Offshore Company

Introduction – If you are reading this you are probably contemplating acquiring an offshore company as part of your asset protection or business model. What we will, attempt to do is touch on some of the important points to enable you to make an informed decision as to which jurisdiction to use and what type of offshore company structure to acquire with the goals being asset protection, privacy, security and ease of operation.

Jurisdiction – Of course while the country is most important when selecting a bank for your offshore structure, jurisdiction can still be an important factor for your offshore company. Different countries have different laws regarding companies, their formation and operation. We will discuss some of the things to be concerned with.

Type of Offshore Company – The most secure and private type of company is the bearer share company. These are often referred to as Sociedad Anonima or S.A. being the short form. In a good jurisdiction the shares of the company can be made out in blank. These means there is no recorded name of owners in any public registry, in fact the government does not even know who owns the shares of the company formed in Guatemala or Panama. Whoever owns the shares of the company controls the company. One nice advantage of having such a bearer share company is that the various banks and governments monitoring the wire transfer system will not know who the natural persons are behind the corporate entity sending or receiving the wires. Remember privacy and security go hand in hand; it is impossible to have one without the other. The bearer shares in a good jurisdiction do not have to be kept by the registered agent in that country. Changes of ownership do not have to be reported to any government or registered agent. Nominee directors are used for the public registry. These are people unknown to you but known to the law firm that formed your corporation whose names do appear in the public registry. They have little power and cannot access the bank account. They are not signatories on the bank account; they do not even know the account number and any changes in the bank signatories must be approved by the existing signatories. Nominees as we use them are not a threat.

Laws – The country where the offshore company is in must have statutory corporate privacy. This means that it would require a court order from a court in the country of incorporation for the corporate veil to be penetrated. This is generally reserved for major criminality, not taxation matters in the countries we use. Even then things can become difficult to run a trail if the shares were traded or sold to one in another jurisdiction who may have again sold or transferred the shares as well. Laws of a favorable jurisdiction should not require that the books and records be kept in the country of incorporation with the registered agent.

Lawyers – Please remember only a lawyer can offer you attorney client privilege and you should never form an offshore company with a non-lawyer formation agent. If an attack is made on your corporate records by a lawsuit and subpoena in the country of incorporation the corporate agent cannot defend against such an attack. They must go out and hire a lawyer to defend against the subpoena which is an unlikely event. Why should they pay $5,000 to $10,000 to defend you when they can just photocopy the records for the other side? A law firm has an obligation to defend the attorney client privilege and protect the privacy of the client. It also does not cost the law firm out of pocket money to defend such an action.

Taxes – The country selected for the incorporation should have no taxation of offshore-derived income. This means that money coming into the corporation derived from outside of the country of incorporation is not going to be taxed. In Panama there is not even a need to file a tax return.

Tax Treaties – A favorable jurisdiction will have no tax treaties in place. Tax treaties lead to fishing expeditions. Since countries tend to cooperate with other countries that may not be in the tax treaty the only secure country will not be in any tax treaties at all.

Banking – Remember you do not have to bank in the same country you are incorporated in but you can do so for convenience. Some people advocate filing the offshore company in one jurisdiction and opening the bank account in another. This is something that can be done but it is not mandatory. If the country has good asset protection and privacy laws that is generally sufficient and there is no real need to use two countries in the asset protection structure.

Offshore Foundations – One useful tactic is to use an offshore foundation in your asset protection strategy. Foundations are generally better than trusts since they are judicial persons like corporations and have their own assets and liabilities. A trust is just a written agreement as to how to handle assets. The foundation generally has no owner’s just protectors and beneficiaries yet the foundation can be the owner of the shares of the offshore company. It is at times convenient to not be the owner of a company that you control. Foundations are anonymous as well in good jurisdiction.

Favorable Jurisdictions – The jurisdictions we prefer to work in are Hong Kong, Belize, Nevis and Panama.