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Is offshore business the right business for you?

Written by: Lawrence Smith

Article Overview: Taking a look at what offshore business has to offer and which businesses and entrepreneurs can truly benefit. This article provides a basic way of identifying whether a company is overlooking more efficient practices for their business.

Is offshore business the right business for you?

Offshore business has attracted significant attention recently including the highly publicized case between a bank in Switzerland and the US government who actively pursue individuals, or companies, suspected of tax evasion activities. The effect has been a snowball of TIEAs, better known as Tax Information Exchange Agreements, especially between the jurisdictions often labeled with the tax haven image and the larger nations who suspect tax evasion.

So how can offshore business still be useful in the face of such risks?

The important thing to note is that information being withheld by the account holders to evade tax obligations, would be considered illegal. However, it is still possible to conduct offshore business in tax friendly jurisdictions, in compliance with the law. The key is to identify and choose the best jurisdiction for your business type and structure your company accordingly. This is obviously more tedious than most entrepreneurs initially imagine, and for that reason the use of consultancy firms and offshore specialists is both a logical and common practice.

Still, offshore may not be right for everybody.

Who conducts offshore business?

Offshore business is popular with the following professionals: successful, independent contractors, consultants –especially in IT and global financial services- and traders -especially global commodity traders-.

The following types of business can also make use of an offshore company: import/export companies, international trading companies, asset holding companies, property investment/intellectual property holdings.

Businesses that are located in unstable jurisdictions or economies can benefit from an offshore company in a secure jurisdiction or economy. Similarly, expatriates who would like to protect their assets from home country taxes and inheritance laws can do so through offshore business.

If that is you…

What advantages does offshore business provide?

Offshore business is a way to potentially achieve the following: (i) minimize international taxation legally (e.g. Singapore has legally low tax rates), (ii) provide a reputable image for business (e.g. if the original country of business is untrustworthy or unpopular in a specific industry), (iii) protect global assets (e.g. if in original country asset protection laws are inadequate or badly implemented), (iv) facility company incorporation procedures (e.g. offshore business set up procedures are often simpler, faster and cheaper for entrepreneurs than their home jurisdiction),(v) provide confidentiality (e.g. some offshore jurisdictions do not publish shareholder/owner information to the public), (vi) fee exemption (e.g. business license fees, stamp duties and various taxes), (vii) no exchange controls (often the case in offshore jurisdictions), (viii) no accounting/audit requirements (some jurisdictions do not require financial statements or annual audits).





What are the risks to be aware of?

If you decide these advantages are relevant to you and you choose to incorporate a business offshore, be aware of the following: (i) OECD pressure on certain offshore jurisdictions – many popular jurisdiction are bigger targets of OECD pressures for TIEA (ii) certain offshore jurisdictions have a negative reputation that affects business image (iii) concealing information about offshore investments is illegal in most countries.

What exactly can an offshore business do?

Offshore businesses can do a variety of things dependent on the offshore jurisdiction it is incorporated under. A few examples to note are:

(i) Have limited liability status, thereby limiting director and shareholder liability to the amount of money invested i.e. share capitalization, and separating the company as a legal entity from its owners.

(ii) Conduct business in any country, just like a local company. Note: like a local company it is also subject to each of the rules and regulation of the jurisdiction in which business is conducted.

(iii) Buy, sell, hold securities, certificates of deposit, open savings and other bank accounts, transact in multiple currencies, stocks, bonds, mutual funds, other banking instruments, real estate and valuables.

(iv) Open a bank account in an international or local bank and borrow or lend money.

(v) Hold international meetings of directors and shareholders via telephone, fax or any other electronic or virtual means of communication.

(vi) Trade its own shares, hold treasury shares, and conduct mergers, acquisitions and/or joint ventures.

(vii) Transfer assets to a trust or foundation.

(viii) Trade licenses and royalty rights without paying taxes on royalty income.

Many businesses miss out on legally available tax efficiencies that can be achieved through incorporating an offshore business. It is important for any entrepreneur or director to properly research the practices that exist and that are legally viable, in order to conduct business in the smartest way possible. If offshore business sounds like a relevant practice for your business, consider your options and seek advice and approval from a well-informed reliable source, in order to take full advantage of what the globalized business world provides, and avoid becoming another news headline for tax evasion.

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Article Tags: entrepreneurship, incorporation, international business, offshore business, offshore company, start a business, tax evasion



Related Forum Posts
Where Would You Like To Start Your OffShore Business and Why - Hi all, I was wondering that if given a chance and freedom to start an offshore business where would you prefer to start and what reasons can be behind this preference. Thanks,
Re: How will an african make money truely on the net? - [quote="OmnivoreInk":1gmz8h93]Is it possible for an African business to set up an "offshore" account in the US or England... or even Switzerland... where all monies are paid? And a trusted agent there, who gets a percentage of any money, can then take that money from paypal and wire it or mail it or whatever to an African bank? There are lots of countries in Africa, is this a problem in all of them? Seems like an internet entrepreneur who can set up a "Paypal" like company of their own might be able to make money on this... ? Course you'd need governmental contacts...[/quote:1gmz8h93] You can actually get an offshore account but you have to provide many documents except if you will open a brokerage account which operate like checking account. Omnivorelnk, i believe one of these days a company will spring up to meet this challenge and make internet a worthwhile for africans and other under priviledge.
what kind of qty are you looking for? - Hi, Shimmy, My name is Steven and my business is specialized in offshore sourcing products from China. If the volume is big, then importing them from oversea factories is a realistic and economical solution. Let me know what I can do for u. Regards Steven
Re: How will an african make money truely on the net? - Is it possible for an African business to set up an "offshore" account in the US or England... or even Switzerland... where all monies are paid? And a trusted agent there, who gets a percentage of any money, can then take that money from paypal and wire it or mail it or whatever to an African bank? There are lots of countries in Africa, is this a problem in all of them? Seems like an internet entrepreneur who can set up a "Paypal" like company of their own might be able to make money on this... ? Course you'd need governmental contacts...
Re: What is your biggest challenge? Today? - Here are some tips on how to choose the right outsource company for your business: *Figure out what expectations you have and how you plan to reach them. *Do a background check on the companies that you have shortlisted. *Send the company a sample project for them to accomplished so you can gauge their infrastructure and competence. *Determine if the offshore service provider is financially strong. *Make sure there are no culture clashes between you and the service provider. *See if the service provider is one that has plans to build a long-term relationship with you.


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