Known globally as legal entities established in a foreign country, usually with low or zero taxation, high confidentiality, and flexible business regulations, offshore companies offer many advantages for entrepreneurs and investors. However, setting up an offshore company is by far not a simple task. To accomplish it, you will have to choose a suitable jurisdiction, prepare the required documents, open a bank account, and comply with the local laws. Still willing to go ahead?
Below, International Wealth experts will explain how to set up an offshore company in 3 easy steps in 2023.
Step 1: Choose your offshore jurisdiction and company type
The first step is to choose where and how you want to establish your offshore company. Multiple jurisdictions come with varying perks and drawbacks for offshore company formation. Below, you will find some of the factors to consider to make the right choice:
- Tax regime: Certain offshore jurisdictions offer low or zero corporate tax rates, as well as reductions or exemptions on other taxes, including withholding, capital gains, value-added tax, etc. NB: Beware of tax implications in your home country and the states where you do business, as some of them may have anti-avoidance rules or information exchange agreements with the offshore jurisdiction.
- Legal system: Offshore states may come with either common or civil law systems. The legal system affects the offshore company type you will set up, the protection and flexibility level you will enjoy, and the ease and cost of doing business.
- Reputation: Offshore jurisdictions differ in terms of their reputation. While some are recognized in the international business community, others enjoy ill fame, being blacklisted or sanctioned by international organizations. This might affect your company’s credibility and legitimacy, as well as its ability to open bank accounts, obtain licenses, or access international markets.
- Costs: Fees for setting up and maintaining an offshore company differ as well, ranging from low and reasonable in one place to high or hidden in the other. These costs include annual, registration, accounting, and/or legal fees, etc.
After choosing a suitable offshore jurisdiction, pick a company type. Depending on a particular state, you will have the choice of International Business Companies (IBCs), Limited Liability Companies (LLCs), Foundations, Trusts, etc. Each type has its own features and benefits:
- Number of shareholders and directors: Offshore companies may require a minimum or maximum number of shareholders and directors that can be both resident and non-resident individuals or entities or do without such restrictions.
- Share capital: The above entities might need a minimum or maximum amount of share capital or face no such limitations. Paid up or not, the share capital can be denominated in any currency.
- Name: Sometimes, offshore entities require a specific suffix or prefix in their name, like IBC, LLC, or Ltd. The name should be unique and not identical or similar to any existing company name in the offshore jurisdiction.
- Registered office and agent: Having a local registered office and agent, who can provide a physical address and act as a liaison between the company and the authorities is a must in certain offshore jurisdictions.
Step 2: Prepare your documents and submit the application
The second step is to prepare the necessary documents and submit your application to the relevant authority. Depending on the offshore jurisdiction and the company type, such documents may vary. Here’s what they generally include:
- Passport copy and proof of address for each shareholder and director certified by a notary public, a lawyer, a bank, or an embassy.
- Business plan that describes the nature and purpose of the offshore company, its products or services, target market and customers, competitors and suppliers, financial projections and budget, etc.
- Bank reference letter to confirm your good standing and reputation as a customer of a reputable bank issued within 3 months from the application date.
- Name reservation form indicating the preferred name of your offshore company together with 2 alternatives.
- Application form with the basic information about your offshore company, e.g., company type, its share capital, shareholders and directors, registered office and agent, etc.
Feel free to submit the documents and application online or through an intermediary. The latter can help you with the registration and provide additional services, like opening a bank account, obtaining a license, or setting up a virtual office. NB: With numerous scams and frauds in the offshore industry, please be careful when choosing an intermediary.
Step 3: Pay the required fees and receive your certificate of incorporation
The third step is to pay the required fees and receive your certificate of incorporation. Although they vary depending on the offshore jurisdiction and company type, such fees generally include:
- registration fee
- annual maintenance fee
- accounting fee (where necessary)
- legal fee
- intermediary fee.
FYI: You can pay the above fees online or through an intermediary using your credit or debit card, wire transfer, cheque, cash, or crypto. Be sure to keep track of payment receipts and invoices for future reference.
Once you have paid the fees, you will receive a certificate of incorporation from the local authority. The latter is an official document confirming your offshore company’s existence and validity. Here’s the information that it usually contains:
- offshore company’s name and registration number
- date and place of incorporation
- company type
- share capital
- shareholders and directors
- registered office and agent.
NB: Keep your certificate of incorporation in a safe place and make copies for backup purposes. To prove your identity and legitimacy, you may need to present it to banks, suppliers, customers, etc.
Although setting up an offshore company in 2023 is not exactly difficult, purely incorporating one is not enough to enjoy the related benefits. You also need to duly manage and operate your offshore business, following the laws of both the offshore jurisdiction and your home country.
To ensure it stays compliant, be sure to monitor and update your offshore company regularly. Is it too much of a burden? If so, go ahead and consult International Wealth seasoned pros before making that final decision. Not only will they help you with setting up your offshore company but also offer a set of related services to promote your business success.