An offshore company generally refers to a corporation or LLC of the organisation formed in any foreign country. It is quite easy to open an Offshore company due to tax legislation and sound regulation. The incorporation process for setting an offshore company is easy and can be done online in just a few days by spending minimal amount.
The various countries where offshore companies are easy to set are Belize, Seychelles, the British Virgin Islands, Panama, Hong Kong, Singapore and many others. There are no serious legal barriers in moving or shifting your company in any other country, you just have to follow some laws of the country in which you are going to set up your offshore company. In order to open an offshore company your company’s previous records are needed to be clean and do not involve any criminal background.
The European Union is making several attempts to limit the amount of tax avoidance from which the citizens are trying to escape. It is the only reason which makes an offshore company harder to operate even after providing so many benefits.
Before setting up an offshore company it must be essential to take advice from a qualified person in your home country, by doing so you can earn the satisfaction of running your business with the knowledge of every aspect related to law and tax regulations, this is because every country contains some specific laws for the people opening offshore companies.
After winding up all the process of company registration, you have to open a bank account for the company to make the real evidence of your company and to operate the day to day transactions of your company.
It is not possible to manage the offshore company from your home country which means management of the company like invoices, contract signing, billing is needed to be performed in the offshore jurisdiction. If in any case you are found managing the same from your country you have to pay huge penalties as a punishment. The best option to run your offshore business by staying in the home country is you can hire managers or associates for your firm who can manage your business living in the offshore jurisdiction.
The major aspects which are needed to keep in mind while opening an offshore company are:
- You are always liable to pay tax in your home country even if your company does not pay taxes on its revenue offshore.
- You have to open your firm by keeping your customers and business partners in mind if your business is not dependent on the location, it may not matter where your business is incorporated, but they may still not like having to send money into a bank account in a faraway land.
- You have to pay a huge tax in a situation when your employees are working from another country and not in the country where the offshore company is set.
Let’s discuss the bank accounts which are needed to open for the offshore company.
The incorporation process of an offshore business is easy but to open a bank account is difficult many times. The international banks have strict guidelines to follow, this is because of the legislative changes that occurred from the recent year, it is not so easy to open a bank account without proper identity and documentation.
The companies who own an advanced structure like offshore trusts have the opportunity to open a managed investment account with cost around USD 500,000 to 2.5 million minimum balances. To open this type of account an investment manager is required in the country. These bank accounts are easy to open, in some countries, the person who is opening an account has to visit personally for fulling all the necessities.
You also have an option to open your bank account in an offshore bank, these types of banks allow you to open your account via email or sending documents by post, a personal visit is also necessary for some specific conditions. The time limit of opening these accounts is about two weeks. The small offshore banks maintain minimum account sizes between USD 5,000 and 20,000. These types of banks are the best options at the time of starting an offshore business.
These type of banks allow to open a business account but it may cost high for wire transfers, thus, business accounts in these banks for individuals who acquire transferring money for more than 5-7 transactions per month is not always a good option.
After these two, there is one more option which is to open a business bank account at larger commercial banks in the countries like Hong Kong and Panama, but the approval for this type of accounts is difficult. You will need to put a lot of efforts to convince them to open an account for your business furnishing them with a lot of documents after getting success because the bank is exposed to risks of money laundering, tax evasion or involvement in a dispute with our countries.
Different types of companies
1. IBC- International Business Company
IBC is a company like private limited company and it is the most common form which is adapted for offshore business, it includes the following.
- It has a board of directors, shares, and a share capital
- The shares of this company cannot be traded publicly.
- They maintain confidentiality and does not share your details with anyone.
2. Private Limited Company
To adopt this form of company for offshore business, the following things are needed to keep in mind.
- In this form of business, the confidentiality is not strict, as names of directors and sometimes shareholders can appear on the public record.
- To maintain the confidentiality the nominees or corporate directors and shareholders use the corporate entity that is an IBC.
- In private Limited Company, it is mandatory to perform bookkeeping and accounting, sometimes audits are also necessary.
3. Limited Liability Company
This form of business is not so common for offshore business, but it is recommended for the locations like Anguilla, Belize, Costa Rica, Marshall Islands, Panama, Saint Kitts and Nevis, and Delaware (USA). Many LLCs are formed and located in these places.