Offshore Company Formation
To set up an offshore company or relocate your existing business overseas is a crucial step toward internationalizing yourself and your assets. There are 100% legitimate ways to structure your business interests overseas and realize significant benefits from an asset protection standpoint as well as tax-standpoint.
Another important advantage is that the identity of the company’s owners (and officers) can remain private or anonymous. This not only enables the individual to retain control over his/her assets, it also makes it impossible for third parties to link the assets in question to the ultimate beneficial owner.
Assets held in an offshore jurisdiction, in the name of the individual’s offshore company, are far more lawsuit-resistant than those held by the individual in his home jurisdiction. Bringing litigation against properly structured offshore companies is more difficult, due to the added difficulty of locating foreign assets and subsequently proving ownership of them. Furthermore, in many jurisdictions, the lawsuit would have to take place in the country of incorporation, since foreign judgments are not recognized, except in cases of money-laundering, weapons and drug smuggling, as well as criminal tax fraud.
In addition to putting assets beyond the reach of potential litigants, investments made through an offshore company usually avoid being the subject of tax on investment income. There are many low or zero tax jurisdictions where offshore companies can be established. Offshore companies established in these jurisdictions may reduce, delay or even completely eliminate the tax burden on the company.
One often overlooked aspect of offshore companies is how it helps to simplify processes. For example, an offshore company holding overseas real estate not only allows individuals to avoid inheritance tax and capital gains tax, but also simplifies the process of the sale of property because there is no need to transfer the property title. Instead, the sale is achieved by the transfer of shares in the offshore company, which saves both time and money on legal and transfer fees.
Having said all that, going offshore is not for everyone. True, it is relatively inexpensive and easy to incorporate an offshore company, as is the subsequent administration. But you also have to also look at your goals, which could be lower or zero tax, privacy, protection against creditors, the size of your capital or your business turnover/profit, to see if setting up an offshore company makes financial sense.
But if the cost can be justified, it is hard to find any drawbacks of incorporating offshore.
The legal structure and operation of a typical offshore company is similar to any common law-based limited company.
Just like any limited company, it is managed by a board of directors for the benefit of its shareholders, who have the power to elect the company’s directors.
In many offshore jurisdictions, a single person of any nationality can act as both the sole director and sole shareholder.
Nominee directors and nominee shareholders are increasingly used to protect the actual beneficial owner’s identity. Nominees are professional parties who, subject to a private contract with the beneficial owner, allow their names to be used in place of the name(s) of the company’s owner(s).
Most offshore companies are permitted to conduct any business activity that is not specifically prohibited by the legislation of their place of incorporation. A typical offshore company can do what any limited company can, and more, including:
- Opening bank accounts worldwide
- Owning cash, securities, commodities
- Owning real estate, land
- Owning intellectual property
- Trading worldwide
Offshore companies can be managed from anywhere in the world, however, a common restriction is that they cannot conduct business inside their country of incorporation.
Many offshore companies are completely tax-free, so they are exempt from any taxation on their profits or assets. The one exception to this is the requirement to pay a small annual license fee.
An ideal offshore company does not need to file annual accounts or returns.
As with any financial endeavor, one is encouraged to weigh up the risks involved, as well as assess any pitfalls that may arise. The first thing that anyone interested in company formation should do is to research the jurisdictions and weigh them against their needs and desired results. As every jurisdiction is different, one cannot make general assumptions regarding the methodology used to establish or maintain the company.
It is important to check with the local government about any laws and procedures that need to be followed during the setting up an offshore incorporation, so as to make sure that the company is formed legally. Where two of the main assets of offshore entities are privacy and the limiting of government involvement, one cannot abandon the jurisdiction of which they are a part completely.