Reasons to Form an Offshore Company
You might hear people say that it is a good move to form an offshore business because of its benefits. But, it needs careful consideration for a company to make this kind of move. If you think of starting your own company in your own country is difficult enough, would it be easier to start one overseas? You need to ask yourself if it is the right decision to make or is it the smartest decision to make. Determining the jurisdiction you will form your offshore company in is another important thing to consider.
Many people today think of offshore companies in a negative way. You can hear people denouncing offshore companies as companies that do shady business and those that don’t want to pay their taxes. There might be a bit of truth to some companies and people mostly react from hearing bad cases reported by media. There are many legitimate businesses that are using offshore locations as a leverage tool that would not be possible if not for their location.
Here are some reason why people form offshore companies.
Your business can be protected legally in an offshore location. In a typical business, your assets are tied to your name, if you are the owner. You name is not tied to an offshore company. This then makes your offshore assets immune to lawsuits and other legal judgments.
Another reason for forming an offshore company is for privacy. You don’t have the same level of privacy for your local business compared to an offshore business. You company assets does not remain anonymous here. But this anonymity that you desire is provided in an offshore business.
You save a lot on taxes in an offshore company. However, this will depend on what jurisdiction your business is in. You get huge savings in some jurisdictions. There are jurisdictions where there is no tax imposed at all. Tax benefits vary from one jurisdiction to another so you will need to perform research and due diligence to know which one provides the best benefits.
Offshore companies are formed for these reasons and more. But there are also disadvantages to it.
Although you retain the privacy you want in an offshore company, your problem is in getting investors or financial partners since they cannot determine the actual worth of your business. And lenders will not be comfortable granting financial assistance to a business that is not within their reach.
Your business can be restricted if the US places restrictions on business activities on your jurisdiction. You may not be eligible for trade benefits given to US companies.
The negative publicity on offshore companies can affect you as well. This is all because of the negative publicity media gives to offshore companies.
So, if you plan to form an offshore company, do it with great care and privacy.