There are negative notions in the business world, indicating that setting up an offshore company means you are going to do something illegal. Although it is true that some offshore companies are set up for questionable purposes, it is unfair to judge that ALL offshore companies are questionable.
If you are running an online business with no physical presence, for instance, you can benefit greatly from an offshore company setup compared to the conventional counterparts. As you are not having a physical premise for your business, you are exempt from certain tax laws.
Other benefits include asset protection, confidentiality and more. Read this for more information.
Another major benefit of an offshore company is the ability for you to open an offshore banking account. There are numerous benefits of opening an offshore banking account, such as higher interest rates, more investment opportunities, and an opportunity to open the account in a more stable jurisdiction.
When you have decided that offshore company formation is for you, your next step would be deciding on where you want to set up the company, and how. Here are 5 quick tips from ICO Services, a company specialized in the formation of offshore companies:
1. Plan and prepare a list of questions
Just like in anything related to business, you need to plan. Firstly, you need to answer these questions: Why is offshore company formation for you? Who will involve in the company? What is your exit strategy?
What you should do next is to prepare a list of questions need answering, and go to tip #2 below…
2. Choose the right adviser
DIY your company setup is not recommended, unless you have the required knowledge and experience. With that being said, you need to choose the right adviser with extensive knowledge in forming an offshore company.
Discuss what you have in your list thoroughly so you will be able to make a well-informed decision.
3. Choose the right jurisdiction
This is important: Not all jurisdictions are reliable and respectable. As a rule of thumb, you need to choose a jurisdiction that has a long-standing good reputation; you should choose a stable country, which accommodate partial or full tax exemption and/or have a strong reputation as an offshore financial center.
Some of the most popular jurisdictions: Belize, Seychelles, and Hong Kong.
4. Discuss costs early on
While some reputable international incorporation services like ICO Services list their prices publicly on their company website, many don’t. The non-existent price list doesn’t mean that the service providers are not trusted, but you need to confirm the incorporation costs with them early when you express your interest in their services.
Please note that the typical fees include setup fees plus annual renewal fees. ICO Services, for instance, offers several options you can choose, serving different needs – so you also need to discuss which option is the best for your needs.
5. Keep everything legal
An offshore company is a legal entity, which means you should operate the business legally. You must abide by the local laws and regulations. You also need to understand that you are prohibited to setup a physical presence and do business in your jurisdiction.
There are some countries, like Hong Kong, Singapore and Uruguay, which allows you to do business locally. They adopt territorial tax law, which require you to pay taxes on the income you generate in the territory, while keeping other sources of income tax-exempt.
Setting up a company in other countries is not a complicated process. It’s pretty straightforward and company registration on certain jurisdictions, such as Belize, only take two working days. Opening a bank account in the jurisdiction usually takes several weeks, depending on how well you meet the document requirements.
Choosing the right service providers can help you cut the hassles of company formation. Get recommendations from your family and colleagues and do your homework in getting yourself educated, so that you can make a well-informed decision.