Offshore company is not a new term. In fact, it has been well-known as a powerful tool for many successful entrepreneurs and investors who are well perceived of its advantages and values.
In this article, we outline a comprehensive guide to offshore company, including what an offshore company is, its great benefits that have attracted numerous business people, as well as how to set up your offshore company.
- 1. What is an offshore company?
- 2. What are benefits of setting up an offshore company?
- 3. Some popular countries where you should set up an offshore company
- 4. Proceed to the incorporation process
- 5. Conclusion
1. What is an offshore company?
Let’s get started with the definition of an offshore company. An offshore company is a company incorporated or registered in a jurisdiction which is different from where its investors reside.
In a simplistic manner, an offshore company is nothing more than a company which is established in another country. Let’s say you are living in Singapore and you incorporate an International Business Company (IBCs) in Belize to do business, so that is an offshore company.
One key feature with regard to an offshore company that you need to know is that offshore companies would be prohibited from conducting any economic activities within offshore jurisdictions.
Notwithstanding, law amendments in each offshore country can bring different bonuses and barriers to an offshore company registered in that particular jurisdiction. In some cases, you may also find out an offshore jurisdiction in which your offshore company can be allowed to do business inside the territory, but is required to suffer local tax along with many compliance obligations.
Sometimes people can feel confused due to the misconception about offshore company - which is said to be a tool for tax evasion or hiding money from the government. It, however, is not such case. Offshore companies are legal since they are governed by the jurisdiction regulations where they are incorporated or registered.
In addition, not only does an offshore company take advantage of a favorable tax regime offered by most offshore jurisdictions, but also there are more possibilities when it comes to incorporating an offshore company.
What are these enticements? Let’s look at our following parts.
2. What are benefits of setting up an offshore company?
“How can I benefit from offshore company formation?” is a typical question. And here are some advantages of going offshore:
2.1. Tax benefits
This seems to be the top reason why people opt for setting up offshore business. By forming an offshore company, foreign investors can be entitled to gain a deduction or even a total elimination of tax burden. In other words, they are often tax-exempt or just pay a modest rate of tax by virtue of the business-friendly taxation laws of certain jurisdictions.
Take Hong Kong as a typical example, the territorial taxation system in this country allows profits which derive from trading activities outside its territory to be not subject to suffer profits tax.
2.2. Asset protection
Beside offshore company tax advantages, protecting your wealth is another appealing factor that makes people seek offshore, especially when your company is incorporated in a jurisdiction with a strong reputation and stability in both politics and economy.
Obviously, the act of moving your assets to offshore corporations and legal business structures abroad helps to create a stronger protection layer for your wealth from unexpected liabilities. Some offshore centers which offer favorable laws regarding financial privacy such as the BVI, Belize, Seychelles et cetera have been widely preferred in the world as deemed best destinations to go for asset protection.
2.3. Minimal maintenance requirements
Not only do offshore companies offer a simplicity during setting-up process, but they also are offered more flexible regulations after the incorporation stage – which is fewer requirements in terms of annual reports and financial account with the Companies Registrar (providing that they do not carry out business activities inside the jurisdiction whey they register). As a result, most offshore companies tend to be easier to maintain in comparison with onshore companies.
It should be worth mentioning that the level of information in which the registrar of companies at each offshore jurisdiction could be not the same. Our advice is that once you have come to the first step for offshore company formation which is to choose a suitable jurisdiction (a guideline of full steps on how to set up an offshore company will be discussed in the last part), do examine whether you can fulfill that jurisdiction’s requirements after registration.
2.4. A high degree of confidentiality
Typically, most offshore countries do not disclose the company directors, beneficial owners, shareholders to the public, thus you can feel secure that all information would be kept confidential. However, it is a must to register and maintain these profiles and data with the Company Registrar.
3. Some popular countries where you should set up an offshore company
Try to search for offshore company on the internet and you will find out a variety of choices of offshore jurisdictions that may be best suited with what you need. Below we list out some popular countries where you should put into consideration for your offshore company incorporation:
- Cayman Island
- The British Virgin Island
- United Kingdom
- Hong Kong
4. Proceed to the incorporation process
One of the driving forces that leads to the popularity of the offshore company is its ease of incorporation. The offshore company setup process is very straightforward and easy. Despite the fact that each offshore jurisdiction can show differences in terms of requirements, we can outline the fundamental steps of this process as the followings:
- Choose a suitable jurisdiction & business structure: Keep in mind, choose the jurisdiction which best suits your needs. You may feel muddled because of so many choices of countries and do not know which one is the best. And should it be the case, you are advised to take into account some factors that assist you to pick the most well-matched one to your company plan, key of which include jurisdiction reputation, taxation, company structure, residency situation, banking needs, compliance requirements, et cetera.
- Select a company name: Naming requirements are crucial when deciding on your company name. Moreover, specific required criteria for a company name can be varied from jurisdiction to jurisdiction. Therefore, please well examine the eligibility of your chosen company name to get approval
- Fulfill due diligence requirements: It is in need to understand your offshore location's KYC process to fulfill all needed requirements. Please note that if a corporate body is going to be your company's shareholder, further documents must also be submitted.
- After you have done all the required documents, deliver them to the Company Registry of the jurisdiction that you choose and proceed to register your company.
To read in detail a step-by-step guide to the process of offshore company formation, please visit our blog How to set up an offshore company for 2020
Would it be a great idea to establish an overseas legal business structure?
Look at the aforementioned offshore company benefits maybe you get the answer. Yes! As you can be seen clearly that there are dozens of drawcards that an offshore company can contribute to your business, internationalizing your business, keeping your assets safe, safeguarding your company’s, confidentiality, optimizing your tax burden, ease of incorporation and many more. We can also understand why there are a large number of entrepreneurs and investors flocking to places deemed the best jurisdictions to start their business.
Should you have more questions on how to set up an offshore company, talk to us now by dropping a chat message or sending an email via firstname.lastname@example.org!