LEGAL GUIDE
Written by attorney Jingming Cai | May 26, 2011

The Pros and Cons of Offshore Incorporation

Offshore corporations have long been a choice of companies interested in an economic option for their business. There are four top reasons to establish an offshore company: 1. Tax Savings: Offshore companies can provide a portion of an overall taxation reduction strategy for individuals or entities. When combined with an offshore bank account, for example, an offshore company can reduce individual taxes. If the offshore corporation is created in a low or no tax jurisdiction, it allows a business to obtain profits easier. 2. Asset Protection: Probably the most well known intents behind offshore corporation creation, is the goal to preserve wealth with trusts or offshore accounts. Assets can be owned by the offshore corporation and the company itself can even be placed in trust that may be outside the jurisdiction of the local courts situated at the principal owner’s state of residence. 3. Higher Level of Anonymity: As an extension to preserve wealth, options exist to leave the shareholders and directors of an offshore corporation off public record. 4. Favorable Local Legislation: Depending on the jurisdiction, there could be reduced requirements for accounting and company information which allows offshore businesses to run with less record keeping burden. Cons to Offshore Incorporation There are some downsides to offshore corporation that need to be considered. 1. Local legislation can be less than perfect and leave the company open to uncertainty. 2. It can be costly to set up and maintain an offshore corporation. 3. Depending on the jurisdiction you choose to set up your offshore business, there can be issues with local infrastructure function. 4. Federal agencies may take a special interest in an offshore corporation due to their asset protection options and lowered reporting requirements.

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