Incentives for Incorporating an Offshore Business

Offshore businesses have received unwanted attention in recent years, as governments see them as tools for tax evasion. However, there are many reasons why having an offshore company can benefit entrepreneurs, aside from through a tax perspective.

 

Starting with the obvious tax advantages, offshore companies, if properly structured, can significantly reduce tax liabilities for many businesses. An offshore company in Singapore, or a Dubai offshore company, can potentially owe zero taxes, which is almost unheard of to regular companies in the UK or the US. Many entrepreneurs may question why they are paying 20% all the way to 40% tax rates, while other companies can get away with zero. Put in real terms, a company making US$1 million in profits, could save US$200,000 by properly structuring an offshore business to legally owe zero tax. This is one of the main incentives for entrepreneurs starting an offshore business, understandably so. However, it is important for entrepreneurs to ensure that their liability to tax is reduced legally. Often, this calls for an incorporation services company or professional services firm, to oversee the new business start up.

 

Aside from tax incentives, there are also many other benefits offshore business can provide. Entrepreneurs from countries that are politically unstable, often consider an offshore business to enhance the reputation of their firm. Being established in Singapore suggests the company may be efficient and its employees are highly efficient, as Singapore boasts a reputation for excellence. In this way, having an offshore business can be part of a company's marketing and branding strategy.

 

If an offshore business is incorporated in a jurisdiction with low labour costs, it is sometimes legally possible and financially beneficial to open a functioning office in the country of incorporation. Whilst this procedure may seem time consuming and complicated, incorporation service companies can assist with identifying a respectable, secure and reasonably priced office location, hiring staff as well as setting up a virtual office to ensure close monitoring of the offshore business. In most cases, entrepreneurs opt to have a virtual office service, and to undertake most business management in their home country.

 

Another benefit of offshore business is to take advantage of a well-implemented legal infrastructure. For example, entrepreneurs in industries where intellectual property is of high value would prefer to incorporate in a jurisdiction where intellectual property rights are strong and well maintained. It can be more beneficial for a person from some developing countries to set up a company in Singapore than in their home country, as Singapore has extremely thorough legislation to protect intellectual property, whereas their home country may struggle with this.

 

When determining where to locate a corporate offshore account, various factors need to be taken into consideration. Firstly, offshore banking jurisdictions are often in remote locations with poorly-developed communications technologies, which can complicate banking queries or issues and even impede on bank/client relations. Furthermore, since the September 11 terrorist attacks, offshore banking is sometimes associated with terrorist group and criminal money laundering. That being said, various offshore banking locations, such as Singapore and Hong Kong, remain reliable and are highly respected in the business world.

 

Incorporating offshore can also mean faster incorporation time for many entrepreneurs. Some countries are not perceived as being business 'friendly', while others are. This means that the legislation in that jurisdiction either facilitates or complicates business set up procedures. In France, for example, it may take somebody months to set up a company, whereas in Singapore or Hong Kong, this could be done in days to weeks. For entrepreneurs in a competitive market, this can be a very important and decisive factor for the company domicile. An entrepreneur with a product they need on the market as soon as possible, before the competition gets there no longer has to spend months dealing with complicated and unclear legislation. Incorporating overseas can allow them to introduce the product more efficiently and effectively.

 

Offshore incorporation can also allow an entrepreneur to undertake business their home country would not have authorized them to undertake. For example, a person interested in starting a finance company in the U.S. may require complicated licensing and a strong academic history to be approved. These procedures may rule out such careers for many people who are simply interested in testing the waters in finance, or who may have a strong knowledge of finance without the expense of the qualifications. These people can benefit from incorporating in various offshore jurisdictions where licensing may not be required, or where the regulations behind these industries are not as stringent. In this way, offshore incorporation allows people to do business in industries they may have thought impossible.

 

Similarly, some individuals may have an excellent business idea, and wish to start up a business. However, they are lost when it comes to the formalities such as accounting records and audits, and do not wish to take the financial burden of hiring an accountant or auditor. Various offshore jurisdictions facilitate entrepreneurialism not only upon incorporation, but also when running business. Some countries don't require annual audits, and some don't require detailed financial accounts to be kept. In this way, entrepreneurs who want to pursue their business ideas have the opportunity to do so by incorporating offshore.

 

Ultimately, offshore company incorporation provides many advantages for many types of entrepreneurs. From those with high ambitions who seek intricate legislation for intellectual property protection, to those who want a quick and easy way into the business world, offshore incorporation can facilitate obtaining the right kind of business for anybody's business idea. It is no wonder offshore business is so popular in the 21st century, globalized world.