A company formed in a jurisdiction outside the home country of the owner of a company is called an offshore company. Such companies are mostly set up in countries that are a tax haven – where there are no corporate, personal or capital gain tax or restrictions on employment policies. The flourishing corporate scenario, advanced technology and globalization of the economy have given rise to various business opportunities for promising entrepreneurs. This has resulted in a popular trend of forming offshore companies.
There are many reasons to go for an offshore company:
• Tax saving
• Asset protection
• Flexible business law
• Privacy
• Lawsuit protection
Following are the steps involved in the formation of a successful offshore company:
Planning
Immaculate offshore tax planning, preferably with the help of a corporate consulting company is critical for the formation of offshore companies. Successful tax planning involves key issues of legal, financial and tax aspects of the company and business. When planning for an offshore company, the following points must be kept in mind:
• Identification of legal, tax efficient jurisdiction. Selecting a jurisdiction that suits the business to the utmost is the first important step. It is better to select a jurisdiction that complements various business forms like investment, trade and financing that will help to consolidate the business.
• Identification of an ideal corporate bank account to facilitate international trade in tax efficient way.
• Verifying whether register of director and shareholders are made public. Successful offshore tax planning identifies jurisdiction with minimal reporting requirements.
• Check minimum capital requirement and if the company is required to be registered for taxes like VAT.
• If the company can receive foreign sourced fund without being subject to local tax.
• It is necessary to know the types of taxes and exemptions allowed.
• Almost all jurisdiction demands an annual fee. It is better to check the frequency and rate of renewal fee.
• The minimum and maximum number of directors and shareholders allowed in the jurisdiction should be ascertained.
Process of Formation:
• After planning and selection of jurisdiction the incorporator files Memorandum of Association with appropriate authority of that jurisdiction, like the Registrar. The Memorandum of Association gives the new company’s name, authorized capital, nature of business and details of registered office. An offshore company formation agent may be hired to do the necessary paperwork with the office of the Register
• Certificate of Incorporation is issued by the Register on successful completion of the registration. This document confirms the legal commencement of the company from a particular date.
• On receiving the Certificate of Incorporation, the incorporator signs the “Resolution”, appointing the first director(s) of the company. This may be the incorporator or a nominee on his/ her behalf. Once this appointment has been done, the power of the incorporator ceases and it is upto the board of director(s) to manage the company.
• The board of directors should hold a first meeting to adopt the company’s seal, by-laws and appoint the banker of the company. At this point, the company is ready to function as an offshore company.
Formation of offshore company has become simple and easy with a wide range of choices for jurisdictions. The ease of operation, advantages of flexible taxation, protection of assets and fruitful business prospective have made it a popular choice.
Tony Thornton shares his expert knowledge on company formations. Find out more visit - cfsformations.com
