A corporation is a common vehicle choice for those considering an offshore business. A corporation is considered a legal entity that is separate from its shareholders, offering those individuals protection from debts, taxes, and legal issues of the company.
Many companies choose to incorporate because of the benefits involved with this option, particularly that owners are not held responsible for any of the company’s financial or legal problems. Additionally, stockholders’ assets are protected due to the limited liability status of corporations. Since individuals interested in offshore businesses are often seeking to protect themselves from financial and legal problems, as well as finding a secure location for their assets, the corporation is a popular vehicle for offshore businesses.
Because corporations are considered to be legally separate from its owners, it typically pays its own taxes. With offshore business formation, these taxes are relatively lower than they would be at one’s home jurisdiction.
Other advantages for individuals to choose a corporation as the vehicle for offshore business are related to investors and employees. Investors prefer businesses that are corporations because of the stock structure of the company. This same structure allows owners and management to offer stock options to potential employees, essentially allowing them to work towards owning a piece of the company. Owners who also work within the company can become employees who are eligible for insurance, reimbursement on expenses, and other benefits.
In larger companies, the shareholders are not responsible for the day-to-day activities. Shareholders elect a Board of Directors, who in turn choose officers. These elected individuals are responsible for the operation of the business. However, with smaller corporations, oftentimes individuals who are shareholders may also function as CEO, treasurer, or other officer within the organization.
Another benefit of a corporation is that the shares can be transferred. A corporation remains in existence until the shareholders decide to dissolve it. So shareholders may sell their shares or transfer them without affecting the existence or status of the company.
Disadvantages of a this vehicle for your offshore business include the cost of incorporation, the strict requirements and paperwork involved, the disclosure of officials names, and the high tax bracket. However, offshore business formation will mitigate these issues, particularly the privacy and tax issues, as well as the paperwork in most cases.