7 minute read
17 May 2022

Top 5 Most Common Types of Offshore Company for Foreigners in 2022

top 5 common types of offshore company

Starting a business offshore is one of the most appealing prospects for any entrepreneur, but the joy falls short when one question arises: Which type of offshore structure should I go for?

Depending on the type of offshore business you choose, you may be eligible for certain benefits. This article will take you through various common types of offshore businesses to consider.

1. International Business Company (IBC) or Business Company (BC)

International Business Company (IBC) or Business company (BC) will vary depending on the rules of the offshore jurisdiction. In Belize and Seychelles, an offshore company is known as an IBC, while in the British Virgin Islands, it is known as a BC.

The characteristics of an international business company (IBC) and a business company (BC) are relatively similar. Some countries, however, have some differences. For example, BCs in the BVI will allow businesses to operate in the country. But Belize-based IBCs will be unable to conduct business in the country.

They are free to participate in normal business activities as long as they are conducted outside of the jurisdiction in which they are formed. If not, they don’t qualify for the special tax benefits.

Advantages

  • Tax-free 

As long as international business companies stay out of the local market, they are not subject to stamp duty or other local corporate tax regulations.

  • Multi-currency account

Accounts in IBCs can be kept in almost all currencies. This helps you keep your wealth’s integrity without losing value or being subjected to the global market’s significant currency changes.

  • Confidential

IBCs, such as Seychelles IBCs, avoid having to keep track of their basic business costs, but more importantly, they keep their earnings hidden.

Disadvantages

There is a restriction on the business activities that IBC can conduct. Providing banking or investment services to third parties; offering to gamble, betting, or casino services; supplying insurance or reinsurance services, and offering insurance services to third parties are all prohibited activities for IBCs unless they are licensed under an enactment authorizing them to carry on such business.

IBCs are the ideal match for cryptocurrency ventures in SVG. But what benefits do they bring and how can you successfully establish one on your own? Find the answer in our article here.

2. International company (IC)

The names International Corporation (IC) and International Business Corporation (IBC) are interchangeable (IBC). Several offshore jurisdictions, like Samoa IC, RAK IC, and others, have close links to this form of company.

Advantages

  • Tax-free

ICs do not have to pay any taxes. For example, RAK IC does not have to pay a number of taxes like withholding taxes, corporation taxes, import-export taxes, or income taxes.

  • Simple annual maintenance

The annual maintenance needs are simple. For instance, a Samoa IC has no annual reporting requirements, such as filing annual reports or submitting financial statements.

  • Confidential

The shareholders’ and directors’ names are kept a secret from the public. It is also illegal to publish their other IC information.

  • No minimum capital

There is no need for a minimum capital amount. The authorized share capital in Samoa and RAK is only US$1.

Disadvantages

ICs are also restricted from conducting certain types of business, For instance, insurance or reinsurance companies, insurance agents, brokers, or managers are prohibited from doing business under this corporate vehicle. Moreover, you cannot conduct business in the pharmaceutical, casino (gambling), or pornography industries.

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3. International Limited Liability Company (LLC)

An offshore limited liability corporation (LLC) is an incorporated business. This form of business has elements of both a limited corporation and a partnership. Besides, its owners have limited liability. Belize, Seychelles, and Panama are the most typical examples.

Advantages

  • Asset protection

When it comes to asset protection, an offshore LLC can benefit. Because the account is in a foreign country, a creditor’s ability to access the company’s assets will be restricted in many circumstances. It’s possible that this will protect you from legal action.

  • Tax-exempt

Aside from being a good vehicle for asset protection, an LLC also allows for a decent level of tax optimization. In detail, you may be excluded from some of the following taxes, depending on the regulations of each nation:

(1) Income tax
(2) Business tax
(3) Asset tax
(4) Gift tax
(5) Capital gains tax
(6) Distributions tax
(7) Inheritance tax
(8) Estate duty
(9) Estate duty on assets
(10) Withholding tax

  • Limited liability

Members of LLC have limited responsibility in terms of the amount of share they contribute to the company. It means that if no legal agreement exists then you as an LLC member are not personally liable for the company’s debts or liabilities.

  • Confidential

The identities of those who act on behalf of Belize LLC, as well as the register of those who do so, are kept private.

Disadvantages

  • Restricted business partner

The LLC is not allowed to do business with residents.

  • Prohibited issuance

It is banned from issuing any of your firm’s shares, stock, debt obligations, or other securities to residents or any company formed under the Companies Act.

Thanks to the digitalization of entity formation, you can now register an LLC in just a few clicks. Discover more in our article on How to Start an LLC Online with 5 Easy Steps: From A to Z guide.

4. Private Limited Company (Pte Ltd)

A Private Limited Company (Pte Ltd) is an incorporated business whose members are exclusively responsible for debts and other financial obligations that come under the company’s property duties. This form of business also has limitations on owner liability and public trading of their shares.

Advantages

  • Asset protection

Because of the shareholders’ financial responsibility limitations, shareholders would not risk losing their personal assets if a private limited business ran into financial difficulties and had to dissolve.

Hostile takeover insulation: It benefits several shareholders as shareholders who wish to sell their shares can’t do so to outside buyers. Shareholders must also agree to the sale or transfer of shares, therefore hostile takeovers are unlikely.

  • No minimum capital

There is no minimum capital requirement (except for the need that at least one share be issued at the time of formation).

  • Perpetual succession

Pre Ltd continues to exist notwithstanding membership changes since the legal existence of a business and its owners are separated.

Disadvantages

A private limited company is considered non-confidential. Some information must be made available to the general public.

To get more understanding of how to start a Pte Ltd on your own, check out our article on How to set up an offshore company for 2022: 4 Steps to go.

5. Limited Liability Partnership (LLP)

A Limited Liability Partnership (LLP) is a hybrid of a limited company and an ordinary partnership. Often, these are professionals in high-risk lines of work looking for a more accessible option that covers limited liability, organizational flexibility, and tax transparency.

Advantages

  • Perpetual succession

Any changes in partners have no bearing on the LLP’s continued existence.

  • Simple annual compliance

An LLP is free from appointing a company secretary, holding annual general meetings, and complying with some filing obligations, such as filing tax reports.

  • Asset protection

Because an LLP has its own legal business structure, members’ assets are protected from business liabilities.

  • Various business activities

This type of business can perform a variety of activities, including owning, renting, or leasing property as well as hiring staff.

  • Unlimited partners

If you meet all of the requirements to become a partner in an LLP, you won’t have to worry about whether or not the LLP will reach its maximum limit, because there is no such limitation in an LLP.

Disadvantages

  • Restricted fundraising

It is illegal for LLP to raise funds by issuing shares to the general public.

  • Easy to fall into conflict

An individual partner might allow the partnership to enter into business agreements without the approval of the other partners. When running a firm, this might lead to disagreements among partners.

6. Conclusion

Offshore incorporation requires taking the proper steps to guarantee that your firm is properly set up. Already have a destination in mind?

BBCIncorp can advise and support you throughout the incorporation process, from start to finish. Feel free to contact us via service@bbcincorp.com or chat with one of our friendly consultants for actionable advice today!

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