Incorporating offshore is about taking advantage of local laws in foreign jurisdictions using global opportunities to maximize business and investments options. Offshore company structures provide businesses looking to globalize their corporate structure with benefits that can not be found domestic corporate settings.
Many countries around the world have an regulatory environment that give non-resident entities special status to encourage foreign capital, investors and entrepreneurs looking to maximize profits.
Forming an offshore business company provides a number of benefits that are unique to offshore entities in comparison to traditional onshore corporations. Below are six particular benefits you stand to gain if you move your company offshore.
Tax Reduction Possibilities
Offshore companies provide tax restructuring opportunities when you move a business company to a location that does not tax worldwide profits. In many offshore financial centers there are no corporate or capital gains taxes and tax only income that is generated within the country. With proper structuring a company can receive profits from income generated overseas and it in an offshore structure tax free.
While corporate structures remain tax free, you may still be liable personally, depending upon where you residency. In that case, offshore assets can remain in a holding company indefinitely, or until you decide to withdraw income and move it ‘onshore.’
Flexible Corporate Structure
Corporate laws are made in many countries around specifically to attract foreign investment and do so by having minimal reporting requirements and compliance mechanisms that allow entities to function with minimal oversight.
In contrast, many modern onshore financial centres have a high-regulatory environments with excessive red-tape and financial reporting policies that create expensive and restrictive conditions for many businesses.
Offshore financial centres provide the perfect environment for businesses that have global operations and benefit from f low capital paid in requirements, single member company formation, together with no audit or financial reporting as well as low governmental and yearly fees.
Hiding your accounts from the government in a anonymous numbered Swiss bank account is largely a thing of the past.
The USA and Europe have aggressively sought out tax dodgers since the early 2000s. After the implementation and enforcement of global transparency laws such as CRS and FATCA starting in 2014 all financial transaction are made available to the governments of member countries.
Although complete anonymity is much more difficult to achieve, it is still possible in many offshore jurisdictions to keep your records and personal details away from public scrutiny. Offshore structures such as LLCs or foreign trusts provide layers of offshore protection prevent parties from accessing particular assets. Creating a multi-jurisdictional structure combines two different structures in two countries with one holding the assets that is owned by the other entity.
In other words if you have a Cook Islands Trust that holds a Nevis LLC with a corporate bank account opened under the name of the LLC, creditors would not be able to link you to those assets as they are owned by a Trust whose beneficiary can remain hidden.
Asset diversification is about spreading your assets not only among different forms of tangible and intangible goods, but across across accounts, banking institutions and countries.
Offshore entities give you the possibility of creating a holding company or entity that can hold assets in an account owned by a corporation, foundation or trust. This helps to spread your risk by distancing yourself from its ownership.
If assets are entirely held in a single domestic institution they are more liable to be tied to the viability of that single institution, are prone to be targeted by lawsuits, and are more susceptible to fluctuations in the economy or currency in which the assets are in.
Creating an an offshore company and having assets held by that company effectively creates distance between you and your assets. Because a corporate entity is a legal entity it takes on all the rights and responsibilities of an individual. Therefore if a lawsuit is brought forward against it your assets will be protected because your assets are attached to the offshore entity.
This means, that if you are being targeting by a lawsuit and there is an assets search you will not be connected with as the assets as they will be located in a different country and under the domain of the incorporated whose registry is not open to the public which will be very difficultly to trace and/or locate.
Similarly having a second separate legal system creates another layer of protection around your assets. Because of the difficulty in pursuing grievances across borders, it ensures that most parties will seek to compromise rather than go after foreign assets. As many countries to not recognize the authority of foreign courts especially when it comes to small grievances, threats of legal action are mostly ignored unless there are criminal charges being investigated.
Offshore companies are highly effective structures for asset protection whether that is a private company, account, trust or foundation.
Any lawsuit that is seeking to get at your assets will find it very difficult in many offshore jurisdictions such as Nevis or the Cook Islands or example. Because your assets are not held personally in your name, it forces the lawsuits to be filed against the entity.
In order to pursue a lawsuit that is made against the structure it must be done not only within the country that entity is held, but must also show proof that there was a fraudulent transfer made specifically against the particular party.
If a creditor seeks to pursue a legal claim it must be under the statue of limitations (which in case case of Nevis and Cook Islands is 1-2 years) and they must post a 100,000USD bond. The lawsuit will be trying to go after your assets, but if those assets are held by an offshore structure that is held by a bonded trustee with a beneficiary whose details are not made public then it will be incredibly difficult for them to both find and tie you to the offshore entity. All of this ensures that only the most serious cases ever make it to local courts.
Whatever your business forming an offshore corporate structure gives you access to a realm of tools and opportunities that can not be found in a domestic corporate environment. Position yourself with a global outlook and see what going offshore can do for you.
Interesting related article: “What is an Offshore Company?”