minimize your tax liability and keep more of your profits in your pocket. Setting up an offshore corporation does not alleviate the need to pay taxes in the country where the income was derived however.
The other benefits of incorporating an offshore company are; the ability to trade internationally, financial confidentiality, asset protection, business and land ownership in a foreign country, increased financial flexibility and privacy.
You may also find that offshore companies offer a higher quality of asset protection than setting up your company in the United States. In many offshore jurisdictions you can form an offshore corporation in such a way that your earnings are protected from future liability.
In jurisdictions such as Panama a person can incorporate an offshore company without using their real name. This can provide a level of anonymity that is not possible in the U.S. system of business. This type of corporation is known as an anonymous bearer share corporation. In today’s banking world very few places outside of Panama still offer and enforce, through banking secrecy laws, this level of privacy.
Business owners can also form an offshore company with a minimum amount of cash equity in the business. Different countries have different rules for this, but overall upfront costs are much cheaper to set up an offshore company in a jurisdiction like Panama as opposed to Switzerland for example. Each offshore destination should be carefully researched and an asset protection lawyer consulted prior to making a jurisdiction selection.
In addition to the benefits, there are some disadvantages to setting up an offshore company that you should be aware of. If a person incorporates an offshore version of their company there is a chance that they won’t be able to have employees on a payroll for that companies American counterpart.
There may also be restrictions on the type of company that a person may form in certain countries. For instance, a person may not be able to open a bank, insurance company, lottery or another entity in a strictly controlled industry.
Another drawback of going offshore is the necessity of putting your estate through a protracted probate process if you die suddenly. Even if you have a will, foreign countries will still look over your business dealings with a fine tooth comb before they release your assets to your heirs.
There are many countries where you can incorporate an offshore company. Some of the most popular are; Switzerland, the grandfather of offshore banking, the Isle of Man, which has favorable tax laws, Singapore, which has excellent investment potential and the Republic of Panama which is extremely favorable to incorporated companies.
After a time, you may choose to move your company from one location to another. You must incorporate your company in a country that allows for this type of cross border movement and you must also move to a country that has laws favorable to a move. If you file the proper paperwork utilizing the services of an asset protection lawyer, you will not lose your incorporation charter, no matter how many different jurisdictions you move your offshore company to.
If you decide that you would like to start an offshore company you need to do your research and be comfortable with the choice you make and its associated benefits and drawbacks. Learn more about offshore company formation and anonymous bearer share corporations at the author’s website.