Incorporating a company offshore was once upon a time known only to wealthy individuals. With the advent of globalization and the increased economic activities in different countries, ordinary people and business owners have come to discover how incorporating a company offshore can be a viable option for them. “Offshore” in the context of company incorporation generally refers to any jurisdiction other than one in which the company incorporated will conduct the majority of its activities or simply put a country other than where a business entity or an individual resides in.
A jurisdiction offers some degree of commercial advantages in the form taxation and reportorial conveniences which make it attractive to company owners. Incorporating a company offshore will bring about at least one of the following benefits to a business owner:
1) Ease of Operations – this usually comes in the form of lower operating costs and amount of time saved when company directors file forms and reports. Depending on the jurisdiction and the type of business activities the company to be incorporated will be involved in, operating restrictions, reportorial requirements, accounting and auditing requirements and standards are far less restrictive offshore than onshore. This means that officers and employees of the company can focus on what they do best – run the business efficiently and effectively. This condition may not be true for financial services companies as they are strictly regulated for the protection of their clients.
2) Reporting simplification – as mentioned in the first benefit, company activity reporting requirements are far fewer and less complex as business activities being entered into by the company to be incorporated will be conducted in the offshore jurisdiction. In addition, personal information of company directors and shareholders need not be exposed or in cases where personal information is required it will still be far less intrusive than what is considered standard in other countries.
3) Taxation reduction/negation – this is by far one of main benefits in investing offshore, opening a bank account offshore or incorporating a company offshore.
If a company is incorporated in a low or no tax jurisdiction, it can potentially save a substantial amount legally. It works in a way that if the incorporated company does not derive income from the local economy it can operate virtually tax free.
4) Asset Protection – operating a company offshore affords certain protections against liabilities typically by positioning assets away from the reach of any potential legal claim or litigation. In addition, the company is shielded from the ever prying eyes of competitors.
5) Personal Privacy Protection – as mentioned in the second benefit, the level of exposure of personal information of company directors and shareholders are quite limited and far less invasive offshore. It is possible to appoint nominee directors and secretaries in an offshore setup in many jurisdictions that result in the shielding of the identities of true company owners and key stakeholders.
The information in this article cannot be construed as advice as every situation or circumstance for offshore incorporation will vary and will be unique so it is still best to seek professional advice to come up with the best approach.