Before we get into the whole ‘benefits’ debate, let’s first define what an offshore company actually is. An offshore company means a corporation, LLC, or a similar entity formed in a country other than the one where the principals of the organization reside in. Basically, it means a company that is situated outside one’s national boundaries.
The major reason behind forming such an entity are often to take advantage of the laws that are not available in one’s own country. These might include tax savings, asset protection, or take advantage of foreign business opportunities. An example of this is Apple, Inc. the tech giant whose headquarters are in Cupertino, California in the United States of America. Apple established offshore companies in Ireland. In Ireland, if a company is linked to another company which is doing business in Ireland, this country allows some Irish companies to claim non-residence status. This allows Apple’s main company to not pay taxes anywhere at all.
One of the major benefits of an offshore company is that the identities of the owners and sometimes even the directors are not made public. The leaders of the economy and their families are always at risk of being targeted by financial enemies, scam artists, and other criminal minded individuals who are looking to make easy bucks by inflicting harm. Thus, having an offshore company gives you enhanced privacy.
Another common reason to set up an offshore company is to follow the legal requirements of the country where you want to purchase property. In many countries, you cannot buy a property if you don’t have a local company. Many countries give incentives to individuals who are buying property through offshore companies. This increases the country’s revenue.
If you live in a country where the justice system is a mess and everything is just chaotic. A person may not mind paying more taxes if he gets more protection in the form of a better legal framework. There are countries in the world that have lower taxes, but setting up and maintaining a company is extremely inefficient and tedious. In this scenario, you will not mind paying taxes in the least, if you can solve so many other issues.
Many people set up offshore companies to protect their assets from attorneys, plaintiffs, creditors, ex-spouses, etc. In countries like the United States, where people sue everyone and anyone they can get their hands on, having an offshore company can be a life saver.
If you start an offshore company in, say, Idaho, USA, you will get a US address. This means that your company is now a US-based company. Depending on your type of business, this could give your business a reputational boost. This is specifically advantageous for online businesses that cater to a worldwide audience. They could have their headquarters in an attic or a basement and still market themselves as a leading US business.
A lot of countries are business-friendly. Not only do they have low tax rates, but they also make it easy for a company to set up its office in their jurisdiction. The Baltic countries have offered very low rates so they can develop their economies. Estonia is one country that actually offers zero tax as long as the money stays in the company. These are countries that are developing their economies by attracting businesses and wealth with the low tax rates policies.
Those are just some of many benefits a small business can get by getting incorporated in an offshore jurisdiction. As you can see, there are plenty of upsides to it, which is something you should explore as a business owner. To learn more benefits, especially legal benefits, of doing so, consult with your trusted lawyers and consultants.