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Is offshore business the right business for you?
Written by: Lawrence SmithArticle 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.
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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.
Article Tags: entrepreneurship, incorporation, international business, offshore business, offshore company, start a business, tax evasion
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About the Author: Lawrence Smith RSS for Lawrence's articles - Visit Lawrence's website Healy Consultants is a leading corporate services firm that assists entrepreneurs and investors with their offshore company incorporation requirements. The firm provides a range of services including Singapore Company Formation, tax planning and offshore investing. More information on company incorporation can be found by visiting http://www.healyconsultants.com Click here to visit Lawrence's website Choosing Hong Kong For Company Registration Hong Kong Company Formation Options for Foreign Entrepreneurs How to set up an offshore company Singapore Company Laws Hong Kong Corporate Tax Explained |
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