Whether to consider going offshore is a contradictory issue for many. On the plus side, reasons to set up an offshore company appear tempting enough. A well-tried remedy to diversify or protect your assets and secure privacy thereof, offshore businesses are worth the hassle if you aim for a reliable offshore asset protection. A reduced tax load appears to be a fabulous prize for emergent entrepreneurs even more so if they are trying to enter international markets with a company that is easy to operate. On the minus side, offshore business incorporation is bound with economic and political risks plus in certain regions reputational risks for emerging offshore businesses and founders thereof are significant, even though it is completely legal to incorporate one. Basically, it all comes down to whether offshore company setup makes sense in your particular case which should be decided on a case-by-case basis. To find a solution, let us start from scratch.
It is a fact of life that offshore businesses are formed outside of the founder’s residency jurisdiction. Tried and true offshore jurisdictions as well as popular OFCs come with straightforward incorporation procedures for wanna-be offshore companies and their founders, which might work best if you are not well-familiar with the offshore world yet. The jurisdictions listed below are considered classic time-proven choices:
- Caribbean Region
When mulling over the idea of your own offshore business, it is essential that you take into account all possible ayes and nays. Here’s what you will enjoy as an offshore company founder and/or owner:
- Regulatory and tax benefits. To attract overseas capitals, offshore jurisdictions oftentimes offer appealing financial incentives and tax breaks for would-be investors. Boasting a legislation different from the one in the founder’s country of origin, offshore jurisdictions let them benefit from the offshore presence.
- Affordable labor costs. Hiring overseas employees to do the same job is an efficient instrument for offshore company owners to cut labor costs. In emerging economies or developing markets, the job can be done for less compared to the same job in a developed market.
- Asset protection. Offshore company owners hold all their assets therein including company bank accounts, its name, employees, and the like. They are the only people with access to the said assets. Should anything go wrong, time is the only thing they may lose.
- Privacy. Offshore business records are stored offline and are out of reach of tax authorities. The link between an offshore company owner and the company per se is extremely hard to trace in case anyone tries to.
- Limited liability. In jurisdictions like Panama offshore business owners face no personal liability for any debts the company may incur.
- Greater business opportunities. Without the burden of complying with the local legislation which may be quite complex, offshore business owners enjoy an excellent start into the world of business. Blessed with an opportunity to legally run operations in any corner of the world, offshore companies couldn’t care less about such matters.
However, no angelic landscape comes without a blot and the offshore landscape is no exception. When looking to incorporate an offshore business, beware of the following pitfalls:
- High compliance costs. To ensure they are compliant with numerous laws regulating offshore activities, businesses have to pay extra for filing, accounting, and administrative services. To minimize your offshore company expenses, it makes sense setting it up in the cheapest country to start a business, like Nevis or Belize.
- Tough reporting standards. Offshore companies shall submit multiple reports to local financial and regulatory bodies as well as national governments in the incorporation jurisdiction. Non-compliant offshore businesses may be subject to administrative and even criminal sanctions.
- Complex setup procedures. Compared to establishing a regular business, setting up an offshore company is seen as more complex. To achieve your goal, you will need to find a lawyer, register your offshore business with local authorities, and file out multiple forms, at the least.
- High service and maintenance fees. For your offshore company to run smoothly, you will have to pay your accountants and lawyers and their high fees and these have a tendency to multiply as the time passes.
- Ill fame. Although it is a city legend, some guys still believe offshore companies indulge in tax evasion and money laundering, or asset hiding.
- Higher complexity. Compared to domestic ones, offshore businesses are associated with a higher level of complexity. They have to both comply with overseas laws and meet the demands foreign tax agencies set. Although offshore jurisdictions often come with superb tax incentives and even zero taxes, annual reporting to local tax authorities remains a must.
- Fewer opportunities for non-residents. Offshore companies do not accept non-resident directors as BOD members. Consequently, their non-resident shareholders enjoy lower decision-making potential, where the matter concerns taking important decisions that may affect the company’s fate.
- Low transparency. As provided for by the laws of incorporation jurisdictions, offshore businesses are not required to disclose information pertaining to their transactions, operations, members, or owners. You will never find much info of this kind on the Internet as they tend to keep a low profile.
Should you encounter any issues with selecting the right jurisdiction to form an offshore company, feel free to consult experienced industry professionals. Recommendations from the best in business are strongly encouraged and are pure common sense. At International Wealth, we assist our customers with making a wise choice that may shape their future and change things for the better. To book your free initial consultation, go ahead and email us at email@example.com.