What is an offshore company? The term can refer to any company under offshore jurisdictions, or it can refer to entities like limited liability companies or corporations filed outside a person’s residence country.
What Are the Registration Requirements?
The following criteria have to be fulfilled:
• The company has to meet tax expenses imposed by the offshore jurisdictions
• The company has to be incorporated under offshore company laws
• The company has to abide the regulations of the offshore jurisdiction and mustn’t do the trade within it.
What Are the Benefits?
• Taxation: non-resident companies are almost never subject to taxation.
• Legal protection: in most cases, there are strict provisions when it comes to allowing a court to get through the corporate veil.
• Simplicity: it is not too difficult to set up an offshore company. Requirements vary, depending on a country’s jurisdiction, but in general, this process is not too complicated.
• Anonymity is another advantage. In legal terms, the company is a separate entity, and the underlying principal name can be left out of documentation.
• Professional services and consultancy: A self-employed person can choose to incorporate a business to represent his/her own services, and work as external consultant or employee of an offshore company where he/she is the only shareholder.
• An offshore company can employ expatriate workers. The expenses and taxes are reduced by not remitting the full salary. Expats who work in unstable economies are often attracted by such arrangements.
• Capital gains tax and inheritance taxes can be avoided.
• The accumulated funds can be deposited or invested throughout the world.
• Unwanted publicity can be avoided by owning assets through such companies. Accounting records don’t have to be published, and shareholders’ names can remain private.
What Are the Disadvantages?
• An offshore company cannot do business and retain employees within its jurisdiction. However, this may vary, depending on the type of company and the jurisdiction.
• There can be some restrictions regarding the type of business that a company is allowed to do without a license.
• “Anti-tax haven” legislation in some countries can prevent offshore companies from doing business.
Offshore companies are used for:
• Captive insurance, asset protection, tax avoidance, yacht registration, succession planning, intellectual property protection and confidentiality.
*Offshore companies can be used illegitimately for:
• Money laundering, terrorism finance, frauds, irregular trading activities, tax evasion, etc.
An offshore company must have:
• Fundamental documents (such as memorandum and association articles) that prove the company’s existence.
• Incorporation certificate
• A registered agent who must be licensed and responsible for the company’s business activities
• Registered office. This is where the official documents will be sent. A company can also have other correspondence addresses, in addition to the official address.
• Members and shareholders are the company’s legal owners. There can be nominees who will act on the owner’s instructions and hold shares on his behalf. This is usually done for anonymity.
• Bookkeeping is mandatory. The requirements may vary, depending on the jurisdiction and the type of the company’s business.
Learn more about offshore company formation.