It is always a misconception that establishing an offshore company is about evading taxes and hiding money from the government. This is certainly not the case. Instead there are many legitimate ways to structure the business interest overseas and realize significant benefits from both tax and asset protection standpoints.

An offshore company is defined as a business entity established outside the owner’s country of residence. Similar to an onshore company, an offshore company can conduct the same business activities, open bank accounts, has similar organizational structures, allot shares to shareholders, declare dividends, etc. The major differences between an onshore company and an offshore company lie in the tax structure and level of confidentiality.

Home jurisdictions may have issues of unreasonable tax burden, economic and political instability and complicated law on property protection and inheritance matters. Entrepreneurs therefore choose offshore jurisdiction with a minimal level of risks to incorporate companies. The well-known tech giant Apple Inc. has its two subsidiaries in Jersey because Jersey, as an offshore tax haven, does not tax corporate income.

Minimizing taxes and increasing confidentiality are not the only benefits of setting up an offshore company. The following are numerous benefits that an offshore company offers:

The procedure for registering for and incorporating a company is very simple. In some cases, only 24-48 hours are required for processing after all incorporation paperwork is submitted to offshore authorities

Most offshore jurisdictions do not have restrictions on foreign exchange. Offshore companies can repatriate overseas profits to home jurisdiction at any time, if necessary. Companies incorporated in offshore jurisdictions therefore have a high level of capital mobility.

Depending on which offshore jurisdiction, details of owners, accounts and financial information are kept confidential at different levels. Unlike Hong Kong, corporate information for companies incorporated in Seychelles and Nevis is absolutely not available to the public.

There is no limitation on the business activities involved. In some offshore jurisdictions, there is no formalities and licensing practice. Offshore companies are free to engage in virtually any economic, financial and business activities.

Offshore companies are very useful to multinational corporations with international business because they are valuable vehicles for holding such assets as intellectual property and real estate investments.

Offshore companies are not required to have accounts audited and adopted at the annual general meeting. The need for staff and a physical office is also overcome by virtual office service. It helps entrepreneurs save time and money.

A registered offshore company helps entrepreneurs minimize tax obligations of their businesses because non-resident companies are often exempted from tax or enjoy low levels of tax rate. There is also no tax on capital gains, dividends, profits repatriated, sales, income, and stamp duties as well. These types of tax havens are therefore very attractive to entrepreneurs who want to maximize shareholders’ wealth.

Offshore companies take many forms but are generally some forms of company with limited liability. The most popular forms are International Business Company (“IBC”) and Limited Liability Company (“LLC”).

An IBC is very popular for holding offshore investments, international real estate and as a personal services company for expatriates working abroad.

It is a company that is registered in a tax neutral setting without being liable to taxation or, if taxed, very minimal. It is privy to tax relief as long as the business is from outside the country. Although it is unable to trade within the country in which it is domiciled, it is free to operate as it wishes.