Why Offshore Company Formation Is Essential to Protect Your Assets
Offshore company formation is a key part of your asset protection tool kit. Having an offshore company separates your personal assets from corporate assets. If you’re asked to disclose your assets, as we are more often than ever, you won’t have to disclose assets held by your offshore company. If you’re the owner of the shares in your personal name you’d have to disclose those but not what the specific assets are. You may not want to disclose a bank account in The Cayman Islands. No Problem, if it’s held by your offshore company it wouldn’t have to be disclosed.
What are some of the main reasons for offshore company formation? Let’s have a look here at some of the reasons people set up offshore companies.
1. Asset Protection
To protect your hard earned assets is the principal goal of Offshore Company formation. A Company set up in an overseas jurisdiction will be much more difficult for any hostile creditor to attack. In some jurisdiction such as The Cook Islands it will be all but impossible. Other jurisdictions such as Nevis require any creditor to post a substantial bond before starting legal action against a Company set up there. Of course the best defence is for your hostile creditor not to know of the existence of the Company or your connection to it in the first place.
There are several jurisdictions for offshore company formation where you needn’t disclose publicly any information about the Company. Nobody will be able to find information on directors or shareholders. If privacy is your main goal in the formation of an offshore company you should choose a jurisdiction that does not make details of the ownership public. If your from an English speaking country set up an offshore company n a jurisdiction with a different language to make life more difficult for any pursuer.
Choose a jurisdiction with no Mutual Legal Assistance Treaties with your country too. Mutual legal assistance treaties are where states have agreements to help each other investigate matters. A country like Panama is one of the best for privacy.
3. Legal Tax Reduction
There are many offshore locations where the tax rate is zero. Income earned by your offshore Company will be tax free in the jurisdiction it’s set up in provided it doesn’t do business there. Careful planning will be needed if you stay in a high tax jurisdiction to make sure you are compliant with tax laws there while staying tax free. You will have to be aware of CFC Rules that attempt to trip up anyone who has set up an offshore company to avoid tax.
4. Avoid Capital Gains Tax
If you own assets such as a property or a business in your home country you will probably be liable for capital gains tax when you sell it. Offshore company formation, when planned carefully, can help reduce or completely avoid capital gains tax. If your assets are transferred to an offshore structure in advance of any sale and the transaction is structured carefully, it will often mean that there is no capital gains tax liability in any jurisdiction.
5. Protection from Political and Economic Instability
If your country suffers from political or economic instability an offshore company formation is essential. You will not have to worry about exchange controls or arbitrary asset confiscation. Your assets will be safe from government seizure in a more politically and economically friendly jurisdiction.
6. Avoid Filing Financial Information in Your Home Country
Countries such as the UK insist on Companies filing a lot of financial data each year. This is intrusive, time consuming and costly. Most offshore jurisdictions will not insist on you filing financial information. You will want to set up your offshore company in a jurisdiction that doesn’t insist on having annual accounts prepared and filed each year, for example.
7. Offshore Company Formation to Own Overseas Property
Your offshore Company can own your overseas property. In fact, in some cases it will be essential to incorporate a Company in the country where you’re buying a property. Overseas real estate is normally not a reportable asset to tax authorities so it can be a good way to move money out of your home country. It’s also a key part of any back up plan to have assets outside your home country. Often buying property overseas can lead to a second residency or citizenship.
8. Hold Precious Metals Overseas
Precious metals are another asset that’s normally not reportable to tax authorities. If you hold precious metals in an overseas vault it’s best that your offshore company is the legal owner of the precious metals. As the Company is a separate entity you will not have to disclose your precious metals ownership anywhere you’re obliged to disclose your personal assets.
9. Offshore Company Formation for Access to Investment Opportunities
Some investment opportunities are for “high net worth investors only” or “not available to citizens of the USA, Canada or the UK”. Of course your offshore Company will be able to invest in these opportunities where you, as a private individual, cannot. Your offshore company will be the entity making the investment. I’ve never seen companies from Nevis or Panama banned from investment opportunities.
As we can see there are many excellent reasons for offshore company formation. But every situation is different and there is no one solution to sui everybody. To achieve your objectives with an offshore company it’s normally necessary to do some detailed planning in advance. It’s necessary to look at where your main residence is and if there are CFC rules there and what you want to achieve with your offshore company set up.
At Liberty Mundo we help clients from around the world with offshore company formation. We help our clients set up structures that work and achieve the goal set by the client, whether that be asset protection, privacy or reducing tax. Contact us here to start the discussion about setting up your personalised offshore structure.