Establishing a business in an offshore jurisdiction is a popular idea among wealthy all around the world. They do so to gain several benefits that are otherwise not available in any onshore location. Despite severe criticism, doing business offshore is a completely legal process and most of the individuals and companies having their businesses overseas face no legal problems in these circumstances. One such example is the recent disclosure of few leaks where hundreds (or even thousands) of names (of individuals and corporations) were disclosed with offshore companies. But very few among them paid the price because most of them were doing everything according to the law.
Benefits of offshore business setup
- Most of the superrich prefer offshore businesses in order to achieve legal benefits of tax avoidance, capital security, and privacy, etc. Most of the offshore jurisdictions provide either tax-free or very low tax business opportunities. This is very beneficial for entrepreneurs of such countries where they may be charged with a hefty amount of taxes on the formation of companies and their profits. Many countries allow the formation of companies in offshore locations to reduce taxes. A few recent examples are multinational companies like Apple Inc. and Nike that saved taxes worth millions of dollars by using offshore business opportunities.
- Formation of offshore companies also provides privacy and security of wealth. In most of the offshore jurisdictions, the name of owners and shareholders of a company are not required to be made public and it becomes very difficult to know about the real owner of any offshore business. This privacy will save the assets from financial rivals (who made unnecessary legal claims in case they know their assets) and from tyrant governments (recent step by Saudi Arabia is a perfect example of the way such regimes tackle superrich).
- Most of the offshore jurisdictions provide best political stability and security (e.g. UAE, BVI, Switzerland). It is appropriate for entrepreneurs in countries with dwindling law and order situation or political instability to shift their capital in a secure location by opening a company in an offshore location. This can be done by setting up an offshore company in UAE, Switzerland, Panama or other appropriate locations. It will provide them with mental satisfaction and sustainable business growth.
Procedure to start an offshore business
If you are willing to establish an offshore company to get the above mentioned and other potential benefits of offshore business, then you must consider these important points.
- In the initial step, you have to choose an appropriate offshore jurisdiction according to your requirements. Offshore jurisdiction must be selected after considering the popularity & reputation of the location, availability of bank services, incorporate cost rate & tax rate, a requirement of directors and shareholders. Two other most important factors that should be kept in the mind is the acceptance of type of company you want to establish and whether it has signed tax treaties relevant to your business.
- The second step is to contact a reputable Offshore Service Provider (OSP) that will register and incorporate your company in the overseas jurisdiction. They will also provide a registered agent. A registered agent is responsible for receiving legal notices and documents on behalf of the offshore business. OSPs are important for foreign businesses as they are familiar with all the legalities of overseas businesses.
- In the third step, you will choose the type of company you want to establish in the overseas jurisdiction. International Business Companies (IBCs) are the most commonly used offshore companies. It is especially important to use IBCs for international trade. They carry out international business activities including investment and trade. They are preferred as only a single person can be a director and shareholder of the company. Along with IBCs, private limited companies are also popular. Shares of such companies are held privately by shareholders. Another important offshore company is the LLC (limited liability company). In these companies, the owners are not held liable for loss in business.
- After completing these initial steps, you will be required to incorporate your offshore company. For this purpose, you have to present all the required documents (different jurisdictions need different documents). You will also be required to prove your identity by providing bank statements, utility bills, etc. Thirdly, you will describe the type of business activity you want to conduct in the offshore jurisdiction. Offshore jurisdictions will also require verification of your financial information.
- It is important to note that there is a clear difference between offshore and local bank accounts. You need to adopt different procedures for offshore bank account opening.
It is worthy to mention that Belize, Hong Kong, UAE (Dubai, RAK), Cayman Islands, BVI (British Virgin Islands), Switzerland, Seychelles, etc. are few of the world’s most famous offshore jurisdictions. These locations provide best business opportunities by providing security, privacy and low taxes on your assets. If you want assistance in setting up an offshore business in any offshore location, then you can contact Riz & Mona Consultancy via our WhatsApp # 971-54-5821012.