Why an Offshore Company Should Be Part of Your Business Strategy

What is an Offshore Company

We have talked about offshore companies and accounts so many times in our blog posts. However, it seems that there still a large number of people who are not quite clear on what offshore means. We thought it would be useful to give some more details, debunk some common misconceptions and explain the benefits from having an offshore company.

What is an Offshore Company

By definition, given in an article on the ICO Services website, an offshore company is a business structure formed for legal purposes outside of the stakeholders’ country of residence. Such company is expected to comply with the rules, laws, and regulations of the country it was set up in. So this means, you can have a business that operates in Europe, but your company could be formed in Puerto Rico, therefore complying with the Puerto Rican economic and legal rules and regulations.

A very common misconception is the belief that if a venture is an offshore company, then it must be illegal. To be fair, there are people who try to use this route for carrying our criminal activities, but in its core, having an offshore company is completely legal, as long as you pay your taxes and follow the laws that apply in the country of your business’ formation.

What are the Benefits from Having an Offshore Company

The main reason for people opening offshore companies is the tax benefits they get. For example, a company registered in Hong Kong and operating elsewhere would be able to reduce its taxes by almost 50%, because of an exclusion available to Hong Kong companies that derive income from outside the jurisdiction.

Apart from the tax benefits, though, there are other advantages that come with the formation of an offshore company. For instance asset protection, which may come in various forms:

  • Wealth protection – avoid excessive taxation
  • Intellectual property protection – it’s more difficult for others to claim a patent or trademark if the company is registered offshore
  • Lawsuit protection – an offshore company can provide a shelter from lawsuits aimed at shrinking your assets.

Another great benefit from creating an offshore company is the fact that you can access more business opportunities, such as:

  • Investing in real estate abroad
  • Investing and trading on foreign markets
  • Providing a solution to local issues




How Does an Offshore Company Work

Setting up an offshore company is not always a straightforward process. In fact, in most cases, it involves several steps. Here they are:

Step 1: Research

You must learn about international laws and business formation processes in the country you want to set up your offshore company. If you don’t think you could do the task yourself, the best piece of advice we could give you is to seek the professional help of an international corporation service advisor. They will assist you in getting the next steps right.

Step 2: Choose the right jurisdiction and plan well

It’s important to form your company in a jurisdiction which will bring you the most benefits. You must also be familiar with the tax treaties between various jurisdictions to make your venture really work for you. A professional service provider can give many valuable insights on this. Be very careful with your tax planning and avoid DIY when it comes to it.

Step 3: Submit the necessary documentation

Once you are convinced the first two steps are completed to perfection go ahead a submit the required information for the setup of an offshore company. This most often will be:

  • Proof of identity for the shareholders
  • Proof of address
  • Bank account details

Step 4: Register your offshore company

This can take anything between a couple of days and 3 weeks. In many jurisdictions, you can do that remotely using online corporation formation services. In other places, though, like Delaware or Hong Kong, you will have to be physically present to register your company.

Is having an offshore company something you would consider? Contact us for a confidential consultation on the topic. Together we will find the best route for your tax planning, asset protection, and wealth maximization.

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA is a Certified Public Accountant, specialized In Tax Planning, International Business, Wealth Management and Offshore Banking. You can email him to fa@fascpaconsultants.com or follow us on Facebook : FAS CPA & Consultants.

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