10 Useful Benefits of Offshore Companies

Why You Should Use an Offshore Company to Protect Your Assets

There are many benefits of offshore companies when used correctly. Unfortunately, most people don’t understand how to take advantage of the many benefits offshore companies can offer.

1. Eliminate or Lower Taxes can be one of the main benefits of offshore companies

• Taxes are increasing worldwide. Business owners have to find solutions to lower or eliminate those taxes to provide a cushion for future growth.
• With offshore companies, you can avoid a lot of these taxes by creating or registering your company overseas. This will enable you to pay less or no tax at all, depending on where you set up and your company’s legal structure. There are many jurisdictions you can set up your company that have zero or very low tax rates.
• Depending on where you live, it may be important to ensure that some of the operations of your company are carried out overseas. It’s important to be aware of Controlled Foreign Corporation rules (CFC rules) when setting up your overseas structure. The benefits of offshore companies are only available to those structures set up with care.

2. Privacy and secrecy

Privacy is being eliminated in many countries. Nowadays, everything must be disclosed to all kinds of organizations. Another of the benefits of offshore companies is to get back some of your lost privacy. You can structure your affairs in a way that makes it impossible for anyone to discover who is behind the corporation.

• No disclosure of ownership
• No need to disclose financial information
• No reporting requirements
• No annual meetings
• No minutes
• No annual filing
• No requirement to file financial statements (except for certain jurisdictions)
• No requirement to file annual returns
• No requirement to appoint auditors

3. Separate Yourself From Your Business

There are two main forms of business; a sole proprietorship, which is owned by one person, and a corporation which can be owned by many people (shareholders). In either form of business, it is possible to draw a line between the owner and the business. For instance, in a sole proprietorship, an owner has all of the rights to profits earned by the business, but he also has unlimited liability for any debt or damages done by the company.

As an example of this, if an employee was injured on the job in a sole proprietorship and sued for medical expenses and lost wages, as well as pain and suffering expenses, this suit could be brought against both the company and its owner. If there are no assets in the name of either entity, then it would be impossible to collect on such judgment.

The benefits of offshore companies are that your assets are hidden from any potential creditor, even if you operate a sole proprietorship.

4. Credibility

Companies have always used offshore jurisdictions to enable them to conduct cross-border business. If your company conducts international business, the use of an offshore company can give it an air of credibility and professionalism in the eyes of your customers.

Companies in the most credible offshore locations, such as Hong Kong, Singapore, or Monaco, add to your credibility when conducting business overseas. That’s another of the benefits of offshore companies.

An offshore company is also a great way to enhance your status when dealing with clients or suppliers outside your home jurisdiction. Of course, this only works when using companies incorporated in the most credible jurisdictions.

5. Asset Protection is one of the key benefits of Offshore Companies

When you organize your business offshore, you get to protect your assets from a range of threats. Whether it’s the threat of business failure or the threat of creditors and competitors, here are some ways that an offshore company can help you preserve your wealth:

• Lawsuits

If you have a business in the US or UK, there’s a good chance that you could be sued at some point in time. For example, if someone gets injured while they’re on your property as a customer or employee, they might sue you for negligence. Or if someone buys one of your products or uses one of your services and it causes them harm in some way, they might sue for damages. With an offshore company, you can create an added layer of protection between yourself and any lawsuits that arise from this type of situation—and with fewer legal restrictions abroad than in the US.

• Divorces

In the US and UK, in particular, divorcing spouses are able to divide up their marital assets according to community property laws. If you fall into this category and decide to start an online business with your spouse after marriage—without registering it as a separate entity first—it’s possible that everything will end up being split right down the middle in case things don’t work out romantically. Even though this kind of asset division is less common outside the US than inside it (especially in countries like Belize), establishing an offshore corporation can still be helpful because doing so allows both parties to maintain more control over what happens to their financial interests.

Of course, there are many benefits of offshore companies when planning for divorce to keep assets out of reach of your spouse. This kind of asset protection strategy can be complex and must be planned years in advance.

6. Difficult for a creditor to sue you

If this sounds a bit like paranoia, you wouldn’t be far off. But the best way to prepare for unfortunate eventualities is by ensuring that your assets are protected from any potential lawsuits.

Of course, there’s no way to completely avoid legal trouble in the first place. No matter how hard you work to ensure that every transaction and every decision is made with complete transparency and honesty, something can always go wrong. An employee could cause an accident on company property or make a mistake that costs your business money; dissatisfied customers could become disgruntled enough to sue you; or perhaps you’ll come up against an aggressive competitor who will stop at nothing to tarnish your reputation and put you out of business.

Whatever the case may be, an offshore company structure can make it much harder for creditors to successfully sue you and get what they want out of it. In fact, many jurisdictions do not recognize foreign judgments—meaning that lawyers won’t be able to enforce them in court if they’re filed against your offshore corporation. But even if they did produce such a judgment, they would have little recourse because it would need to be filed against the corporate entity itself. Any pursuer would have to be aware that you owned the offshore company in the first place.

The Cook Islands has been described by The New York Times as a paradise of Untouchable assets due to the difficulties creditors have in enforcing judgments there.

7. Transfer of wealth to your children easier & more financially efficient

You can transfer wealth to your children or other heirs in the following ways:

• Gift shares to your children or other heirs. Since you have complete control over who owns the company, you can gift stocks and shares to whomever you wish. If there is a need for confidence in financial resources, it will be difficult for creditors to come after them if they are not part of the offshore company. This cannot apply if there was fraud committed by the gift recipient, which caused injury or damage to another person or entity.
• Assign rights over the assets of an offshore company to your children at any time (for example, through a Power of Attorney). In this way, although you retain ownership and control (as a shareholder), it may be possible to manage and use assets without creditors being able to access them.

8. Ownership of overseas assets

• Ownership of overseas assets

You can hold overseas assets in your offshore company. This enables you to buy overseas assets anonymously and own them in the jurisdiction of your choice (where it is protected by law). Many jurisdictions have no capital gains tax for holding property within an offshore company. If you are not a permanent resident in a country or do not live in the country where purchases are being made, then you can also save on income tax.

If you are buying an overseas property, it’s much safer to hold it in a separate offshore company.

9. No withholding tax on dividends

Another benefit of offshore companies is that there is no withholding tax on dividends paid from the company to shareholders. Of course, if the shareholders live in high-tax countries, they’ll be taxed there. It’s easy, though, to set up the structure where the company is owned by a trust or foundation. This makes dividends tax-free too. Again you must be careful with CFC rules when setting up any offshore structure.

10. Easy and inexpensive to set up with professional help

Offshore companies are easy and inexpensive to set up with professional help. It’s important to get advice on the structure you should set up. There are many traps you can fall into and end up creating future problems. It’s worth spending a little extra at the outset to make sure your structure is watertight.

This process is quick and easy once the paperwork is correct. Preferably your assets will already be under the umbrella of an offshore trust or foundation, which makes setting up your company much easier.

If you’d like to set up an offshore company anywhere in the world and receive the best advice on your structure, get in touch with us using the form below.