HOW TO START AN OFFSHORE COMPANY

Offshore company formation is generally much easier than onshore incorporation, due to lax legislation and business-friendly regulation. You can have your company in as little as a couple of days from payment to your offshore service provider (OSP).

There are a few things you need to consider before start your offshore company:

• What company form do you need?
• How many persons will be involved in the company?
• Which offshore jurisdiction is the best?
• What extra services do you need? Offshore bank account, nominees?

OFFSHORE COMPANY LEGAL FORM

The first two questions go closely together.

Companies formed in the most popular offshore jurisdictions, in particular Belize, Seychelles, BVI, and Anguilla, are IBCs, which is short for International Business Company. They are called BCs in BVI, but there is virtually no difference between an IBC and an BC.

IBC – INTERNATIONAL BUSINESS COMPANY

An IBC is very similar to a private limited company in that it has a board of directors, shares, and a share capital, but the shares cannot be publicly traded.

IBCs are characterized by many if not all of these features:

• Complete tax exemption. In lieu of taxation, an annual fee of usually 100 – 500 USD is charged.
• Strict confidentiality; no company details go on public records.
• No need to disclose ultimate beneficial owner (UBO).
• Very little limitation on business activities.
• Bearer shares or registered shares – neither of which goes on public records.
• No requirements to perform bookkeeping and prepare accounts. No audits.
• Minimum of 1 director and 1 shareholder, which can be as few as one person or one legal entity in total.

There are several hundred thousand IBCs registered throughout the world. It is the most common legal form for offshore companies.

IBC can often use a wide range of suffixes: Ltd, Limited, Inc, Incorporated, Corp., Corporation, S.A., et cetera. Not all jurisdictions allow this. The Seychelles is among the most lenient.

PRIVATE LIMITED COMPANY

Not surprisingly, the second most common legal form is private limited or variants thereof. This includes local variants, such as:

• Sociedad Anónima (S.A.): Panama, Costa Rica, Uruguay.
• Aktiengesellschaft (AG): Switzerland, Liechtenstein.
• Société Anonyme (S.A.): Luxembourg, Monaco, Switzerland, and Lebanon.

Private limited companies usually rely on non-residence or territorial taxation to be exempt from tax or apply a very low tax rate. Confidentiality is not as strict, with names of directors and in some cases shareholders often appearing on public record. This can usually be mitigated by using nominees or corporate directors and shareholders, where the corporate entity is an IBC.

These companies are usually required to perform bookkeeping and prepare accounts, and may be subject to audits.

LIMITED LIABILITY COMPANY

These are not particularly common in offshore jurisdictions but there are a couple of offshore jurisdictions where you can form an LLC:

• Anguilla
• Belize (Limited Duration Company, maximum 50 years)
• Costa Rica (Sociedad de Responsabilidad Limitada)
• Marshall Islands
• Panama (Sociedad de Responsabilidad Limitada)
• Saint Kitts and Nevis
• USA (most famously Delaware)

COMPANY MEMBERS

Offshore sole proprietorships are most often incorporated as IBC or private limited, where available with only one member.

There are ways around this.

Panama, for example, requires a minimum of three members in order to form a private limited (Sociedad Anónima). Many choose to either hire two or three nominees as members. Corporate directors can be used and one person can incorporate a S.A. in Panama with two or three other companies all belonging to the same person. Be warned though that Panamanian banks may find this structure off-putting.

THE BEST OFFSHORE INCORPORATION JURISDICTIONS

The following are the most popular offshore jurisdictions and the common company legal form:

• Belize – IBC
• Seychelles  – IBC
• British Virgin Islands (BVI) – BC
• Panama – Private Limited (Sociedad Anónima)
• Hong Kong – Private Limited
• Mauritius – GBC II

These six truly stand out in terms of number of offshore companies incorporated. A few years ago, the Cayman Islands and Bermuda and while there are still many companies there, they are no longer the largest in numbers of new offshore incorporations. The costs to incorporate in the Cayman Islands are significantly higher than other jurisdictions and Bermuda has moved away from tax exempt trading companies. The two may still have uses but they are becoming niche jurisdictions.

Below is a list of additional offshore jurisdictions where incorporation is popular:

• Anguilla – IBC
• Bahamas – IBC
• Costa Rica – Private Limited (Sociedad Anónima)
• Cyprus – Private Limited (non-resident)
• Dominica – IBC
• Gibraltar – Private Limited
• Malta – Private Limited
• Samoa – IBC
• Saint Kitts and Nevis – LLC
• United Arab Emirates (UAE):
  • Dubai
  • Ras al-Khaimah (RAK)

Picking jurisdiction is not easy. It should be done together with a qualified adviser and after doing your own research.

OTHER OFFSHORE SERVICES: BANK ACCOUNT, NOMINEES

If you have visited a couple of OSP websites, you have no doubt noticed that they all offer miscellaneous services in addition to incorporation.

Nominees are persons (individuals or companies) which assumes director and/or shareholder roles in the company, in order to keep your name away of from the company records. This can be useful when incorporating in a jurisdiction which publishes names of directors and/or shareholders on public records. It can also be used in other jurisdiction as an additional layer of privacy. Note that using nominees make bank account opening on your own significantly harder, if not impossible.

Editor’s Note: One expert on offshore companies whom we’d highly recommend is none other than Doug Casey, the original International Man. Doug’s been to over 145 countries and started offshore companies in a number them. He wrote a thick and detailed free guide on this topic, including his favorite countries. It’s a must-read for those interested in this extremely important topic.