How to Set Up an Offshore Company

By | Sep 21, 2018

As business transactions migrate online, more and more businesses are now considering setting up offshore companies for an array of benefits. This is especially true if your business operations do not need to stay put in a single place.

Why set up an offshore company?

For many new businesses, an offshore company is a highly preferred business structure because it is easier to incorporate. There are a number of business-friendly jurisdictions that offer minimum administration requirements and attractive regulations.

The main purpose of incorporating an offshore company is to skirt the tedious and costly process of setting up and maintaining a business here in the US. Some jurisdictions are also considered tax havens because of their very friendly taxation regulations. Nevis, Belize and Cook Islands are just some of the most popular tax havens for offshore companies.

However, investors also set up an offshore company for wealth management and asset protection. For instance, foreign investors can incorporate an offshore holding company that conducts either no business or insubstantial operations from where it is located. In some jurisdictions, an offshore company can serve as a legal entity and can be used to own properties and other assets. An offshore corporation can also conduct business operations, such as for international trading and other services. If you’re expanding your business and are looking for new markets, you can also set up an offshore company.

How to set up an offshore company?

Here are the basic steps you need to take when contemplating an offshore company.

1. Choose a strategic jurisdiction

When incorporating an offshore company, you need to choose a suitable jurisdiction as this can have significant consequences for your business. Some important considerations include regulations on business ownership by foreigners domiciled abroad, regulations on transacting business abroad, political and economic stability of the jurisdiction, taxation regulations, and statutes on liabilities, especially one-year look-back statutes.

2. Incorporate an offshore company

Setting up an offshore company in business-friendly and tax haven jurisdictions is pretty much straightforward. You just need to meet the basic requirements as provided by the jurisdiction’s official business bureau/regulatory body. However, a lot of investors prefer working with local company incorporation professionals, especially if traveling abroad is not an option. Each jurisdiction has different suitable types of legal entity (such as LLC, Corporation or Incorporation). In some cases, investors opt to acquire a shelf company. You might need the help of a local advisor to guide you in choosing the most suitable business entity for your business.

3. Open a bank account

Next, you’ll need to open a bank account as part of the offshore company. In opening a bank account, the offshore company can serve as the owner as it can now stand as a legal entity. According to a financial analyst, those that set up offshore companies in tax havens prefer anonymous banking for asset protection and wealth management. In some jurisdictions, you can use bank accounts that are opened abroad, such as Swiss bank accounts.

4. Compliance with regulations

Once you’ve completed all the regulatory requirements, you simply need to observe the business and taxation laws of the jurisdiction where your offshore company is located. Usually, these jurisdictions have very light taxation regime or very friendly tax incentive plan for offshore companies. To ensure that you don’t run into any taxation problems, you should consider working with a tax specialist. Take note that every country will have different taxation rules.

What are the best jurisdictions for setting up an offshore company?

As mentioned above, Nevis, Belize and Cook Islands are three friendly jurisdictions for offshore company formation. These jurisdictions offer a high degree of confidentially for investors. Meanwhile, Panama, Cayman Islands, the Bahamas and the Seychelles have long been considered as offshore financial centers. Numerous offshore companies are located in these tax havens.

Aside from these tax havens, there are also the traditional offshore wealth centers. Switzerland remains the top offshore wealth center. It is followed by Hong Kong with US$1 trillion in offshore wealth. These countries and jurisdictions offer a low tax regime, no foreign exchange control, and straightforward company incorporation.

Category: General

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