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How to Start Your Offshore Journey? Opening an Offshore Company in 3 Steps

  • Last updated on 27 July 2023 . Written by Offshore Protection .

Questions to Ask When Setting up an Offshore Company

Establishing yourself offshore has never been more popular, as many people are seeking alternative resources and ways to save money, protect their privacy and assets in times of uncertainty.

Setting up an offshore company   is simple, straightforward and can be completed in a matter of days with just a few basic personal details.

This article is to take you through how to set up an offshore company : from selection, registration, all the way to the formation process in order to break the commonly held idea that a company formation process is a burdensome affair with lots of difficulties and pain along the way.

Below we've outlined a few questions that are important to ask yourself as you begin to decide where to have your offshore company set up, the type of entity you would like to form and how you would like to structure your new company.

How to Set It Up

Creating an offshore company can be broken down into three steps. These days most company formation processes can be completed online with minimal documentation and fees in as little as a few days.

Open in 3 Steps

Offshore company selection - Choose your offshore company jurisdiction, type of company, and company name

Offshore company Setup - Submit fee, business plan and all personal documentation and KYC forms

Offshore company incorporation - Add on any extra services, bank account opening and understand your reporting obligation

1. Selection

The first task it to choose what jurisdiction and offshore vehicle structure is right for you . While not all jurisdictions and offshore structures are created equally and similar in benefits, there are many similarities and overlaps, without as much difference and variances as one would expect.

However, it is important to ask yourself:

  • What is the main function of the entity?

Is it for Asset Protection, Charity, Estate Planning, Charity, Business, Investment, Holding Company, etc. Depending on your needs there are different offshore structures whether that is a Trust, Foundation or IBC, LLC etc...

Due to the continually changing nature of the offshore industry, especially when it comes to offshore tax laws, it is important to have up-to-date information, as local tax laws are increasingly changing due to global corporate pressures.

  • Where in the world would you like to incorporate?

While there are formation vehicles all over the world, it is important to consider:

  • Do you want to visit the destination and have easy access to it?
  • Do you want to live in close geographical proximity?
  • Is the jurisdiction right for my business?

While these are more practical questions. They are equally important to consider as many business owners or individuals like to keep things close to home.

1.1. Tax and Transparency Laws

The next set of questions is likely going to take some research as tax laws are different for each country. To make sure you are tax compliant it's important to speak to a qualified accountant or lawyer to make sure you are not missing anything.

  • What are the tax laws in the offshore jurisdiction?
  • Does the offshore jurisdiction have any tax agreements? Think: Double Taxation Agreements  (DTTs) or bilateral agreements
  • Does the offshore country have any Information Exchange Agreements (TIEAs)?
  • Does my country of residence have Controlled Foreign Corporation CFC laws? This will determine your reporting requirements and obligations to your country of residence.
  • Is my country of residency a signatory of the Common Reporting Standard CRS?  This will determine the level of privacy you will be able to achieve

Certain countries have reciprocal tax agreements such as DTTs that can help reduce the amount of taxes an individual must pay. While DTTs can help you save on taxes, CRS and TIEA do not.

Tax Information Exchange Agreements like the TIEA  are a form of reciprocal tax information sharing that are signed between member countries. While there are still many offshore jurisdictions that are not signatories the number is quickly dwindling as more and more countries are being co-opted by the OCED to sign onto greater transparency measures.

The Common Reporting Standard (CRS) has been signed by over a hundred countries (108 as of this writing(2020)) effectively sharing tax rates and tax information of non-residents amongst member countries.

Controlled Foreign Corporation or (CFC) laws govern how corporations are treated as a tax entity. Every country has its own specific CFC laws and regulations which may or may not affect your company operation and structuring. Some countries have very strict CFC laws that essentially treat foreign corporations as local entities for tax purposes.

All of the above considerations are important as they will influence the company or business structure, location and corporate vehicle that would be used.

Though to a large extent, wherever your primary residence is, will largely determine your tax structuring and whether or not certain privacy services can be used as a means to remove the person from the corporate entity so as to maximize confidentiality, asset protection and privacy.

That is why it is so important to speak with an offshore specialist. Without such specialized knowledge, there is the risk of forming the wrong entity in the wrong jurisdiction, with the wrong corporate structure.

Forming a complete holistic offshore legal plan helps to ensure that all of the pieces are organised and that the offshore strategy fits with you the goals of the company.

     Get a Consultation & Start Your International Plan        Schedule a Free Consultation       

  

1.2. Foreign Entity with a Bank Account

If you are starting an offshore company merely as a holding company for intellectual copyright for instance, then the following questions would not need to be asked. However, if you are entering into any type of financial transaction with clients or customers then you need to ask?

  • Do I need a personal or corporate bank account with my company?

Opening an offshore bank account in many places does not need to be done in person and can be completed online.

However, the offshore banking industry has changed dramatically in the last few years and in many places, it is required to have a local company formed in the jurisdiction, requires more extensive background checks or more documentation.

While that is not always the case, it is becoming more common in places like Singapore, Panama, and Hong Kong where there are more restrictions, higher price tags and more due diligence.

Still, there are offshore jurisdictions like St Vincent, Nevis, or Andorra that do not require a local company and can be opened virtually without any in-person requirements.

Another important question:

  • Do you have a virtual or internet-based business?
  • Are you going to need a merchant account or payment processing?

If you are an online eCommerce site or are a company that needs to take online credit payments then setting up a merchant account or a similar payment process application is another piece of the offshore puzzle that needs to fit.

And Lastly:

  • Do you require any corporate, management or secretary services for your company?

There are a number of associated  corporate services  that can be coupled with your offshore structure, such as: professional management, nominee services, secretarial services, mail forwarding, re-invoicing, virtual offices etc...

Offshore Company Setup

Once you have picked your offshore jurisdiction and company formation drawing up Articles of Association creates a legal document for the formation of the company.

The company-by-laws will layout the responsibilities of the Directors/Shareholders and create an internal structure for which the business operates.

The importance of a properly structured offshore company setup is obvious. Though often carelessly done, a  company setup structure is especially important to properly secure assets and protect the privacy of the individuals in case of legal or financial duress. 

This becomes essential if there is a complex arrangement of companies or businesses, trusts, of foundations existing in a multi-jurisdictional arrangement with many directors, and owners.

2.1 Structuring

If a beneficial owner wishes to remain anonymous , in some rules and jurisdictions its is possible to use nominee shareholders or nominee directors that act as third party actors whose name and details will be recorded on the legal documents and accounts, however, they will remain fully under the purview of the beneficial owner who still maintains direct control of the company, yet remains unaffiliated. 

For entrepreneurs, investors, or individuals looking to maintain privacy, the use of a second LLC or IBC as a corporate director and shareholder can be used so that no individual's identity remains on the corporate registry.

While most offshore jurisdictions still have very strict privacy and banking secrecy laws, like the Cook Islands, and Nevis, there are many countries like the US and many parts of Europe that require individuals to declare and foreign ownership of a corporation, thus making your obligations to declare any companies and assets an obligation required by the country where you live. 

If you are lucky enough to live in a country that does not have CRS or any overly restrictive CFC laws, then you may be able to have a purely tax free entity that for all intents and purposes can remain anonymous.

Due to the change in many countries' transparency laws foreign governments, if you live in a country that is a signatory of the CRS then your government will have greater access to your foreign corporation information. However, these records would only be available to YOUR home government, and would not be apart of the local public registry. It just depends on the level of privacy and confidentiality that you are seeking. For most individuals, this is not much of an issue. However, if you are looking for complete anonymity and you live in a CRS member country, the only way to remain anonymous is to move to a tax haven or low tax country that is not a signatory.

   

    Safeguard Your Assets With the Strongest Multi Jurisdictional Asset Protection Structure in the World       Read the Guide →    

2.2 Filing Documents 

Company registration requirements consist of: 

  • name of director(s) or beneficial owner
  • copy of passport
  • proof of physical address
  • processing and governmental fee

However, depending on the company and jurisdiction there might be a few more minor pieces of documentation such as more comprehensive Due Diligence or Know Your Customer (KYC) forms, a more extensive background check, that will need to be completed before the registration process can be finalized.

In some jurisdictions, requirements for opening an offshore bank account have become tighter and can require banking or professional reference letters, and a copy of a business plan.

This process usually takes a matter of days upwards of 1-2 weeks depending upon the jurisdiction and if there are longer background or due diligence checks.

set up an Offshore Company

3. Incorporation 

Once the appropriate offshore company registration and government fee are received together with all the necessary documents the application is sent to the relevant company registry. If the registration is not successful it is usually because the documentation is insufficient or they require a more thorough background check. However, in most cases more extensive checks are not required and offshore companies are formed without much trouble.

If successful, hard copies of the incorporation documents, or scanned versions detailing the specifics of your newly formed company along with a notice documenting any future annual fees that might be required by the jurisdiction. 

Corporate documents are usually received 6-8 weeks following company registration although the company registry number will already have been issued after the successful application usually within days to a week or two upon successful completion of the application.

    

Are You Ready to Incorporate Overseas?

Setting up a company offshore while it can be completed in just a few steps does take some research and someone who has walked this path before. Offshore company registration though simple, is not easy. Making sure you pick the right structure, in the right country for your business requires some careful deliberation.

Without A Customised Legal Strategy, You Put Yourself At Risk.   A Personalised Offshore Protection Plan Makes Sure You Are Protected.  .       Book a Free Consultation     No Obligation. Absolutely Free. Completely Confidential.   

*Note for U.S. citizens: US citizens are limited in their tax reduction possibilities due to FATCA and CFC laws. Opening an offshore company can increase privacy and asset protection, but you can not eliminate your taxes without giving up your citizenship. If you are a US citizen you are obligated to pay taxes on all worldwide income. 

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business plan for offshore company

For example, Apple has $157.8 billion in cash sitting overseas and reported the biggest quarterly profit in corporate history this month. Microsoft and Google, not to be outdone at offshore business planning, hold about $82.1 billion and $60 billion respectively overseas.

While tech companies are often better suited to offshore business planning, these laws can be used by anyone willing to diversify abroad. For example, General Electric holds about $110 billion offshore. Other big time offshore business planners include tech and pharmaceutical giants such as Pfizer, Merck, Johnson & Johnson.

According to Forbes, U.S. companies seeking to avoid high corporate tax rates stockpiled an additional $154.5 billion overseas in the last year, bringing the grand total to more than $2 trillion (link is to Forbes).

But, here’s the thing: U.S. laws may have been designed by lobbyists for big corporations, but they apply equally to all of us entrepreneurs. Whether you’re a one man shop or a medium sized venture with millions in sales and 100 employees, offshore business planning can help you cut your taxes, increase profits, and protect your assets from frivolous lawsuits.

  • Our team of US expats has decades of experience offshore… and we live what we recommend. We are all American expats and Premier operates from Panama and Belize.

Here are just a few of the areas our offshore business planning service can help:

Planning Your Offshore Strategy: Beginning with the jurisdiction and then the type of entity, we will design a custom offshore business structure that will reduce your worldwide tax obligations, diversify your business abroad, and protect your asset.

For example, let’s say you have an ecommerce business. Together, we decide that the country of Panama is the most efficient jurisdiction for the parent company and call center:

  • the business can be structured to eliminate local taxes,
  • low cost English speaking employees are available,
  • the country offers excellent internet connectivity,
  • banking and ecommerce are available at competitive rates, and
  • 5) visas are available for you and your executives.

Next, we decide to add an offshore subsidiary in the country of Belize to receive payments from clients outside of Panama. Panama will not tax foreign sourced income, so billing through a subsidiary is efficient.

Then we transfer existing and future intellectual property in to subsidiaries incorporated in Cayman Islands. The Panama corporation licenses the IP from these companies, providing another level of asset protection, country and currency risk diversification, and tax mitigation.

Finally, we wrap all of this up in to an offshore trust or a Panama Foundation to maximize privacy and protection.

Offshore Staffing and Visa Issues: As expat entrepreneurs we bring years of experience to your team. We can help you find, qualify, and manage employees and independent contractors.

We can also help with work and business visas for you, your family, and your executive team. Some of our visa programs are proprietary and, depending on your country of operation, can reduce costs and speed up you entrance to the market.

Onshore and Offshore Merchant Accounts: We can negotiate both onshore and offshore merchant accounts on your behalf with ISOs and acquiring banks around the world. The country and structure selected will depend on many factors and we have experience in all levels of merchant processing.

Of course, if you are going to go offshore, you should go all the way. Moving your credit card processing offshore has many benefits. So long as you have an office with employees offshore, your discount rates will be reasonable.

Some clients require U.S. banking and credit card processing. We can assist you to find the best processor for your niche and mary your desire to go offshore with your need for a U.S. account. Such a structure adds layers of complexity to your offshore business plan, but we can guide you through the minefield.

For a detailed description of the offshore merchant account, see my article: How to Get an Offshore Merchant Account .

International Tax Planning: We are one of the few firms offering international formation and tax planning services to small and midsized businesses. Our offshore business plans are specifically designed for closely held companies looking for the same tax and business benefits available to the multinationals.

For example, we might develop an offshore plan that allows you to qualify for the Foreign Earned Income Exclusion , draw a salary of up to $100,800 tax free from your active offshore business ($200,000 p.a. for a husband and wife), and retain earnings over an above the FEIE tax deferred. For more on this, see my article on retained earnings in an offshore corporation .

Or, as mentioned above, we might decide that an IP holding company is the cost effective way to move a portion of your profits from foreign sales out of your parent company.

Another offshore business planning technique making headlines is the offshore inversion . This is where your business buys a foreign competitor (doesn’t need to be a competitor, but that is the most common) based in a low tax country. At the end of the transaction, the tax home of the business becomes the low tax jurisdiction, greatly reducing your worldwide tax obligations. That is to say, the tax home of the company is “inverted” from the U.S. to the low tax country.

If you, your business, and your employees must remain in the US, and you don’t have significant foreign sales, an offshore captive insurance company might be the solution. An offshore captive will allow you to move up to $1.2 million per year out of your U.S. corporation on on to the books of your offshore insurance company. That is to say, you pay insurance premiums to your offshore insurance company of up to $1.2 million which are deductible to your U.S. company.

The offshore captive is most effective for a U.S. based business with at least $500,000 p.a. in net profits it wants to move offshore for several years.

We can assist with these and other offshore business planning techniques. Every situation is unique and we will build a plan that fits your needs. Maybe a “double Irish,” or a “double Irish with a Dutch sandwich,” fits the bill. Or maybe you have significant capital gains and will benefit from a US complaint offshore life policy. Or maybe a merger or JV with a foreign partner that minimizes both taxes and reporting fits your goals. No matter the situation, we can help.

All you need to benefit from these offshore planning strategies is a guide. Our team has decades of experience advising entrepreneurs and navigating international waters… and we are US expats living what we recommend. [br][br][br][br]

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Home > Offshore > How To Setup Offshore Company: 2024 Guide

Business Offshore How To Setup Offshore Company: 2024 Guide

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Table of Contents

Offshore companies are defined as a corporate entity that does not operate domestically in the jurisdiction it is incorporated in, but rather conducts its business activities in foreign markets. The main reason for doing so would be to gain access to favourable tax regimes and to facilitate global trading and expansion. Despite their traditionally negative association with money laundering and tax fraud, it is completely legal to setup offshore company .

Let Tetra Consultants take you through the steps on how to setup offshore company in the most suitable jurisdiction and with the most suitable business structure to help your business to expand and grow globally. 

There are four main steps to legally setting up an offshore company. 

  • Choosing a jurisdiction
  • Offshore business set up
  • Offshore bank account opening
  • Remaining compliant 

By following these four steps, you can expect to have a seamless and successful offshore company incorporation .

how-to setup-offshore-company

[ps2id id=’step1′ target=”/]Step 1: Choosing a jurisdiction

Offshore jurisdictions can be split into the categories as follows: traditional tax havens, zero-tax jurisdictions, and legally tax-exempt jurisdictions. 

In most cases, Tetra Consultants would not recommend setting up in traditional tax havens as they are usually on the Organisation for Economic Co-operation and Development (OECD) and European Union ’s (EU) greylist or worse, blacklist. This category of jurisdictions includes Seychelles , the Cayman Islands, and Mauritius . Usually, regardless of whether they are currently part of the blacklist, the connotation of being a tax haven would remain. This increases the level of scrutiny by banks and tax authorities on your offshore business, and also results in a lack of credibility when dealing with suppliers and customers. This cancels out any benefits in terms of a low tax rate, except in certain scenarios where no tax reporting or transactions are required, for example using your offshore company as a personal or investment holding company. 

Zero-tax and legally tax-exempt jurisdictions offer a 0% tax rate through competitive tax subsidies or do not have corporate tax. Compared to traditional tax havens, they have stricter financial reporting requirements, offering them more credibility to facilitate any business dealings you might have. Companies in such jurisdictions are suited to a wide variety of purposes, including import and export or investment companies. 

[ps2id id=’step2′ target=”/]Step 2: Offshore business set up

Choosing a company structure.

There are three main types of offshore company structures: corporations, partnerships, and sole proprietorships, and lastly, foreign offices. 

Partnerships and sole proprietorships might be easy to incorporate, but they do not offer limited liability. Foreign offices are usually restrictive in the scope of activities they are allowed to undertake, and also face the same drawback of unlimited liability. Therefore, corporations, or more specifically a private limited company, would be the most common and suitable option for our investors since it offers a good balance of being easy to incorporate, protection from liability, and ease of succession.

Before every engagement, Tetra Consultants will seek to understand your business activities and goals to recommend the most suitable jurisdiction and company structure for you to reap the most benefits from offshore company incorporation . 

Company incorporation

Your chosen jurisdiction might come with additional requirements. Common ones include:

  • Name reservation
  • Tetra Consultants will also help you to conduct a name search and reserve your preferred, unique name with the Company Registrar.
  • Local director, shareholder, or secretary
  • Tetra Consultants can offer you nominee director and shareholder services to help you meet this requirement or for additional privacy. We will draft an agreement that ensures this director will have no decision-making power in your company.
  • Certain jurisdictions also require a local secretary or management company. Similarly, Tetra Consultants can help you to meet this requirement. 
  • We also offer virtual and local office services to help you handle correspondence from government services and banks.
  • Paid-up capital 
  • This includes the Memorandum and Articles of Association, business plan, and other corporate documents. We will draft these documents to prepare them for submission, and also courier them to your preferred address once they have been approved.

Certain jurisdictions might also require a management company, corporate service provider, or registered agent to process your application. If this is the case, we will assign one to your company. 

Tetra Consultants aim to help you fulfil all these requirements so that you will not experience any delays in offshore business set up. We hope to deliver a seamless and hassle-free offshore company incorporation experience to all our clients.

[ps2id id=’step3′ target=”/]Step 3: Offshore bank account opening

Tetra Consultants works with an extensive global network of banking partners to ensure that you are able to open your offshore bank account smoothly, and without travel if possible. If a face-to-face meeting is required, we will negotiate with the bank to provide our clients with alternative modes of identification such as video conference calls or visiting a bank branch in their home country instead.

Such multi-currency offshore accounts allow your offshore company to facilitate international transactions conveniently and offer access to new banking and payment options that might not have been available to you domestically.   

[ps2id id=’step4′ target=”/]Step 4: Remaining compliant

The last but often overlooked step of how to setup offshore company is fulfilling all the tax and accounting obligations.

Different jurisdictions have different requirements, but rest assured that our accounting and tax team will help you to prepare the necessary financial statements and corporate tax returns to ensure you can continue to operate legally. We will also file these documents with the relevant authorities as required.  We will also help you to apply for additional required licenses based on your business activities. 

How we can help you to setup your offshore company

Contact us  now to find out more about the comprehensive range of offshore incorporation services that we offer, and our team of experts will revert within the next 24 hours.

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Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at [email protected] for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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business plan for offshore company

Setting Up An Offshore Company: A How-To Guide

Are you looking to set up an offshore company? If so, you’re in luck! This how-to guide will walk you through the process step-by-step. It’s important to do your research before setting up an offshore company, as there are a few things you need to take into account. In this guide, we’ll discuss the benefits of setting up an offshore company, as well as some of the most popular jurisdictions for doing so. We’ll also provide a checklist of what you’ll need to get started. So without further ado, let’s get started!

What Is An Offshore Company?

An offshore company is a legal entity that is incorporated in a jurisdiction outside of the country where it conducts business. Offshore companies are often used for tax minimization and asset protection purposes. There are many benefits to setting up an offshore company, including reduced taxes, increased privacy, and greater flexibility. However, there are also some risks associated with offshore companies, so it’s important to do your research before setting up one.

1) Look For Offshore Company Formation Services

The first step is to look for an offshore company formation service. This can be done easily by doing a quick Google search. There are many different services out there, so it’s important to check them all and choose one that’s right for you. Also, if you want to learn more , make sure you do your own research and find out as much as possible. Once you’ve found a service that you’re happy with, the next step is to fill out their online application form. This will usually ask for basic information about your company, such as its name, registered address, and contact details. You’ll also need to provide some personal information, such as your name and address.

Once you’ve submitted the form, the company formation service will take care of the rest. They’ll usually provide you with a registered address and contact details for your company, as well as a few other things. In most cases, they’ll also set up a bank account for you and help you with the process of setting up an offshore company.

2) Check the Jurisdictions For Offshore Companies

There are many jurisdictions around the world that offer favorable conditions for offshore companies. Some of the most popular jurisdictions for setting up an offshore company include the Cayman Islands, Delaware , Hong Kong, Mauritius, and Seychelles. Each jurisdiction has its own benefits and drawbacks, so it’s important to do your research and choose the one that’s right for you.

Once you’ve chosen a jurisdiction, the next step is to check the requirements for setting up an offshore company. In most cases, you’ll need to have a registered address and contact details for your company, as well as a few other things. Once you’ve met all the requirements, you can then proceed to the next step.

3) Meet all the Requirements and Submit the Necessary Paperwork

As we mentioned above, each jurisdiction has its own requirements for setting up an offshore company. Besides having a registered address and contact details for your company, you will need to submit articles of incorporation, share certificates, and bank references. In some cases, you may also need to provide a business plan or proof of financial capacity. Articles of incorporation are usually provided by the company formation service, but you may need to get them from the relevant authorities in your jurisdiction.

Share certificates are documents that state how many shares each shareholder owns in the company. In most cases, you’ll need to have one share certificate for each shareholder. Bank references are letters from your bank confirming your financial history and ability to repay debts. These are usually required by banks when you’re applying for a loan or line of credit.

Once you’ve gathered all the necessary documents, the next step is to submit them to the relevant authorities. In most cases, this can be done online through the company formation service’s website. However, in some jurisdictions, you may need to submit the paperwork in person.

After you’ve submitted the necessary paperwork, you’ll need to wait for the authorities to approve your application. This can take a few weeks or even months, depending on the jurisdiction. Once your application has been approved, you’ll be able to officially start operating your offshore company.

Consider The Pros And Cons

Before setting up an offshore company, it’s important to consider the pros and cons. One of the biggest advantages of doing so is that it can help you to save money on taxes. Offshore companies are often taxed at a lower rate than their onshore counterparts, which can lead to significant savings. Another advantage is that it can offer greater flexibility when it comes to your company’s structure. For example, you can choose to have a holding company or a wholly-owned subsidiary.

However, there are also a few disadvantages to setting up an offshore company. One of the biggest is that it can be difficult to open a bank account. This is because banks are often reluctant to do business with offshore companies. Another disadvantage is that it can be difficult to get access to the necessary funding. This is because most investors are wary of investing in offshore companies.

Types of Offshore Companies

There are two main types of offshore companies : holding companies and wholly-owned subsidiaries. Holding companies are used to hold assets such as shares in other companies, property, or investments. Wholly owned subsidiaries are used to conduct business activities. The first one offers greater flexibility when it comes to taxation, while the second one is simpler to set up. Also, note that there are other types of offshore companies, such as trust and foundations. Trust companies are used to manage assets on behalf of a third party, while foundation companies are used to support charitable causes.

If you’re thinking of setting up an offshore company, it’s important to do your research and make sure that you understand the pros and cons. Once you’ve decided that it’s the right move for your business, follow the steps we’ve outlined in this guide and you’ll be on your way to setting up a successful offshore company. Good luck!

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What is an Offshore Company and where to start your Offshore Business

Many have likely heard the term “offshore company” before. It’s been a hot topic in the political landscape for quite some time and is often viewed in terms of being a legally grey area. While many people have heard of the term and understand the most basic concepts behind what these companies do and how they impact our economy, there is often quite a lot of misunderstanding in regard to the way they work. Let me explain what is an offshore company and and where to start your offshore business

Below, I’ve gathered resources to provide you with a clear understanding of what it means to be an offshore company, where many of them are located and how they work. Upon reviewing the article, it’s my hope that readers will have a better understanding of what an offshore company really is, how they operate, and the impact they may have on our overall economic situation.

What Does “Offshore” Refer To?

The definition of the word offshore has many different meanings. Originally, the word began as a way to describe situations or items that were not located on the shore of a country or island. For instance, offshore may have referred to someone moving to a foreign country.

Alternatively, people may say that a ship was offshore, in that it was some distance from the shore of the country or island. This second definition was common among naval units in regards to where specific ships were located. However, the word began to evolve as time went on. As some would say that someone lived offshore, referring to another country or island, the idea began to grow.

Slowly, business owners and entrepreneurs would be referred to as having moved their businesses offshore, which effectively meant to another country. This is how we come to the meaning of the word as we know it today.

Offshore often is synonymous with the word abroad , and workers for offshore companies from the United States may refer to themselves as “working abroad.”

What does it mean to have an offshore company?

Now that you understand the meaning of the word offshore itself, you can likely infer the meaning of the offshore business.

Ultimately, companies that out-source their work to other countries are often considered offshore compies and may be either partially or fully established outside of the United States , with their primary operation and business functions often taking place in the States.

Typically speaking, owning and operating an offshore corporation requires a variety of permits and registrations in order to maintain business within the United States legally. These companies often will create branches of their company in other locations worldwide.

Offshore locations are often assigned a specific set of tasks or specific operative measures. Some companies operate almost completely offshore, with only their primary business functions taking place within the United States . Others will utilize offshore employees for specific tasks, such as customer service .

To be legally considered an offshore business, however, it is important that business owners properly register their offshore companies prior to out-sourcing their work in this manner. Individuals who own businesses with offshore offices must go through a legal registration process with the country they intend to out-source their work in.

Often, you will need to have a registration agent assist you in this process, as many countries work with select registration clients to ensure safety and policies are being enforced in the offshore company.

Many individuals believe that starting an offshore company, means that the business owner will relocate to live in the country they will be out-sourcing their work to . However, many business owners may choose not to do this.

Offshore companies are often opened for a variety of money-saving reasons .

Effectively, creating an offshore company is to create a company or assign tasks for your company abroad while still maintaining primary operations within the United States.

Offshore Companies: Global Jurisdictions

By this point, we have learned that offshore companies are owned by United States residents and operated overseas. However, we have yet to address where the majority of these companies are operated.

Ultimately, where business owners choose to house their offshore company will depend upon a variety of reasons, such as:

  • The kind of work they are looking to out-source.
  • The benefits they are seeking for opening an offshore company.
  • The legal restrictions involved in opening a business in specific countries.
  • How much they are looking to pay offshore workers.
  • The accessibility of the company for legal and liability reasons.

These are only some of the driving factors behind what will help individuals determine where to open their offshore companies. Often, a driving factor behind choosing to open an offshore business is the benefits that may be reaped from the creation of the business in the long term.

Additionally, many business owners choose to open branches of their businesses overseas due to an abundance of affordable labor when compared to the United States.

Combining these two factors, many offshore businesses are able to easily create profits , which can then legally be stored in a bank account offshore .

Storing funds offshore allows individuals to avoid being taxed for these funds, as they are considered foreign revenue and only applicable to tax laws in the nation the business is run in.

That being said, there are several countries that are often selected as they meet the needs of the employer in regard to their business while also providing them with additional benefits, which will be discussed later in the article.

The countries that are most often selected for offshore businesses are discussed below.

Belize is often a popular choice among many individuals looking to open an offshore corporation, as the country is known for its International Business Company .

These are companies that operate foreignly in Belize and reap a variety of benefits that are not provided overseas, such as:

  • Virtually no taxes for corporations through the IBC. Businesses operating from overseas are not taxed for operation, saving business owners thousands of dollars a year in taxes.
  • Long-term business stability, as Belize has a strong workforce. Many foreign-owned companies have shown that it is relatively easy to thrive in Belize.
  • Foreign banking and business protection provides business owners with the ability to guard funds that are earned within the country.
  • IBC provides protection for foreign businesses and makes it relatively easy to begin operations, making it an easy decision for many business owners.

Additionally, many offshore business owners have advised that operating in Belize allows them to utilize affordable labor , depending on the types of skills they are seeking.

Employees are often dedicated to their jobs, willing to put in long hours, and can easily be transitioned to alternative tasks at need .

This type of workforce is great for offshore companies. Often, this allows owners to save even more money in labor costs , increasing revenue. However, IBCs do still require the business owner to maintain a line of liability, even from afar. Unlike in other countries that are often a popular selection for an offshore company, business owners are responsible for the operation of their company. This means that any major liability issues may have to be handled by the business owner or their representatives .

Ultimately, the business structure for foreign companies in Belize makes it a great choice for individuals who are looking to create powerful, prosperous companies while saving money in taxes and labor costs.

If you would like to learn more, check out my Belize Business report.

While this is a less popular place to see an offshore company, there are many reasons that a business owner may choose to open a business in Hong Kong .

With the ease of opening and the country’s operation policies, it is no surprise that many individuals will choose to host foreign operations here.

One of the most important reasons that many people choose Hong Kong for their offshore company is that it is known for having a stable economy . This can be important when selecting a location for your offshore business, as it sets a precedence for success in the long term.

A stable economy provides business owners with a steady workforce and ensures that profit generation is consistent. Furthermore, Hong Kong has a generous taxation policy .

The country is known for its relatively low tax rates for corporations and business owners.

Additionally, various regions and locations have signed tax treaties with the nation to provide additional tax breaks for offshore corporations. Therefore, business owners are able to operate their businesses with little to no taxation , depending upon where the business they are founding originates from.

Finally, one of the biggest attributes that individuals appreciate in owning and operating an offshore company in Hong Kong is the ability to operate a business there while remaining abroad .

Creating an offshore business in Hong Kong does not require immigration or presence in order for businesses to be established, but will require presence if you want to set up a bank account in Hong Kong. By working with a business agent in the Hong Kong area, business owners can easily get the permits needed to begin running their business and start operations.

Easily being able to start a business, combined with affordable taxation and a stable economy, makes Hong Kong a prime location for many individuals who are looking to operate their business from afar.

As business owners are not required to be physically present to oversee the operation of their company, they often are not held liable for any major incidents that occur, providing the additional layer of security needed to found their offshore company in the country.

Cayman Islands

This region is one of the most popular locations for offshore businesses.

Most importantly, for most overseas business owners, this region of the world is considered a tax haven , as taxation is minimal to nonexistent .

Therefore, business owners are often not required to pay even a portion of their earnings back to the country their business is established. Offshore companies established here are able to profit easily.

In addition to the low tax rates associated with this region of the world, many offshore company owners will start their business here because of the overall cost of labor .

Typically speaking, they can pay employees half as much as they would within the United States, and that is considered an acceptable rate.

This allows business owners to profit while still being able to pay employees easily.

Companies that are started in the Cayman Islands often have to only go through a simple application process to begin operating. This is great for business owners who are looking to get their company off the ground overseas quickly.

As in most cases, the owner is not legally required to reside within the Cayman Islands; it makes it easy to own and operate their business from afar.

British Virgin Islands

Much like the Cayman Islands, this area of the world is considered a tax haven. Business owners who start their offshore company here will be able to take advantage of a variety of benefits offered to them. As with Belize, IBD is also available here , allowing business owners to establish their business and begin operations easily.

business plan for offshore company

The British Virgin Islands are also a great place to start an offshore company due to the fact they are well known for being financially stable and secure – meaning that offshore businesses are less likely to fail and more likely to profit, overall, upon establishing a business in this country.

With the addition of low-to-no tax rates , this is a great area for individuals to operate. They are able to save money easily, and in many cases, they are not required to pay taxes on income earned through business operations.

This makes it easy for owners to profit, though if they have chosen to establish an IBC company , they may be held liable for any issues that occur overseas. Don’t miss my report on British Virgin Island Business .

Easily one of the most popular places individuals will choose to start an offshore company, Singapore is a city-state that provides many benefits for employers , as well as affordable labor costs , making it a great choice for business.

This region of the world is considered especially financially stable , making earning money in these districts statistically more likely than in other regions of the world. One of the selling points of opening an offshore company in Singapore is its generous tax rates .

Often, business owners are not required to pay taxes on dividends earned in the country .

This is great for business owners who are looking to avoid high tax rates , as often dividend earnings are heavily taxed in the United States. Moreover, the application process in Singapore is relatively simplistic , and with the help of an offshore agent, businesses can often be up and running relatively quickly .

With a high population of individuals living in the city-state, it is easy to find employees who are ready and willing to work, keeping the overall workforce strong and stable .

These factors make it easy for companies in this area to generate revenue, even when the business owner is located abroad. And here are more Infos on Singapore Business and tips.

Mauritius Offshore Banking

Offshore Company Pros & Cons

As can be inferred from reading previous sections, there are some obvious benefits to owning an offshore company. However, there are also downsides that can be discussed.

Below are several of the primary benefits and downsides of owning an offshore company. While this may not be a complete list, it outlines many of the reasons business owners choose to start companies offshore . When it comes to running an offshore business, owners want to ultimately consider what is in the best interest of their company, and how they intend to generate profit.

There are multiple advantages to generating profit offshore that owners are often not able to take advantage of within the United States.

Being able to run your company anonymously has many benefits for employers.

While many of these benefits depend on the offshore company and its owner’s overall intentions with revenue generated from the company, being unknown can be universally beneficial for owners.

To begin with, owning a company overseas anonymously allows owners to generate revenue and profit that may not have to be legally reported in the United States.

Additionally, it allows owners to stay out of the view of the public eye . Any line of business may experience hardships, pay cuts, or temporarily go under. Being able to avoid public attention, should this happen, is often a great way to maintain the overall face of the company.

Lastly, remaining anonymous allows business owners to conduct whatever form of business they like – whether it is politically or morally correct or not. If it is legal in the country, they are performing operations; they are legally allowed to let these events take place.

Business owners who are looking to develop an offshore company catering to those who have needs that may not align with traditional American morals are far more likely to open an offshore business to conduct that type of work.

In the United States, there are often many steps business owners will have to go through in order to be allowed to operate in public.

There are many different licenses and requirements that must be met prior to business starting, as well as many different labor laws and accommodations that have to be made for employees.

Ultimately, the process of opening a business, as well as running and maintaining business credentials, can be relatively difficult for business owners. Conversely , opening an offshore company is relatively simple , in most cases.

By utilizing the assistance of an offshore agent, business owners can often quickly and easily obtain all the licensures they need to start operating as soon as possible.

Companies that help offshore businesses apply for operation have streamlined the process, making it both simple and affordable to get their business off the ground and running in no time.

Financial privacy

Wealthy business owners often seek out financial privacy, as they do not want the public – or, in some cases, the government – to know what type of revenue they’re making or how they are earning it. In establishing an offshore company, businesses are able to open corporate accounts at a number of foreign banking institutions.

Financial information from these accounts often does not have to be shared with the local federal government unless legal documentation is obtained to say otherwise.

Many business owners will utilize these offshore accounts to store funds they want to avoid taxation on. For instance, if an individual owns an offshore company, they may then send private funds from their accounts in the United States to these offshore accounts, allowing them to have less overall earnings and avoid falling into a higher tax bracket in the US. This can be detrimental to the economy here, as tax avoidance creates a lack of funding for local projects and programs.

Asset protection

This is another morally-grey benefit.

For individuals who are looking to protect assets and avoid the seizure of funds due to issues within the United States (such as tax evasion, lawsuit payments, child support, and other federally regulated fines and fees) operating an offshore business provides these individuals with the ability to have funds that are protected overseas.

For individuals who are concerned about their money and the potential seizure of their funds, an offshore company is a great way to ensure these funds – as well as any funds accumulated through these companies – are protected.

As they are considered foreign funds, they cannot be seized by the United States. This ensures they are able to maintain their financial status without fear of repercussions.

While this can greatly benefit offshore company owners, it can often be damaging to the United States economy and legal system, as it is a way to avoid paying fines, fees, and associated taxes required based upon your income bracket. It benefits the owners, as they are able to secure their earnings in an offshore account.

Lawsuit protection

In the United States, business owners can be liable for a variety of different issues.

From health and safety issues such as customer and employee injury to issues with products or company operations, all the way to issues regarding copyright infringement, businesses may often find themselves in legal trouble.

Establishing an offshore company allows these business owners to be no longer liable for such issues. While this may seem nonsensical, in the long term, it makes sense.

In many cases, the owner of an offshore company is not physically present to run their company and often have a team of operators who are stationed in these areas to see to it that business is run as usual.

Therefore, as the owners may claim that they were not there to oversee the business operations, they are often able to negate any claims of liability. This is great for business owners, as the stress of potential issues can be phenomenally decreased.

However, it can often create problems in other parts of the world, as offshore company owners are not held responsible for business operation issues. Subpar workplaces, low wages, and unfair treatment often take place in these businesses as a result of this.

Many Americans complain that companies who are attempting to profit are sending jobs to an offshore company as that way, they are able to easily pay lower wages and not provide benefits to employees – which causes the individuals at these companies to suffer.

Primarily the reason many individuals choose to open an offshore company, taxation in many jurisdictions is a major benefit to running an offshore corporation.

Businesses in many of these areas of the world are often not subjected to tax rates, no matter how much revenue is earned overseas. In the United States, the highest-earning companies may be required to pay up to fifty percent of their yearly earnings in taxes. Read more on United States Business

Offshore business owners utilize these low tax rates in order to save money and increase overall revenue for their businesses.

This is yet another reason many individuals have issues with offshore companies, as creating companies abroad can be seen as a form of tax evasion in the everyday American’s eyes.

And as many individuals will utilize these low taxation rates while simultaneously transferring funds that were earned in the United States to corporation accounts overseas, these business owners are able to evade further taxation by minimizing supposed revenue.

Disadvantages

One of the biggest disadvantages that many offshore business owners face is the inability to oversee operations directly. Given issues such as cultural aspects, time zones, and communication errors, many businesses may not be run the way owners initially expected, which can create some friction in the workplace. Furthermore, another disadvantage to owning an offshore company is the lack of guarantee of stability.

In the United States, many business owners are well aware of the local economy, political issues, and other factors that may impact the success of their businesses. However, in owning an offshore corporation, it is easy to miss critical information that could potentially cause a business to fail.

This can lead to financial issues for the owners, making it difficult for their business to continue to thrive, even within the United States.

Offshore Company Operations Explained

Keep in mind; there are several offshore companies that do out-source work – about half of all offshore companies will out-source work to other regions for benefits, including taxation and affordable labor.

However, many business owners choose to set up their company’s legal foundation in a foreign country while operating within the United States. This is often done in order to secure a foreign bank account and reduce the risk of potential lawsuits as the business is bound by-laws as set up in the jurisdiction in which it was established. Business owners will create businesses abroad and, in doing so, are able to utilize foreign tax rates and remain in a lower tax bracket within the States. Establishing an offshore company is usually a relatively simple process.

To begin with, you’ll often want to reach out to an offshore agent. While you can do the entire process on your own, it is recommended that you reach out to an agent for guidance to ensure all the proper measures are being taken. These individuals are best known as an international corporate services provider.

They are trained in founding businesses abroad and understand the legal technicalities required to establish, and potentially operate, a business abroad. Offshore business owners should then select a jurisdiction and discuss their specific needs with their providers. From there, providers will be able to give individuals an idea of what paperwork needs to be submitted, and what the requirements are for establishing an offshore company.

There are, at times, certain requirements, such as physical presence, that will have to be met in order for businesses to be established, which is why it is important to clarify this with your provider once you’ve made a selection.

Once you’ve chosen your location, you’ll need to submit the required paperwork and documentation.

These requirements will vary by jurisdiction, so you will need to confirm you have all the right information ready to submit.

Additionally, if you will be out-sourcing parts of your employment overseas, these arrangements will need to begin during this timeframe as well.

At this point, you and your agent will submit the required paperwork. Dependent upon where you are attempting to establish your business and what paperwork was required, the approval process can take anywhere from 2 days to 3 weeks. Once your business has been legally established, you’re able to begin operations.

Once your business is operational, you’re able to start working. A legally established business will be able to operate within the United States with ease; however, the company must meet health and safety requirements as required in the region they’re operating in, but will not have to be legally approved for operation by the United States.

This is how individuals are able to get lower tax rates and store funds internationally easily.

Frequently Asked Questions

Are offshore companies illegal.

One of the most commonly asked questions about the concept of an offshore company is if they are legal. Ultimately, the answer is yes. Individuals are able to establish businesses, legally, in other countries, and operate within the United States. While many may consider this a form of tax evasion, it is an effective way for individuals who are concerned about asset protection, revenue, and financial privacy to maintain their funds easily. There is certainly some moral and a political grey area that revolves around the concept of the offshore company. Many financial professionals have suggested that the offshore company model can be somewhat detrimental to the economy as business taxes fund plenty of public resources. But, ultimately, the practice is allowed and is not considered illegal. In fact, many politicians and other officials have established corporations internationally for asset protection. Additionally, some individuals may choose to have an offshore company to utilize the lower cost of labor. While not each offshore company will operate in the country they are established in; there are many that do utilize this out-sourcing to avoid the high cost of labor in the US. This is legal, as well, as it is considered the utilization of resources.

Which country is best for an offshore company?

Determining which country will best fit your offshore company’s needs can be tricky. Many individuals choose to establish their companies in areas such as the British Virgin Islands or the Cayman Islands, however, as they are considered tax-havens. These areas allow individuals to save the most money while also developing the most revenue. Additionally, when companies choose to out-source to these locations, they are able to utilize the lower cost of labor better, making it easy to fund the production of products and other services. Ultimately, determining which country will best suit your needs for your offshore company is important, but will depend on what you are looking for from the establishment of your company. Carefully consider why you are establishing your company before you make your selection, and speak with a professional to make sure your jurisdiction meets your needs.

Why have an offshore company?

There are many reasons to develop an offshore company. The primary reasons individuals choose to establish these companies, however, include: • tax breaks • liability purposes • affordable labor • banking opportunities • asset protection

Offshore Company Overview: Conclusion

At the end of the day, there are hundreds of reasons an individual may choose to create an offshore company.

Whether they intend to use this as a way to out-source labor, or they intend to use it for affordable taxes and banking purposes, each reason is valuable.

Founding these companies allow individuals to make financial investments that secure the future of their company.

There are certain aspects that are morally and politically grey, and some financial analysts have suggested that the practice may be detrimental to the United States economy, it is a legal practice that hundreds of corporations have taken part in.

Those considering creating an offshore company should review the pros and cons of each jurisdiction and determine what benefits you are best suited to.

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10 inspiring offshoring examples for your business

offshoring examples

From WhatsApp to Microsoft , offshoring has helped several businesses save costs and get access to skilled talent from around the world. 

And while you can use offshoring to increase business productivity and growth, you need to understand it clearly before you offshore your processes. 

In this article, we’ll discuss ten successful offshoring examples and the unique benefits of the business practice. We’ll also share three no-nonsense tips to help you and your team adapt to offshoring easily.

This article includes:

(Click on a link to go to a particular section)

  • 10 Successful Offshoring Examples
  • What is Offshoring?
  • When Should You Offshore?
  • 3 Things to Do for a Smooth Offshore Transition

10 successful offshoring examples

Offshoring involves moving a firm’s business processes to a distant location, usually a developing country. ( More about offshoring later in the article .)

Popular companies from different industries have used offshoring to scale up and increase profitability. Let’s look at a few of these giants and their offshoring journeys:

1. WhatsApp

WhatsApp Messenger, popularly known as WhatsApp, is an American free messaging and VoIP (Voice-over-IP) service application — now owned by Facebook.

In its early days, the founders of WhatsApp had offshored its services to developers in Russia to create the application at a low cost. As the organization grew, some of its Russian developers moved to the USA.

Later, Facebook acquired the company for $16 billion as it grew successful.

Google is an American multinational tech company that provides internet services like a search engine, cloud computing, etc. 

In 2020, Google acquired CloudSimple, a Ukrainian company that provides a secure, high-performance, and a dedicated environment to develop a VMware migration (moving a virtual machine from one server to another) solution.

Google has also outsourced tasks related to software development to remote employees across the world.  According to a Bloomberg report, the total number of Google contractors outnumbered their in-house employees in 2018.

Google says outsourcing and offshoring help them manage workload and employ better candidates.

Amazon.com, Inc. is a multinational American tech company that focuses on e-commerce, digital streaming, and AI (Artificial Intelligence). 

Amazon outsourced its call center services to South Africa , a country with several talented customer service outsourcing companies. It later set up a customer service outsourcing base in Cebu, the Philippines, in 2018.

Other than customer support, Amazon has also offshored R&D to a Ukrainian start-up specializing in developing home security systems. By offshoring its R&D, Amazon can access exceptional talents at a reasonable labor cost.

 4. Wise (formerly Transferwise)

Wise is a London -based financial technology company that helps its customers transfer money online from different parts of the country.

The organization has offshored its development to talented professionals across the world. 

Additionally, its remote development team is primarily located in Estonia and Ukraine .

Some developers who have been with the company since the early days have even joined the core team.  

5. BigCommerce

BigCommerce is a US -based e-commerce platform where business owners can set up their online stores and sell their products. 

At a stage of their development, BigCommerce couldn’t expand due to the unavailability of IT professionals. So they outsourced their IT tasks to an offshore company based in Eastern Europe ( Ukraine).

The company also offshore outsources tasks like data entry, accounting, R&D, etc., to talented candidates or companies in different countries.

6. Ford Motor Company

Ford Motor Company is an American automobile manufacturing company.

Due to the high demand for its vehicles and increasing production costs in its domestic market, Ford offshored its manufacturing to China . The company also has offshore manufacturing operations in Mexico .

Additionally, it has outsourced its back-office, software development, IT services, and customer support to India and other countries. It even has several manufacturing units in Thailand , Brazil , France , China , etc., where operations are cost-effective.

Samsung Electronics Co., Ltd. is a South Korean multinational company that makes electronic and smart appliances.

It has offshored its manufacturing to countries like the USA, a huge consumer of its products. It invested $500 million in its Austin semiconductor plant in Texas in 2005.

The organization also has a new plant in India solely to manufacture smartphones. Additionally, it has offshored its customer support for Australian Samsung mobile users to the Philippines .

8. TCS (Tata Consultancy Services)

TCS is an Indian multinational company that offers information technology and consulting services. 

The company’s offshored operations created 276 thousand new jobs in 55 countries in 2013. 

Moreover, TCS also recruits students directly from colleges in the USA , Canada , China , Uruguay , and Hungary . The IT company has also made its presence in China known by operating six global delivery centers in the country.

9. GE (General Electronics)

GE is an American multinational company that builds digital solutions for aviation, healthcare, power, and many other sectors.

The company has offshored its services to India and invested $120 million to build a Research and Development center in Bangalore for new technologies and solutions.

GE also has a technology center in Bangalore, which employs over 2000 engineers and scientists.

10. Microsoft

Microsoft is an American multinational company that develops, manufactures, sells, and supports computer software and electronics. It’s known across the world for offshoring and outsourcing its operations.

The company had signed a three-year agreement with Infosys (an Indian multinational IT company), outsourcing tasks like technical assistance, management of databases, and software applications.

In 2007, it signed a seven-year BPO (Business Process Outsourcing) agreement with Accenture (an Irish multinational consulting company), offshore outsourcing its finance and accounting tasks for $185 million .

Microsoft had gained a profit of $108 million by offshore outsourcing its services in 2015.

What is offshoring?

benefits of offshoring

Offshoring is the relocation of business activities (like production, customer support, etc.) to a different country where the labor and other resources are cheap. 

It’s a cost reduction technique where you usually move operations to countries where living costs are less. This gives companies a competitive advantage over their business competitors.

Another offshoring model is when the business owner hires a third-party offshore service provider to carry out a certain job. This business model is called offshore outsourcing .

Offshoring can be divided into two types depending on the services that are offshored:

1. Production offshoring

The offshoring of the manufacturing process of a company to another country is called production offshoring . In this offshoring, the finished products are imported back to the home country for selling.

For example, a company manufacturing iron-rich machinery may offshore its manufacturing to a country where iron is abundant and labour cost is cheap. 

2. Services offshoring

The offshoring of services like customer support, accounting, finance, IT, marketing, etc., to a foreign country in a different time zone is called services offshoring . Services are usually offshored to save money or when the talent pool in the home country is weak.

For example, an e-commerce platform may offshore its customer support services to a country where agents are fluent in English, have strong communication skills, and are less expensive.

Key benefits of offshoring

Offshoring tasks have been growing in demand as companies look for ways to expand.

Let’s look at a few offshoring benefits that attract companies:

  • Concentrate on core business : With tasks like accounting and finances out of your way, you can invest your time in a core business function like strategy and expansion.
  • Cost saving : Business owners usually offshore services to a country with lower labor wages and cheaper real estate. You can also save on tax, electricity, and other office supplies, due to the lower cost of living.
  • Skilled human resources : Your offshoring country may have more talented professionals than your home country.

Read more about offshoring’s benefits .

Major limitations of offshoring

Before offshoring, you should be aware of its challenges as it’ll help you choose a suitable country to offshore.

Some of its disadvantages are:

  • Language and cultural barrier : The cultural differences between you and your offshore team can be difficult to overcome. Additionally, your offshoring worker may have a different native language, which can disrupt communication.
  • Time zone differences : The time difference between your in-house team and offshoring company employees may make it hard for them to work together on projects.
  • Distance : The distance between your home and offshore location can discourage you from visiting the external team. Travelling can also cost a lot if your offshore country is far.

Explore the disadvantages of offshoring in depth.

When should you offshore?

It’s important that you offshore services only after proper planning. 

Watch out for these signs that indicate that it’s time to offshore your business operations:

1. Skill shortage

According to a survey by SHRM (Society for Human Resource Management), 75% of HR professionals say they face difficulty in recruiting due to the unavailability of talent . This means that you may not find suitable domestic workers.

In such a situation, you may have to consider offshoring or outsourcing to a foreign market where candidates have specialized skills suitable for your work in such a situation.

You can offshore to CPA (Certified Public Accountant) firms or similar core companies where employees may be more talented.

2. High operation cost

According to the USPIRG (United States Public Interest Research Group), Fortune 500 companies have saved $2.6 trillion by offshoring to countries that are tax-havens.

These countries offer tax incentive programs that lead to little to no tax liability to foreign companies.

Additionally, offshoring destinations have lenient offshoring rules and regulations. You can also benefit from the lower cost of resources like office infrastructure, equipment, electricity, etc., — due to the low cost of living.

This way, you can run your offshore operation at a minimum cost.

3. Requirement for better services

Offshoring can ensure your business operates 24/7 .

For example, let’s say you offshored a part of your US customer support to the Philippines (in a different time zone). Your in-house customer care team can engage customers during the day while your offshore agents can answer their queries at night. 

This way, you can provide 24/7 customer service — at a lower cost. 

4. Reduce workload

You can offshore your business when your team’s workload increases. 

By offshoring services during heavy workload, you can:

  • Reduce stress on employees and improve their engagement levels.
  • Reduce room for human error as employees focus on fewer things at a time.
  • Get more work done at a low cost due to inexpensive labor.

This way, you can help your company become more efficient.

3 things to do for a smoother offshoring transition

Offshoring can be challenging to manage for you, your in-house team, and your offshore team. 

However, there are a few ways to make the transition easy:

1. Start with a small team

Managing your offshore team can become difficult if they’re a large team — especially when you have no prior experience offshoring.

So it’s better that you start offshoring with a small team that is easier to guide. You can later expand your offshore team according to your business demands.

2. Train offshore workers

Your offshore team may be unfamiliar with your brand, customers, and operation style — which can reduce their productivity and affect the end result.

To prevent this, you can train your offshore team before they work. Familiarize them with their duties, discuss goals, and create a plan. This way, you can help them adapt to your company.

3. Use the right software

Suitable software can help you overcome offshoring challenges by streamlining communication, managing projects, storing data on the cloud, processing payroll automatically, etc.

Some of the tools that you can use are:

  • Communication tools : Slack , Zoom .
  • Project Management tool : Asana , Basecamp .
  • Storage : Google Drive, Dropbox.
  • Payroll Processing : Xero, Zoro Payroll.
  • Customer Relationship Management : Salesforce CRM , ActiveCampaign.

Time Doctor is another such software that simplifies offshore team management.  

It’s a powerful employee productivity and performance tracking software used by large corporations, like Ericsson, as well as by small businesses, like Thrive Market, to boost productivity.

With Time Doctor, you can:

  • Track work hours manually and automatically.
  • Prevent your offshore team from getting distracted with ‘ Idle Time Pop Ups’ .
  • Add productivity ratings for various websites and applications.
  • Generate detailed productivity reports to analyze your offshore team’s productivity.
  • Use the Chrome extension to integrate with many powerful tools like Asana and Todoist.
  • Access a user-friendly mobile application for Android devices to track time on the go.

Wrapping up

For any company, offshoring is a major step that needs careful consideration and planning.

You need to think ahead about when and where to offshore business operations and how to carry out the process economically.  And for this, you can learn from companies that have used the offshoring model to grow their businesses. You can also refer to the other tips in this article for successful offshoring.

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How to set up offshore companies in the USA

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business plan for offshore company

How to Set Up an Offshore Company in 2024

business plan for offshore company

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 2024.

Step 1: Choose your offshore jurisdiction and company type

business plan for offshore company

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

business plan for offshore company

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

business plan for offshore company

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)
  • 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.

business plan for offshore company

Although setting up an offshore company in 2024 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.

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What needs to be included in your offshore business plan

business plan for offshore company

There is a strong motivation for business to keep money offshore. Proper planning and analyzing will help company to store their assets in a safe and reliable jurisdictions. Many companies from the Forbes TOP-100 list are using offshore plans to maximize their profit and legally keep their money. However, it is not right to look only to big enterprises because the law is the same for smaller companies as well. Every entrepreneur can choose a suitable offshore plan to increase profit and reduce taxes. Sometimes law can be even more loyal to smaller companies depending on the jurisdiction you choose. It may lower the risk of losing money to unreliable contractors or being sued for no good reason. How to start making your offshore business plan? First of all, you need to decide which jurisdiction to choose. Next step is to select the best business structure and legal entity type. Afterwards, entrepreneur will be required to solve other organizational moments which will help him grow the most effective company, gain maximum profit and reduce unnecessary expenses. Here are some benefits of smart offshore business planning:

• local taxes are much lower than onshore; • money is stored in a reliable bank in a best possible way for your business; • bank account opening and all related banking expenses are reasonable; • It is cheaper and easier to obtaining business; • proficient workers who know scope of work are available and their average wages are lower than onshore.

All these pros are available if you choose the right jurisdiction and business structure. Digital companies, call-centers, shops and storages, logistic services – every type of business requires a different plan and each one of them can be managed effectively.

Entrepreneurs are often need a professional consultant. This is why offshore licensing companies exist. Regular person does not have all the required information about offshore jurisdiction and a professional financial analysts or offshore specialists can conduct researches that will allow businessman select the best possible option. What are the main tasks of specialists while making an offshore business plan?

First of all, we need to choose the location of the business. If the company is already incorporated, there is a need to move it in the best possible way. Transferring financial assets, opening bank account and registering intellectual property – and this is only a small part of tasks that needs to be accomplished. Sometimes more than one offshore country is required to achieve effective business planning.

Optimizing taxation is the next important goal of an offshore consultant. Specialist need to consider the possibility of Foreign Earned Income Exclusion while paying foreign income tax; Best time to transfer the profit to your parent company; Which tax privileges for your business are available and many other solutions. Even choosing the type of a credit card is an important part which may affect your taxation plan.

Using special Offshore Inversion or Offshore Captive Insurance Company as beneficiary. The point of Inversion is to purchase a foreign company and to move your profit to a low-taxation jurisdiction to reduce the amount of taxes that you should pay. There is another solution to reduce the taxes for corporations that required to remain in the US, based on restrictions, low foreign sales or another reasons. Offshore Captive Insurance will allow you to divide the assets between your companies. Assets will be deducted from the US company and transferred to your Offshore Insurance Company.

  • Moving problems along with the Logistic issues are also a part of an offshore business planning. Offshore consultant will take care of getting visas, obtaining residence permits, managing possible workers and assisting with employment process. All these problems can be solved just with a help of a professional team. Entrepreneurs are often under great pressure while moving offshore or starting a new business. Considering this, our specialists are focuses on Financial Analysis, Law, Licensing, Consulting, Bank Account Opening, Company Incorporation and other services that will help customers to set up a business in the most effective way.
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Setting Up An Offshore Company in the UK

Author Syahirah Aiman Abbas

Want to set up an offshore company? It’s important to consider all aspects of the process, from your company structure and the jurisdiction to understanding tax liabilities. This article unpacks all you need to know about incorporating a business in an offshore jurisdiction. Shall we get started?

Setting Up An Offshore Company in the UK

An offshore company is a company incorporated or registered away from the country of its investors and the region of its main operation and offices. Usually, it operates outside the country where it is formed. Knowing how to set up an offshore company can help you get on your way to achieving your business goals or growing your assets .

So, why set up an offshore company? There’s a range of benefits, and the incorporation process of setting up in an offshore region like the UK is pretty straightforward.

Feel free to get in touch if you don’t find the info you’re after below, and want to register your company in the UK .

What Is an Offshore Company?

Offshore jurisdictions offer a range of benefits to foreign owners looking to reduce their tax burden and enjoy less stringent regulations and policies. Companies expanding to the UK that are registered, established, or incorporated outside of the country the business owner lives in are considered to be offshore.

Why Set Up an Offshore Company in the UK?

These are some of the benefits of setting up a UK offshore company:

Tax treaty network

One of the reasons why the set up of an offshore company is compelling for savvy business owners is the UK’s largest network of double tax treaties. With this tax treaty network of 100+ globally, UK companies can be a very efficient vehicle for minimising withholding taxes on dividends received. Better yet, the offshore company setup is pretty straightforward, so there’s a lot to gain and very little pain.

Low cost of maintenance of a UK company

The cost of maintenance of a UK company is among the lowest in developed jurisdictions such as Norway and New Zealand, with comparable reputation, international respectability and protection.

Share capital

If you’re considering setting up an offshore company and considering the cost requirements for getting started, you’ll be glad to know that there’s no minimum paid-up share capital requirement and no capital tax on authorised or issued shares.

Audit of accounts

There are no audit requirements to set up an offshore company if you meet the following criteria:

  • Turnover below £1,000,000
  • Net assets of less than £1,400,000 (unless of course, the offshore company you want to set up is part of a larger qualifying group).

Ease of establishment

What if you could set up an offshore company in the UK within just 24 hours? With off-the-shelf companies available, you can set up a tailor-made company based on your specific requirements and do exactly that.

International respectability and protection

UK companies are often used to acquire assets in certain foreign locations to minimise risks of property dispossession by foreign governments.

Characteristics of a UK Offshore Company

When setting up an offshore company and going through the incorporation process, the names of your company officers as well as director and shareholder information, will appear on public record. Once you’ve selected the type of company you want to set up offshore and chosen an approved name, it’s then on to the registration set up process and submission of relevant documentation. Let’s take a look at the features of a LTD offshore company opened in the UK to unpack these characteristics:

Features of UK Offshore Company (Private Limited Company – Ltd):

*You need to pay the local taxes on profits made in other countries, too.

Choosing a Company Structure: IBC, LLC, PTE, LTD

Don’t leave it to a coin flip..

We’ll help you decide which company structure is right for you.

Your company structure often comes down to your chosen jurisdiction and the business structure you expect based on your key operations and strategic business roadmap. Normally, there are three offshore company structures widely chosen by business players moving offshore. We’ve unpacked each in more detail, but below is a snapshot of what to consider when setting up offshore and jurisdiction recommendations for each company structure.

Company Structures

Recommended offshore jurisdictions: Belize, Cook Islands, Nevis, St. Vincent & Grenadine

Recommended offshore jurisdictions: Belize, BVI, Seychelles, Marshall Islands, UAE

Recommended offshore jurisdictions: Hong Kong, Singapore

Private Limited Company (Pte Ltd)

  • Privately held business entity;
  • Number of shareholders cannot exceed 50;
  • Shareholders are restricted from public share trading;
  • Offer limited liability to shareholders;
  • Able to acquire assets and enter into contracts;
  • Able to sue or be sued under its own name;
  • Income earned outside territory of incorporation subject to lower tax rates & possible tax exemption;
  • Reporting requirements are stringent.

International Business Company/Business Company (IBC/BC)

  • At least one director and one shareholder required (can be the same individual);
  • Speedy incorporation process;
  • Low tax rates or local corporate tax exemption (if no business is conducted within the territory of incorporation);
  • Offer corporation privacy and banking;
  • Reporting requirements are minimal;
  • Can engage in international business activities, i.e. trade or investment.

Limited Liability Company (LLC)

  • In place of shareholders and directors, an LLC only has members;
  • An LLC requires at least one member;
  • Can be a hybrid of the partnership and the corporation;
  • Local corporate tax exemption on assets or income earned outside the territory of incorporation;
  • Company members are personally protected from being liable for debts or liabilities incurred as a result of the business;
  • Reporting requirements are minimal.

Deciding on an Appropriate Offshore Jurisdiction

The offshore structures across different jurisdictions may have a lot of similarities, but they’re not all set up and run the same. That’s why it’s essential to know how to set up an offshore company in a jurisdiction that makes the most sense.

There are a few considerations that will come in handy when deciding on the right place for your offshore company set up to kick off.

If you plan to visit regularly or have easy geographical access, you’ll want to factor in proximity when establishing an offshore company.

Wherever you decide to set up an offshore company, make sure you stay up to date with the regularly-changing policies and industry regulations. This is why you want to make sure you set up in a jurisdiction that’s complementary to your chosen company structure and suits the nature of your business.

You also need to take the reputation of the jurisdiction into consideration, as it may affect the growth of your business and your future potential. Seek to establish an offshore business in a place that boasts a sound and stable reputation for business owners. Tax minimisation, favourable rates and low taxation on foreign-sourced income will also benefit your business.

Make sure to check whether or not your chosen place of incorporation is on the non-cooperative list by the EU Council. If you plan to trade or even expand to the EU this is an important element in your decision-making.

Offshore Companies in the UK: Liability to Income Tax, Capital Gains Tax, and VAT

Once you have set up your offshore company, the HM Revenue and Customs (HMRC) will issue you a Unique Taxpayer Reference number (UTR). Your UTR is sent to your registered address along with instructions on company registration, accounts filing, and corporate tax payments.

UK Tax and Capital Gains Tax for offshore companies

Let’s say a property is owned by an offshore company, Jamo Pte. Ltd. Only the basic rate of UK income tax (20%), will apply regardless of income level. This can result in a substantial saving when compared with personal ownership under which the banded UK income tax rates (up to 50%) will apply. The basic rate tax would be deducted at the source by an agent or the tenant. It is possible for the owner to apply to HMRC for a clearance to allow them to receive the income in gross.

You bought a studio apartment for £150,000, which later sold for £200,000. This means you gained £50,000 worth of capital (£200,000 minus £150,000).

If you’re setting up an offshore company as a non-resident in the UK, you are generally not expected to pay CGT. The reach of CGT depends on the taxpayer’s residence, not on where an asset is situated. There’s usually no CGT arising from the disposal of UK assets for an offshore company (unless the gain is caught by the corporation tax charge).

Every rule has an exception . If your offshore company trades or invests in UK property, it may be liable to pay corporation tax or income tax on income gained through UK real estate. Where corporation tax applies, capital gains are also brought within the charge.

UK VAT – what is the VAT rate in the UK?

VAT, or Value Added Tax , is levied on selling goods and services in the UK. The Standard VAT rate in the UK is 20%. The VAT Reduced rate of 5% applies to some goods and services, such as children’s car seats and home energy.

If you have set up an offshore company that does not have an annual turnover of more than £85,000, then Registration of VAT is not required. A Company that does register can collect a number of benefits through registration, such as the ability to reclaim input tax and collect VAT from customers. Companies register through the HMRC website .

Some things are exempt from UK VAT, such as postage stamps, financial transactions, and property transactions. The VAT rate which businesses charge registration depends on their goods and services.

Advantages of Setting Up an Offshore Company

There are many confidentiality and privacy benefits to setting up an offshore company, as you’re conducting your business operations and financial transactions in the name of a legal entity — in this case, your offshore corporation.

This is because the details of the individuals who are linked to companies set up offshore are not divulged by most financial centres (unless required as part of a criminal investigation).

Asset protection

Protection from future liabilities is made possible when assets are placed into overseas legal structures and offshore corporations. Tracking them down via an asset search is tricky when investments, trusts, and bank accounts are in possession of your offshore corporation. This screens your finances from public view, providing effective asset protection for the company you set up offshore.

Legal protection

Legal action pursuits typically involve an asset search to ensure that any negative judgements made against you can be covered financially. Setting up an offshore company and assigning asset ownership to the business means it’s associated with your name. By incorporating offshore, you can legally shield your assets from court rulings or legal opponents.

Disadvantages of Offshore Companies

Difficulty proving ownership.

If you already have a registered offshore company, proving ownership can prove to be tricky. This is often linked to the absence of public registers to be able to refer to. If something comes up and you need to prove that you’re the company’s beneficial shareholder (in your interests), the anonymity aspect of registering offshore can prove to be a disadvantage.

Monies are subject to taxation in the resident countryp

The income and assets of the company you set up offshore are distributed according to taxation policies. While the initial tax-free benefits of offshore incorporation are advantageous, the monies will ultimately be subject to tax when they reach the resident country.

Ready To Take Your Business Offshore?

Knowing how to set up an offshore company can lead your business down a path to success. But consider every aspect of the process, from your company structure to understanding the local jurisdiction and your liability to taxation policies. If you’re considering setting up an offshore company, we’ll gladly take the admin off your hands so you can get down to business.

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How to Plan and Report an Offshore Business

US Tax Filing Status For Those With A Foreign Spouse

If you’re operating an offshore business, you need to come up with a great tax plan and file a variety of forms with the IRS each year. Here’s how to plan and report your offshore business in the most tax efficient way possible.

An offshore business might not need to pay any taxes in the US, but it must always report. When you form the company, when you sell the company, and the existence of an offshore bank account must always be reported. In most cases, you must also report your income and expenses each year.

The first and most basic form an offshore business owned by an American must file is the Foreign Bank Account Report. The FBAR tells the US Treasury that you have an offshore account and gives them the bank contact info and the highest balance for the year. Because the penalties for failing to file the FBAR are so severe, it’s the most important form an offshore business should file. The FBAR is the focus of the IRS collection program and what they target when they go after a US citizen with unreported offshore income.

Now onto the primary forms to report an offshore business and how to use them to minimize your US taxes.

An offshore business should be operated through a foreign corporation. If you don’t incorporate offshore, and use a US corporation or LLC, or your personal account, you will increase your US taxes by at least 15%.

This is because US companies pay social taxes such as FICA, Medicare, etc. If you use your personal bank account, be it onshore or offshore, you will pay Self Employment tax on your profits.

SE tax and corporate / personal payroll taxes are both around 15%. Because you won’t pay them if you operate through an offshore corporation, failing to set up offshore will cost you at least 15% in taxes each year.

Since you’re operating your offshore business through an offshore corporation, you will need to file IRS Form 5471. Most will need to file this form each year and report income, expense, and ownership changes. It works just like a Form 1120 in the United States and requires you maintain the same expense records as if you were operating in the US.

If your offshore business is a foreign joint venture, were a non-US person(s) owns 50% or more, then you have reduced filing requirements for Form 5471. If a US person(s) owns half the company, you need only file when you incorporate the business and when there’s an ownership change. You don’t need to report income and expense each year.

As I said, you need to keep your expense records. I don’t talk much about income records because I assume this is a cash basis business and all deposits are income. If you’re on accrual, and/or have shareholder loans, you will need a more advanced accounting plan.

Your expenses must be reported and records maintained as you would for a US business. The US IRS has the right to audit ANY business, foreign and domestic, that’s owned by a US person.

So, you should be deducting only ordinary and necessary expenses that are incurred in operating the offshore business. You should keep receipts and be able to prove each expense item should the IRS come calling.

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What trips up most people is what income in an offshore business can be held offshore tax deferred and what income must be reported in the United States as earned.

If you are living and working outside the United States, and qualify for the Foreign Earned Income Exclusion, you might not pay any taxes to the US on your offshore business income. This is because your first $102,100 in salary is tax free.

Your first $100,000 in offshore business income will be reported on your personal return using IRS Form 2555. This form identifies the income as salary from a foreign corporation and proves your claim that you qualify for the Foreign Earned Income Exclusion.

Remember that you also pay no self employment or payroll taxes on this money because it’s earned in a foreign corporation.

If a husband and wife both work in the offshore business, they can each take out $100,000 in salary for a total of $200,000 tax free in the US. If the business earns more than this you have two options.

  • Take out all of your profits as salary from your offshore business and pay the tax. If you withdraw $180,000 in salary, you get $100,000 tax free and $80,000 is taxable.
  • Leave the amount over the FEIE in the corporation as tax deferred retained earnings. When you take a distribution, it will likely come out as a nonqualified dividend from a foreign corporation.

You should always maximize the amount reported on Form 2555 using the Foreign Earned Income Exclusion. Taking the full $100,000 provides tax free profits while leaving money in the offshore business gives you tax deferral, but not tax free. You will pay US tax on those deferred earnings some day.

I Will Teach You A Language

If you don’t qualify for the FEIE, then your US income tax picture is much more complex.

Let’s say you’re living in the United States and operating your business through an offshore company. This company has no employees abroad and all work to generate the income is performed in the US.

This means that the profits in your offshore business are US source income. You must pay US tax on them as they’re earned. You don’t get to set up a shell company with no employees and no substance abroad and get tax deferral.

If you’re living in the United States and operating your business through a foreign corporation, it should be tax neutral. An offshore corporation should not increase nor decrease your US tax bill.  You will still report on Form 5471 and your net profits will likely go on Schedule C or direction onto your 1040 subject to self employment tax.

If part of your business is based in the United States and part is located offshore, you get partial tax deferral.

Let’s say you have 5 employees in the United States and 5 employees in Panama. The quality and level of difficulty of the work that each team performs is about the same. The workers in the United States add as much value to the product or service being sold as do those based in Panama.

Also, the mind and management of the Panama team is in Panama, while the mind and management of the US team is in the US.

Because half the value of the product is being generated by work done in Panama, about half the profits can be held offshore tax deferred. Such an offshore business gets 50% tax deferral.

Note that the above numbers are just a rough example. Your situation will vary greatly and will depend on the level of work done offshore, whether you’re selling a physical good, and many other factors.

When I talk about the level of difficulty and quality of the work done, I’m considering the skill level each team has. For example, you can’t have a team of highly paid programmers in California and a team of minimum wage call center people offshore and call them equal.

As you can see, planning an offshore business is complex. You need to find the right structure, the right jurisdiction, the right banking, and then file the correct forms. A misstep at any of these points can eliminate potential tax benefits and get you in all kinds of trouble with the IRS.

If you would like to speak with an expert, we’ll be happy to work with you to structure your offshore business. We can help with the planning, form the offshore corporation, open the offshore bank account, and prepare your US tax returns.

I hope this article on planning an offshore business has been helpful. For more information, please contact us at [email protected] or call us at (619) 550-2743. All consultations are free and confidential.

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Why Setup an Offshore Company?

business plan for offshore company

Setting up an offshore company isn’t just for the wealthy anymore. Small businesses and individuals can protect their assets and enjoy substantial tax benefits by incorporating an offshore company. The incorporating jurisdictions have strong privacy laws in place to protect your identity and your financial transactions. The business reporting requirements are more streamlined and less costly as compared to domestic corporations.

Organisations, irrespective of their size, are now more international than ever. Every business is directly competing with rivals from different parts of the globe, either offline or online. Meanwhile, the obstacles to trade and capital investments have been severely reduced since the turn of the century. In this environment, spreading business operations across the borders may be more of a necessity than a luxury.

Should you decide to set up an offshore company someday, we give you a few benefits of incorporating one to provide you with the needed push.

1.Reduced Taxes

This is the most prominent of all the benefits one gets from  forming a company in popular offshore jurisdictions . Once you incorporate an offshore company, you have to pay lower taxes for your business, and this is somehow the main reason why people shift towards the trend of offshore companies. The non-resident company enjoy tax-exemption, and in some countries, there is tax, but the amount is little compared to other businesses.

2.Asset Security

An offshore business can be the perfect vehicle for the protection of wealth. If you have a substantial amount of money then an offshore company can help you protect it from the lawsuit, you are liable as an individual, including your properties, assets, in fact, and anything that belongs to you could be turned into cash. For added asset protection, you can place the corporation in an offshore trust.

3.Confidentiality

In a few countries, the non-residential companies don’t need to publish their financial information and the details regarding their shareholder and directors. This is helpful to them as they don’t have to disclose any information concerning their company to the outsiders. Offshore businesses can decide to do so only if there is some criminal activity or there is a need for it.

4.Less Red Tape

It is easy to set up an offshore company in a jurisdiction that is a good fit for your business, and it is easy to maintain it. To attract direct investment, local governments grant accessions and offer an advantage for new companies and for already established companies that want to expand internationally. The guidelines are designed to provide flexibility in offshore capital and structuring.

5.Access to New Markets

Growing into new markets from an offshore company is a great way to develop a business in a new region or country. Governments, private companies, and local agencies often boost and support emerging industries in their market with subsidies and other incentives for offshore companies eager to set up and invest locally.

6.Low Capital Requirement

The offshore companies require less capital and make minimal expenses for their company registration. In a few countries, there also are no capital requirements for company setup. Capital acts a hindrance to many businesses who have fewer finances, hence offshore company successful eliminate this factor.

7.Strong Lawsuit

When a business is settled as an offshore, it has a lot of sections and statuses which shows that the applicants and the creditors can’t easily take a right on the assets of the firm in case they face any loss. This is why wealthy individuals usually open up offshore companies so that they could protect their valuables and investments for a lawsuit.

8.Lower Costs of Business Operations

Depending on where you are from, the kind of business you are into and where you plan on incorporating up an offshore company, chances are that you most definitely will have lower costs of operations. If you use a full-service offshore company service, there will be extra services offered at a small fee like mail-forwarding and telephone answering services in addition to a registered office address, payment of government fees, appointment of directors, and adherence to the guidelines.

With such advantages, we know why entrepreneurs prefer opening an offshore company. Businesses are always in search of trends that will minimise their risk and expenses while maximising their profit margin. Having taken note of the above advantages, it’s clear why many businesses are adopting the offshore trend for their business. Here’s a guide on  how does an offshore company work , which will help you to understand the core working procedure.

We at Business Setup Worldwide can help you quickly set up an offshore business. Should you decide to set up one,  contact us ! We’d be happy to assist you.

Published on: 31 Mar 2020

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--Editing by Robin Sayles

business plan for offshore company

New York-based journalist covering renewable energy. Eduardo worked as a Reuters correspondent in Guatemala, Bolivia, Argentina, and Ecuador before moving to the U.S. in 2014. He has written about climate solutions for The New York Times and Slate and is the author of "Things You Can Do: How to Fight Climate Change and Reduce Waste."

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How Fast Should Your Company Really Grow?

  • Gary P. Pisano

business plan for offshore company

Growth—in revenues and profits—is the yardstick by which the competitive fitness and health of organizations is measured. Consistent profitable growth is thus a near universal goal for leaders—and an elusive one.

To achieve that goal, companies need a growth strategy that encompasses three related sets of decisions: how fast to grow, where to seek new sources of demand, and how to develop the financial, human, and organizational capabilities needed to grow. This article offers a framework for examining the critical interdependencies of those decisions in the context of a company’s overall business strategy, its capabilities and culture, and external market dynamics.

Why leaders should take a strategic perspective

Idea in Brief

The problem.

Sustained profitable growth is a nearly universal corporate goal, but it is an elusive one. Empirical research suggests that when inflation is taken into account, most companies barely grow at all.

While external factors play a role, most companies’ growth problems are self-inflicted: Too many firms approach growth in a highly reactive, opportunistic manner.

The Solution

To grow profitably over the long term, companies need a strategy that addresses three key decisions: how fast to grow (rate of growth); where to seek new sources of demand (direction of growth); and how to amass the resources needed to grow (method of growth).

Perhaps no issue attracts more senior leadership attention than growth does. And for good reason. Growth—in revenues and profits—is the yardstick by which we tend to measure the competitive fitness and health of companies and determine the quality and compensation of its management. Analysts, investors, and boards pepper CEOs about growth prospects to get insight into stock prices. Employees are attracted to faster-growing companies because they offer better opportunities for advancement, higher pay, and greater job security. Suppliers prefer faster-growing customers because working with them improves their own growth prospects. Given the choice, most companies and their stakeholders would choose faster growth over slower growth.

Five elements can move you beyond episodic success.

  • Gary P. Pisano is the Harry E. Figgie Jr. Professor of Business Administration at Harvard Business School and the author of Creative Construction: The DNA of Sustained Innovation (PublicAffairs, 2019).

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IBM Reopens Its Frozen Pension Plan, Saving the Company Millions

The company has stopped making contributions to 401(k) accounts, and instead gives workers cash credits in a new version of its old pension plan.

An illustration of an old computer that's melting, with IBM on the screen.

By Jeff Sommer

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy.

Traditional pension plans haven’t come back. But the news from IBM might lead you to think so.

Last month, IBM thawed out a defined benefit pension plan that it had frozen more than 15 years ago. The company has also stopped making contributions into employee 401(k) accounts.

These moves are startling, because, on the surface, at least, IBM seems to be reversing a decades-long trend of corporations moving away from traditional pension plans. With the old plans, companies promised to pay employees retirement income that rewarded them for long years of service. But these plans were expensive, and IBM and hundreds of other firms instead began to emphasize 401(k)s that moved the primary responsibility for saving and investing to workers.

IBM’s new approach is significant because the company has been a leader in employee benefit policymaking. What it is doing now is no simple return to the classic cradle-to-grave benefits system. In fact, IBM’s new pension plan isn’t nearly as generous to long-tenured employees compared with its predecessor.

The move has real advantages for some people who work at IBM, particularly those who put little or no money of their own into 401(k)s and who stay at the company for a relatively short while.

Crucially, IBM’s maneuver is likely to be wonderful for its shareholders. The company is saving hundreds of millions of dollars a year by stopping contributions to employee 401(k) accounts. And it doesn’t need to put any money into the pension plan this year — and, probably, for the next few years — because it has plenty of money already in it. On a purely financial standpoint, IBM is improving its cash flow and bottom line.

For a small but important subset of companies — those with fully funded, closed or frozen pension plans — IBM’s move could be a harbinger of things to come, pension consultants say. IBM is using a surplus in its pension fund to simultaneously change its employee benefits package and help the company’s finances.

“You’ll be seeing more of this,” said Matt Maloney, a senior partner at Aon. “But I don’t think it’s really a watershed event because not that many companies are in a position to do what IBM is doing.”

Retirement Basics

IBM calls its new pension plan a “retirement benefit account.” It is nestled, legally and bureaucratically, within the old version. Because it’s part of the defined benefit pension plan, the new plan is backed by the government’s Pension Benefit Guaranty Corporation , which will pay benefits , up to certain limits, if the plan runs out of money or the employer goes out of business.

Unlike 401(k)s, in pension plans the employer makes “the contribution, owns the assets, selects the investments and bears the investment risk,” said Alicia Munnell, the director of the Center for Retirement Research at Boston College.

Employees are immediately vested in the new IBM plan, and can take their money with them when they leave, IBM says. So far, so good.

But for many employees, the change comes at a cost.

IBM will no longer make contributions to employee 401(k) plans. Until now, it made 5 percent matching contributions and 1 percent automatic contributions, according to internal documents that were posted publicly and whose authenticity Jessica Chen, an IBM spokeswoman, confirmed. That money and those accounts are owned by employees. It took a year for employees to be vested in those accounts.

The new retirement benefit accounts are part of a so-called cash balance plan, a pension plan in which the employer controls how the money is invested.

In the new IBM accounts, employees receive credits equal to 5 percent of their salary — 1 percentage point less than the company’s maximum contribution to the 401(k) used to be. For the first year only, employees are getting a 1 percent salary bump to make up for the discrepancy in contributions between the old 401(k) and the new retirement accounts.

Risk and Return

IBM documents show that in the new accounts, employees are guaranteed a return of 6 percent interest for the first three years — an excellent rate under current market conditions.

From 2027 through 2033, the return is likely to fall. Employees will receive the yield on 10-year Treasuries, with a floor of 3 percent. From 2034 on, there is no floor. So if Treasury yields fall below 3 percent — as they were most of the time from late 2008 through early 2022 — a paltry return is all that employees will get.

Remember, in a 401(k), employees are free to invest as they like. People with a long investing horizon can favor the stock market, which tends to produce higher returns than government bonds over long periods.

Although IBM workers can keep their 401(k)s and continue to add money to them, they won’t have the inducement of a company match. How many will continue to contribute remains to be seen. In the new accounts, employees are receiving only fixed-income investments.

That may be fine for people in retirement, but it’s questionable for those with years to come in the work force. Employees may need to increase the equity allocations in their 401(k)s or other accounts.

The Background

At the peak for defined benefit plans, in the 1970s, as many as 62 percent of workers in the private sector were covered solely by these retirement plans, according to the Employee Benefit Research Institute, an independent organization that researches retirement issues.

By 2022, the institute found , only 1 percent of private-sector wage and salaried workers had just a defined benefit plan, while 41 percent participated in only a defined contribution — or 401(k) — plan, and 8 percent participated in both.

Underfunding of corporate pension plans led to the great shift away from defined benefit plans. At first, 401(k)s were supplementary savings vehicles for employees. Now, along with Social Security, 401(k)s have become core elements of retirement.

By closing the old defined benefit plans to new workers and by freezing benefits for people already enrolled in them, companies reduced their potential pension liabilities. They poured money into the old retirement plans to bring them into compliance with government rules, which were relaxed to give companies relief .

But canny management and cooperative financial markets have helped increase plan funding, too. Because pensions are a form of annuities, the increase in interest rates over the past couple of years has made it cheaper to finance existing pensions. On top of that, strong stock returns over the past decade have bolstered fund assets.

These factors have led to a sea change in the funding of the old corporate pension plans. (Public pension plans, on the other hand, face an estimated $1.45 trillion funding gap, according to the Pew Charitable Trusts .) For big companies, the average defined benefit private plan now has more than enough money to pay off its pension obligations. For defined benefit pension plans at S&P 500 companies, Aon says , funding levels rose to 102.7 percent on Feb. 6 from 78.4 percent in 2011.

The Bottom Line

IBM’s defined benefit pension plan is now extremely well funded. Its annual report shows that it had a $3.5 billion surplus in the plan last year, while it paid $550 million annually in 401(k) contributions. It doesn’t need to put fresh money into the pension plan and now, with the shift to the new retirement benefit accounts, it isn’t making 401(k) contributions either.

Professor Munnell estimated that IBM would be able to credit employees with benefits in the new accounts for at least the next six or seven years. Several pension consultants said that if market conditions were favorable, and IBM invested the $3.5 billion surplus at a higher rate of return than the fixed-income rates it was offering employees, it might be able to avoid deploying any cash on these benefits for many years.

The company said its retirement innovation was improving its finances. In an earnings call on Jan. 24, James J. Kavanaugh, IBM’s chief financial officer, said the company’s cash flow was better this year, in part because of “lower cash requirements driven by changes in our retirement plans.” That could be true for years to come.

Other companies with frozen plans that are fully funded could follow IBM’s lead.

This isn’t a return to the richer benefits for long-tenured employees provided by traditional defined benefit plans.

But perhaps cash balance plans combined with 401(k)s are the best that most big companies are likely to be offering. If so, Zorast Wadia , a principal and consulting actuary at Milliman, the pension consultant, suggested, there are a variety of ways of designing retirement packages that make use of pension plan surpluses. Unlike IBM, for example, some companies could continue their 401(k) contributions while starting cash balance plans.

Finding ways to use well-funded pension plans generously but responsibly is a challenge for big companies. IBM has moved cautiously. But it’s in nobody’s interest for companies to make pension promises that they can’t keep.

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy. More about Jeff Sommer

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There are few challenges facing students more daunting than paying for college. This guide can help you make sense of it all .

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11 Reasons to Use an Offshore Company for Business

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Despite what the media would have you believe, numerous legal and legitimate reasons exist to use an offshore company.

In the past, those who dealt in offshore circles used fake names and fake stock photos as they sought to represent the arguments for the true value and purpose of international diversification from the shadows.

Their masked approach didn’t do much to help the reputation of offshore activity.

One of the reasons our founder, Mr Andrew Henderson, began Nomad Capitalist was to bring more transparency to an industry that was unnecessarily secretive. And we have, in turn, inspired people to become more transparent.

Navigating the complexities of going offshore can be overwhelming, and regulations change constantly. Apply to become a  Nomad Capitalist client , and we will create your bespoke strategy, taking you offshore and helping you legally go where you are treated best.

What is An Offshore Company?

Offshore Companies

Obviously, some people are still skeptical. Decades of bad press take time to overcome. But the good news is that there are many legal reasons to be involved with offshore activity, such as foreign investments,  offshore banking ,  second passports , and, yes, even offshore companies.

The problem with turning the debate about offshore into a list of what is moral and what is not is that you can slip into too many gray areas. We prefer to think in black and white – legal vs. illegal. Laws are definitive. It is clear which side of the line you are on, and clarity like that is vital to good business.

For the average small business owner, consultant, cryptocurrency trader, etc., there aren’t a lot of ways to reduce your tax burden if you own and operate your business in the United States.

And even for those for whom there are ways, it’s rather complex. The bottom line is that you can’t just stay in the United States 365 days a year and benefit from an offshore company. 

People think that all they have to do is set up a  British Virgin Islands  company, and they can run it from the US and avoid taxation. That’s nonsense.

In fact, in many cases, it will make their tax situation worse. These days, real offshore solutions are about finding ways to move your a**, not just your assets.

Moving your assets used to be enough in the days when hiding your money was the name of the game. However, it’s all about transparency and how you and your business can think globally to reduce your tax burden and get other benefits.

None of us chose where we were born, and simply because you were born in the United States, Australia, Canada, or wherever else does not obligate you to live there forever.

You can go where you’re treated best.

And if you’re not sitting around using all the resources in the United States, if you legitimately move what you’re doing and move for a good part of the time outside of the United States, why should you pay tax as if you were still there?

You shouldn’t be forced to pay anyone just as some homage because you were born there.

Again, if you stay there and keep milking all the services and screw everybody else by getting out of taxes, that’s not really fair.

It also isn’t legal.

It is either legal or illegal. We are not here to judge, just to tell you where the line is.

How you present your story still matters. Even if you are doing something completely legal, you must be prepared to explain it to those suspicious of offshore activity. And that’s where  having a bespoke plan  becomes so valuable. 

Even if you have a totally legal offshore structure, the onus is going to be on you to show legitimacy.

So, let’s look at all the possible reasons for using an offshore company for your business and, where necessary, discuss how those reasons fit into the bigger story you will have to paint to show the legitimacy of your offshore activity.

Legal Reasons to Use an Offshore Company

1. financial privacy and safety.

We believe you’re entitled to privacy and that financial privacy and safety are important.

What many people don’t understand is that privacy isn’t always an issue of wanting to hide your money. And this is yet another issue with moralizing offshore activity. Just because something can be used for immoral ends does not make it immoral by default.

For example, we had a client from Mexico who explained that he was looking for greater privacy because, in Mexico, when you have $100,000 or more in the bank, your name may be quickly leaked to the wrong people. 

Do you think those people need financial privacy?

Somebody in a situation like this might understandably want to set up a foreign corporation to add a layer of privacy to their operations. They may not even be doing anything to avoid tax. They may just be trying to protect themselves.

After living in other countries and seeing the issues that people deal with on a daily basis, it can be frustrating seeing these big Western governments come in with their economic and political weight to pressure other countries to make cultural, social, and political changes in a culture and context that they know nothing about, to begin with. But somehow, it is their responsibility to tell the rest of the world how to live. Every country should be like them.

2. To Meet Legal Requirements

A common reason to set up an offshore company is to meet the legal requirements of the country where you want to buy property. For example, in Malaysia, owning property through select foreign companies is possible. In many countries, this is not possible.

Instead, you must purchase the property through a local company. An offshore company. For instance, if you want to use money from your US company to buy a factory in Nicaragua, the Nicaraguan government won’t let you. You would need to set up a Nicaraguan company whose shareholder could be your US company, so it’s a subsidiary, and then you would be able to make the purchase.

That is a completely legitimate reason to have a foreign company.

Now, in many cases, it’s beneficial to own property in your own name. There has historically been a reason for US citizens who own businesses overseas to invest through corporate structures. That incentive has somewhat been diminished with the tax reform, but for the average person who wants to hold property overseas in their own name, the tax structures in many foreign countries are more beneficial than just ownership in your name.

Provisions are available in the likes of Turkey, where you can actually benefit from incentives in the country’s tax system purposefully aimed at bringing more companies into the country to buy properties. They want people to open offices in Turkey, so you can set up a Turkish company and purchase property there as well.

3. Investment Funds in Tax-Neutral Locations

An investment fund run by various individuals from different locations may need a tax-neutral location where they can combine capital from different sources.

The Cayman Islands has historically been a top choice for investment funds because their rules are relatively lax, and the fund will not have to deal with things like the Security and Exchange Commission. By doing this, these funds can often access different investments unavailable to 

US investment funds. A tax-neutral location may offer more benefits than a simple tax reduction.

4. Good Legal Framework

If you live in a country where things are a mess and everything is inefficient, you might not mind paying more taxes to get a better legal framework.

There are certain countries where taxes are somewhat low, but setting up and running a corporation can be extremely bureaucratic and inefficient. Even moving money around can be difficult. In that case, setting up an offshore company is not a tax issue.

In fact, some people may be willing to open a company in the EU, like Bulgaria, to gain better operational efficiency, legal architecture, and access to better courts. They may not get lower taxes, but an offshore company will solve so many other issues that it will not matter.

5. Better Banking Infrastructure

Better banks are one reason to use an offshore company

The right offshore company can give you access to better banks.

We sometimes get inquiries from those who want to set up a  Labuan company  or a Marshall Islands company, and we have to warn them that their company may have more limited banking opportunities.

The reverse can be true as well. If you live in Peru, you may have difficulty getting banks to take your Peru company, so you may choose to set up an offshore company that will give you better access to banks.

A bank may not take your Peru company, but they’ll take your Bulgarian, Cypriot, or Hong Kong companies. Again, these countries may or may not be tax-neutral, but they will give you better banking infrastructure, and that benefit alone is enough.

6. Asset Protection

Beginning with asset protection, the next four reasons to use an offshore company are those that may be deemed to be challenged. 

Many people will set up an offshore company to protect their assets from creditors, plaintiffs, attorneys, family members, ex-spouses, etc. In places like the United States, where people sue on a whim, just having a simple offshore corporation can be a lot more beneficial than setting up a trust or an offshore foundation. You can get enough asset protection from a foreign corporation.

If you set up a company in a place like  St. Kitts and Nevis , somebody would have to post a bond before they could sue you. Obviously, the moralizing comes from the chance that you are stopping people who legitimately have a claim.

But the issue is that a lawsuit is filed every 16 seconds in the United States. At a rate like that, it is safe to argue that many of those lawsuits are illegitimate. And who doesn’t want protection from a system that is out of control?

7. Avoid Capital Gains Tax

Every country is different, and every country has different capital gains tax laws. This post is not to provide tax advice, but it would appear that some countries allow structures by which you can avoid capital gains tax through indirect transfers of assets.

If you’re a US citizen, you can’t avoid capital gains tax, especially if you’re living in the United States. So, while other countries may have this issue where you can avoid capital gains by transferring assets, it is not an option legally available to US citizens.

8. Lower Tax Rates

We cannot agree with the argument that seeking a lower tax rate is wrong. We’re all for lower tax rates, not just because they benefit me but because we understand that there’s a reason why other countries offer lower tax rates. Often, it is to instigate development in their country. 

And who is the United States to say Lithuania or Estonia should be deprived of business?

The Baltic countries have come out with very low tax rates in an effort to develop their economies. Estonia even offers  zero tax  as long as you do not take the money out of the company.

Former Soviet satellite states that have joined the EU and become pretty pro-capitalist free-market societies. They want low tax rates and can develop their economies much more successfully by attracting businesses and wealth with low tax rates than they ever could by overtaxing their people.

And if somebody wanted to move part of their operations to Lithuania and  hire some Lithuanians , what’s wrong with that?

Now, there are rules on transfer pricing. Remember, you can’t just run a company in the United States and shift all your profits to St. Kitts and Nevis or Vanuatu without any reason. There are established principles in most countries.

However, you must ensure you get that lower tax rate through legal means.

If you have a company with 99 employees in Boston and one employee in Thailand, you can’t pay that guy in Thailand 50 times the salary of the guys in Boston. It’s just not going to be allowed.

However, can you set up your business offshore to get a more competitive tax rate? Absolutely. And if you run part of your business in a low-tax jurisdiction and part in a high-tax jurisdiction, there should be no problem with apportioning the proper tax revenues where they belong.

9. Access to Tax Treaties

We don’t come across tax treaties as much in what we do because we generally work with wealthy individuals who are becoming nomadic, and their businesses are nomadic, but tax treaties exist for a reason, so that’s a possibility for some corporate structures.

Illegal Reasons to Use an Offshore Company

Illegal reasons to use an offshore company

10. Tax Evasion

Tax evasion is the old-school approach to offshore where you’d set up a  numbered Swiss bank account  and then simply not report that money. Numbered bank accounts do not exist anymore. And reporting is now the legal obligation of all US citizens.

In the age of transparency, we have  FATCA ,  FBAR , huge IRS penalties, and  the CRS  (the common reporting standard) for the rest of the world, with 120 countries signed up to share information as of 2023.

The days of hiding money are over. Transparency is here.

So, sure, are there still ways to do it? There are plenty of structures where people try to put their friend’s name on something to get past reporting requirements. But most of the time, even these ideas backfire because then the friend has a tax problem.

Tax avoidance is what is legal. It’s up to you to determine if it is moral. If you can establish your business through legal practices, is there a reason not to do that?

What is not legal is tax evasion, hiding money, not reporting earnings, etc. Of course, that’s illegal. And it is definitely not recommended.

11. Criminal Enterprises

This is what the media wants everyone to believe that people are doing offshore: hiding ownership from law enforcement authorities, dealing in corrupt practices, stashing the proceeds of crime, financing terrorist activity, laundering money, etc.

And, of course, this is illegal.

But the reality is that there are millions of people who just live overseas. They’re traveling, digital nomads, and expats, and choose to base their operations in the most convenient place, which often isn’t back home.

Again, the politicians and the people who want to spend your money don’t like yachts being registered in the Marshall Islands. They’d rather you register in the US, where they can charge you a fortune. But if you have a yacht and you’re not docking it in the United States, why would you pay 10 or even 50 times the taxes to the United States when your yacht is not using any of their services?

But thanks to all these criminal activities and the fact that certain banks have been involved with them, the people who suffer the most are those who run legitimate businesses. People have their accounts closed at banks like HSBC in Hong Kong every day. 

So, while criminal activity certainly exists offshore as it does everywhere else, the vast majority of people using offshore companies and banks do not do so to get away with illegal activity.

Your Reasons To Use An Offshore Company

Most of the reasons to use an offshore company are legitimate. Half of them are legitimate by any measure and are potentially tax-neutral. Most of the remaining reasons are legal, although morally debatable. And only two of the reasons are completely illegal.

The small number of reasons that are harmful and illegal are mostly overblown to make everything else on this legal and legitimate list seem like shady or even criminal activity.

The moral debate is mute. The politicians make the laws. We don’t. We just follow the laws.

If you’re going to pay tax, would you not rather pay it somewhere where they respect you and your values?

That’s reason enough to go where you’re treated best.

Become  a Nomad Capitalist client , and we will work as your offshore strategy architects and general contractors, navigating all the complexities with you and taking you where you are treated best. 

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IMAGES

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  6. The Ultimate Guide To Offshore Company

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COMMENTS

  1. How to Set Up an Offshore Company in 3 Steps [2023 Guide]

    Open in 3 Steps. Offshore company selection - Choose your offshore company jurisdiction, type of company, and company name. Offshore company Setup - Submit fee, business plan and all personal documentation and KYC forms. Offshore company incorporation - Add on any extra services, bank account opening and understand your reporting obligation.

  2. How To Set Up An Offshore Company For 2024: 4 Steps To Go

    Tailored business needs: The offshore company jurisdiction should align perfectly with your business requirements. For instance, if you're looking for a foreign location known for its pro-business environment, destinations like Singapore or Hong Kong might top your list. ... This factor holds significant importance if you plan to trade or ...

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    Here are the key points that you should include in your offshoring strategy framework when establishing a business process in another geographic location: 1. Assess processes by value. The first and most crucial step of an offshoring strategy is identifying the business operations you need to offshore. The more crucial the process is, the less ...

  4. Best Countries for Offshore Companies in 2024: The Ultimate Guide

    Offshore Company: A Hong Kong offshore company is a shell company with no bank accounts, accounting, transactions, operations, directors, or shareholders in Hong Kong. Onshore Company: A Hong Kong onshore company has its main base and whole structure in Hong Kong. The corporate tax rate for an onshore company is 16.5%.

  5. Offshore Company: How Foreign Corporations Reduce Taxes

    An offshore company can lower your taxes and protect your assets. You've burnt the candle at both ends all year. You've sacrificed "your time" to build your business, all to be hit with a massive tax bill of 35%, 40%, or even 50%. You now have less money to put back into your business and accelerate growth, less to put into other ...

  6. Offshore Company

    As long as you have a thorough plan, you can start your offshore business right away. Part 2: The benefits of an offshore company ... Holding business. Your offshore company can hold several shares in another foreign company and receive dividends as a main source of income. It can also hold other types of assets like patents and trademarks ...

  7. Offshore Business Planning

    Multinationals have enjoyed the benefits of offshore business planning for decades. Proper Businessman with ideas for success planning has allowed these companies to legally stash billions offshore and out of the reach of the IRS. For example, Apple has $157.8 billion in cash sitting overseas and reported the biggest quarterly profit in corporate history this […]

  8. A Short Guide On Setting Up An Offshore Company

    Setting up an offshore company is one. (844) 493-6249. ... Business Plan; Financial Documents; Banks Statements; Using one of the best platforms that can supply you with these forms and many other pieces of bits of advice, you can settle your offshore company formation Dubai in no time. It would take 2 to 3 weeks to set up everything, and the ...

  9. How To Setup Offshore Company: 2022Guide

    There are four main steps to legally setting up an offshore company. Choosing a jurisdiction. Offshore business set up. Offshore bank account opening. Remaining compliant. By following these four steps, you can expect to have a seamless and successful offshore company incorporation.

  10. Setting Up An Offshore Company: A How-To Guide

    An offshore company is a legal entity that is incorporated in a jurisdiction outside of the country where it conducts business. Offshore companies are often used for tax minimization and asset protection purposes. There are many benefits to setting up an offshore company, including reduced taxes, increased privacy, and greater flexibility.

  11. What is an offshore company and where to start your offshore business

    Ultimately, companies that out-source their work to other countries are often considered offshore compies and may be either partially or fully established outside of the United States, with their primary operation and business functions often taking place in the States.. Typically speaking, owning and operating an offshore corporation requires a variety of permits and registrations in order to ...

  12. 10 inspiring offshoring examples for your business

    This gives companies a competitive advantage over their business competitors. Another offshoring model is when the business owner hires a third-party offshore service provider to carry out a certain job. This business model is called offshore outsourcing. Offshoring can be divided into two types depending on the services that are offshored: 1.

  13. Ask These 10 Questions to Find the Best Offshore Company for You

    Last Updated: September 17, 2020 Dateline: Belgrade, Serbia What is the best country for incorporating your company? If you are doing business in a high-tax country, you may have considered incorporating offshore in order to reduce your taxes.But knowing that an offshore company can help lower your taxes and knowing which jurisdiction is the best place to register your business are two very ...

  14. How to Set Up an Offshore Company in 2024

    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.

  15. What needs to be included in your offshore business plan

    There is a strong motivation for business to keep money offshore. Proper planning and analyzing will help company to store their assets in a safe and reliable jurisdictions. Many companies from the Forbes TOP-100 list are using offshore plans to maximize their profit and legally keep their money.

  16. Best Jurisdictions for Offshore Company Formation

    Offshore company formation at up 50% off on your offshore company registration with us, Worldwide. Get hassle-free offshore company setup in just days. Learn more ... Copy of business plan; CV of the director(s) and shareholder(s) Common Yes No $3,610 $3,770 Register Now. Nevis: 2-3 days $1,750. Nevis Company Incorporation: 1,550 USD.

  17. How to Set Up an Offshore Company in the UK for 2024

    Audit of accounts. There are no audit requirements to set up an offshore company if you meet the following criteria: Turnover below £1,000,000. Net assets of less than £1,400,000 (unless of course, the offshore company you want to set up is part of a larger qualifying group).

  18. How to Plan and Report an Offshore Business

    We can help with the planning, form the offshore corporation, open the offshore bank account, and prepare your US tax returns. I hope this article on planning an offshore business has been helpful. For more information, please contact us at [email protected] or call us at (619) 550-2743.

  19. Why Setup an Offshore Company?

    Growing into new markets from an offshore company is a great way to develop a business in a new region or country. Governments, private companies, and local agencies often boost and support emerging industries in their market with subsidies and other incentives for offshore companies eager to set up and invest locally. 6.Low Capital Requirement

  20. Business Plan for Offshore Companies

    Business Plan for Offshore Companies. As a businessperson, we understand you must be conversant with the fact that an offshore company is a business entity registered and operating in an overseas location. Our role is to convert your business idea to fruition to the extent that your venture to the offshore market will be certain. All documents ...

  21. How do I make a business plan?

    Marketing strategy. Sales approach. Funding information (or request for funding) Financial estimates. Consider adding a table of contents or an appendix if your plan is really lengthy or complex. Anyone with a stake in your organization is, in general, in your audience. They could be clients, employees, internal team members, suppliers, and ...

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    Industry Insight from Reuters Events, a part of Thomson Reuters. Much-needed investments in U.S. offshore wind factories are on the rise on the back of action by East Coast states and expectations ...

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    The company has stopped making contributions to 401(k) accounts, and instead gives workers cash credits in a new version of its old pension plan. By Jeff Sommer Jeff Sommer writes Strategies, a ...

  28. 11 Reasons to Use an Offshore Company for Business

    2. To Meet Legal Requirements. A common reason to set up an offshore company is to meet the legal requirements of the country where you want to buy property. For example, in Malaysia, owning property through select foreign companies is possible. In many countries, this is not possible.

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    Capital One Financial Corp. agreed to buy Discover Financial Services in a $35 billion all-stock deal to create the largest US credit-card company by loan volume, giving the combined entity a ...