Offshore companies can be suitable investment vehicles and can help entrepreneurs better manage their finances. These types of structures are usually easy to incorporate and to manage and have minimum administration requirements, especially when set up in a jurisdiction with favorable regulations.
Reasons to set up an offshore company
Entrepreneurs can choose to set up an offshore company for purposes mainly associated with asset protection or wealth management. Some examples of using an offshore company for legitimate purposes can include the following:
- Asset protection: especially for international investors, offshore companies can be used as holding companies, legal entities that do not engage in effective business activities but serve as a solution for managing stocks;
- Own property in another country;
- An actual new business: offshore companies can engage in international trading and can provide various services; investors may use this option when they want to diversify the areas in which they do business.
Investors who choose to incorporate an offshore company for the purpose of running their own business will benefit from low set up and maintenance costs and a reduced administrative burden.
Steps for opening an offshore company
Setting up an offshore company in a tax haven is a simple process and many investors choose to rely on the services offered by local company incorporation experts, especially when they cannot travel to a specific destination.
The first step for opening an offshore company is choosing a suitable jurisdiction. The choice can depend on a number of factors, including the investor’s preferences for the degree of confidentiality.
Opening a bank account is another important step for incorporating an offshore. Some jurisdictions allow investors to attach a bank account that is opened in another country, for example, Switzerland.
Incorporating a company is the definitive step. Depending on the jurisdiction, investors will have several options when choosing a suitable type of legal entity. Alternatively, there is the option to purchase a shelf company.
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Investors will need to observe the tax laws in the country where they open their offshore. Many of these jurisdictions that are considered tax havens, have – as the name suggests – a very light taxation regime or a well put together tax incentive plan for companies. We recommend that you talk to a tax specialist to find out all there is to know about tax minimization in a particular jurisdiction.
Jurisdictions to consider for offshore company formation
Hong Kong is one of the most popular locations to base an offshore company. Some of the reasons why the city has become an attractive offshore destination are the same as those that make it a business hub. These include a low tax regime, easy company incorporation, and no foreign exchange control.
World-renowned offshore financial centers include the Cayman Islands, Panama, Seychelles or the Bahamas. A Caribbean offshore jurisdiction that also deserves attention is Belize. The country has an attractive blend of tax advantages and a high degree of confidentiality for company owners.
The offshore company can be useful for a number of activities, apart from asset protection. These include offshore banking, international trade, and various investment-related activities. Opening a fund in one of the above mentioned jurisdiction can be another option for asset management. If your goal is to maximize returns, then you should consider opening a hedge fund.
To find out more about how to set up an offshore company we recommend that you explore the available options and jurisdictions and talk to a local expert.