Setting up an offshore company has become an increasingly popular option for entrepreneurs and businesses alike. Offshore jurisdictions offer a range of benefits, from favorable tax policies to increase privacy and asset protection or expand the businesses into international markets. However, the process can seem daunting due to regulatory complexities and misinformation. In this article, LNT Consulting will walk you through the comprehensive roadmap to successfully establish your offshore company.
Offshore Companies Conception
An offshore company is a business entity that is incorporated or registered in a jurisdiction outside of the country where its beneficial owners reside or where its primary operations take place. These jurisdictions are commonly referred to as “offshore financial centers” due to the below reasons:
– Tax optimization: Offshore jurisdictions may offer favorable tax policies, such as low or zero corporate income tax rates that reduce the overall tax burden on the company’s profits.
– Regulatory advantages: Offshore companies may have less stringent regulatory requirements, reporting obligations, or corporate governance standards compared to onshore jurisdictions, which can reduce administrative burdens and ongoing maintenance costs for your businesses.
– Asset protection: Provide a layer of legal and financial separation between the company’s and personal assets of its owners or shareholders, offering protection against lawsuits, creditors, or other legal liabilities.
– High confidentiality and privacy: Some offshore jurisdictions have strict confidentiality laws that protect the privacy of company ownership and financial information. This can be appealing to individuals or businesses seeking to maintain confidentiality for legitimate reasons.
– Ease of doing international business: Facilitate cross-border transactions, international trading, and investment by providing access to global markets and financial services.
Who should set up the new offshore company?
– International trading company: Offshore companies facilitate cross-border transactions and access global markets easily with reduced administrative burdens and regulatory constraints.
– Holding or Asset Management company: Hold shares from other foreign entities and receive dividends as source of income, or holding other properties. It serves as vehicles for wealth management and estate planning purposes, enabling individuals and families to organize their assets, manage investments, and plan for the transfer of wealth to future generations in a tax-efficient manner.
– E-commerce and online business: Allow you to operate e-commerce platforms, online stores, and digital businesses to capitalize on favorable tax, simplified regulatory requirements, efficient banking services and merchant accounts offered by offshore jurisdictions.
– Consultancy and Professional Services: Businesses providing consultancy, advisory, and professional services such as legal, accounting, IT development, finance, and management consulting can set up offshore entities to serve clients globally, mitigate tax liabilities, and enhance confidentiality.
Key steps to set up the offshore company
Understanding your purposes
Setting up a new offshore company involves various considerations, and understanding its purpose is crucial for making informed decisions throughout the process. So which key points you should consider, let’s see below:
– Business Objectives: Clearly define the purpose of the offshore company (what is your business plan, estimated incoming and outgoing funds, operating countries, target clients, marketing plans,…etc)
– Legal and Regulatory Compliance: Ensure that the company’s purpose aligns with the legal and regulatory requirements of the chosen offshore jurisdiction.
– Tax Considerations: Evaluate the tax implications of the offshore structure in both the home country and the chosen jurisdiction. Seek advice from tax experts to ensure compliance with relevant tax laws and regulations.
– International Business Expansion: If expanding internationally is your objective, choose a jurisdiction that offers financial environment, stability, a robust legal system, and access to global markets.
– Confidentiality and Privacy: Consider jurisdictions with strong privacy laws and regulations. But kindly note that if the company’s information is totally kept confidential, it might be a minus point for your partners if they want to verify your business online.
– Risk Management: Assess the potential risks associated with operating an offshore company, such as regulatory changes, political instability, or reputational risks. Consider and develop the preventive risk strategies to mitigate these risks effectively.
Offshore company structure selection
If you are looking for a highly reputable offshore country with disclosure information, fully tax compliance transparency, easy to access global & financial markets, you should set up the new company in Hong Kong, Singapore or the USA.
If you prefer countries that have tax benefits, high confidentiality & privacy with simple ongoing compliance duties, Seychelles, British Virgin Islands or Cayman Islands will be the good choice for your consideration.
Below is 2 common types of offshore companies that you should be aware of:
International Business Company (IBC) type: Also known as Business Companies (BC), Exempted Company (EC) or even Private Limited Company (Pte. Ltd.)
- Favorable tax for foreign sourced incomes
- The structure normally includes at least one director, shareholder and beneficial owner who can be the same person, no need to have a local company’s members
- No minimum share capital requirements, shareholder’s liability is limited up to the shares they hold
- Not have more than 50 shareholders, restrict shareholders from public share trading
- High confidentiality for both business and its owners
- Minimal annual compliance reporting obligations
- Engage for both international and local trading or investment
Limited Liability Company (LLC) type:
- Low tax or tax exemption for foreign sourced incomes
- LLC in some offshore countries does not allow to trade or buy real estate in this jurisdiction
- Structure includes at least one manager, member and ultimate beneficial owner who can be the same person
- No minimum capital contribution requirements, member’s liability is limited up to their capital contribution into this LLC
- Not allow to issue shares, verify the member’s ownership through membership certificate
- Minimal ongoing compliance paperworks
- The information of both business and its owners will be kept confidential
Check company name and fulfill KYC documents
Select the business name you preferred and get approval from the Public Companies Registry. Normally, your company name should meet the below basic conditions:
- Must be unique and distinguishable from existing entities registered in the jurisdiction. It should not infringe on trademarks or intellectual property rights.
- Must be ended with the correct suffix name such as “Limited,” “Ltd.,” “Corp.,” “Inc.,”, LLC, Pte. Ltd. or other local language in their equivalents.
- Certain words or phrases may be restricted or prohibited from use in company names due to their sensitive or misleading nature.
Each offshore jurisdiction has different requirements on KYC documents. But basically, the below documents will normally required in most cases:
- Notarized scanned copy of passports
- Notarized scanned copy of address proof
- Detailed description on the business activities in 20-30 words
During the application process, the compliance officers might require for additional documents, including but not limited to:
- CV/ Resume or LinkedIn profile of the UBO
- Signed declaration form on the business activity
- Bank or professional reference letter issued within the latest 3 months, confirm the good relationship between the applicant and banker/lawyer or accountant in at least 2 years
Documents submission to Companies Registry
Once the above steps are done, it’s essential to file your application to the Companies Registry. The processing time for your registration will be varied depending on numerous factors (Government’s workload, technical issue, holidays, complexity of your case or additional legal and regulatory requirements).
Once the company formation is done, you will receive one set of corporate documents as below:
- Stamped Certificate of Incorporation
- Stamped Memorandum & Article of Association
- Register of Directors
- Register of Shareholders
- Share Certificate
Keynote: Why should you start your offshore company with LNT Consulting?
- We have expertise, experience and knowledge of different offshore countries, legal requirements to advise you where is the best jurisdiction that suits your business’ goals.
- We do offer tailored solutions to meet the unique needs and objectives of each client, provide personalized advice and guidance throughout the offshore company formation process.
- Commitment to compliance with all relevant laws, regulations, and reporting requirements, ensure smooth procedures
- Our dedicated customer support will reply to you in not more than 24 hours with streamlined procedures, quick turnaround times, and proactive communication to deliver timely results.
- We’re here with you within the whole life of your business, from the company formation, bank account opening assistance and ongoing compliance support
Disclaimer: Although LNT Consulting endeavors to provide timely and accurate information on this website, the content is intended for reference purposes only. The information presented in this article should not be considered a replacement for qualified legal advice. Should you need personalized instructions on your case, we highly recommend that you should reach out to our customer services.
