Offshore business setup

Does anyone have any experience with this?

[Marketing Guy]

I would appreciate it if anyone has any experience in offshore business setup they could offer some input on the pros and cons.

It's been suggested to me by a business partner that we purchase a defunct offshore company to use for a new business venture and this is new territory for me! :)

Thanks
Scott

[vibgyor79]

A defunct company? What exactly are you purchasing here? Their clients? Their intellectual property? Do they still have the employees?

[Marketing Guy]

I was under the impression (after only a brief meeting earlier) that the intention was simply to purchase the company (no assets, etc) as a quicker solution to setting up a new company.

Ive been seeking advice on this from several source and by most accounts, a new company registration would be a much wiser move.

Scott

[cfx211]

In buying a defunct company, you could be exposing yourself to some nasty liability or always have the fear that someone will blindside you with some claim from the company's past activity.

I want to say I remember seeing companies that set up offshore companies with all the paperwork and what not taken care of. The company just sits around fully formed not doing anything waiting for someone to buy it.

That approach might save you some headaches in getting started.

[Shane]

Lawyers and accountants in Canada set up numbered companies, leave them "on the shelf" until someone needs a company and then they sell them at a marketed up price. If you are in a hurry, this maybe the way to go.

The other option is to fly to your country of choice and set-up a company there. :) Do I hear potential tax write-off (check your local tax laws, registering a company in Canada is not a legal deduction :( ).

See a tax lawyer or an accountant who specializes in overseas companies before you select a country though as the countries handling of profit and tax laws vary widely (and for general advice).

..... Shane

[TimmyMagic]

Or why don't you just pay your taxes like everyone else. I can't stand these people who use the loop holes to avoid paying tax then complain about the state of the country.

[Go60Guy]

Well, there can be many valid reasons for setting up an offshore company other than tax avoidance. I wouldn't make the assumption that that's the objective.

[Belinda]

We operate offshore and there are a few things you have to bear in mind:

The tax issue is often the main reason but is of small value sometimes b/c of the ultimate requirement to declare worldwide income by most jurisdictions that you are an actual resident in.

We find it valuable for other reasons:

Privacy- if you are resident in a small community this can help, as it gives you some breathing space between your offshore company and the local co. (assuming you have one), and any nosy locals (including dodgy accountants) checking out your operations.

Movement- If you are unsure you are going to stay put for too long in your primary residence it would be a shame to have paid lots of tax :)

We do alot of shipping (mechanical stuff) and really could be based anywhere. Being offshore allows us to decide from one year to the next whether our residence is going to move....

The biggest hassle about being offshore is that you cannot benefit from local infrastructure until you declare earnings.

I.e. No new Ferraris until you can justify where the money came from....

[Tigrou]

Shane, I've bought a premade company off the shelf in the UK and ran into problems. Part of the deal was that my accounting was done by the same financial firm. Fair enough. But they did an exceptionally poor job of it and phoned me about once a week trying to sell me other financial products. It resulted in a lot of stress and a variety of tax issues that I have resolved now. Other people seem to have had more success so I probably just got a cowboy.

TimmyMagic, I agree with you in general about tax avoidance. I used to feel exactly the same way when living in the relatively benign Anglo tax regions.

In contrast though, some areas of Europe on 50K USD/euro your tax rate gets up to 70%. Yup, 70% in tax on your top buck for a not very well paid professional. This doesn't include the 20% of VAT (sales tax). Also factor in that the governments don't really enforce the tax rules plus that banking privacy laws can be very strong and, surprise, surprise, it is pretty rare to find an expat (or local) that pays even close to full taxes.

The main dodge for the expat programmer/consultant type is to use a "management firm" that uses backroom magic to split taxes into one income stream that shows up in your area of residence and one income stream that theoretically goes to the management firm but in reality goes into an offshore account in Andorra, Switzerland, Luxembourg or wherever. The "employee" either invests that money or travels there and lifts it out in cash.

The management firm takes a cut of 5-12% for their services. The "employee" though is fine with that because this more than doubles her take home salary. The absolute percent of take home depends on the absolute salary and how legal they want to be.

Governments (or at least Belgium) also provide clauses that expats working for powerful firms can keep tax level of their home country.

I would say the first two are commonly known, normal and accepted. I haven't heard of anyone having problems with them. After that though you find gamblers playing the dodgiest of games. As far as I can tell, even when playing really fast and loose, independents rarely get busted but small companies try to many dodges and get busted relatively often.

(Marketing_Guy, I think you're in Oz so I realise this didn’t answer your question, but hopefully was somewhat on topic at least ;-)

[Marketing Guy]

Thanks for the replies (Im in spain BTW Tig! ;)).

Timmy, personally I really cant stand people who just like to chime in a discussion without adding anything useful to it. Even worse if these people make rash assumptions without any hard facts to back them up. /shrug

Belinda, you're spot on there - Im a Brit living in Spain - I want to setup an online business and eventually move back to the UK in a year or two, so Im assuming an offshore biz would simplify this process.

Im not looking for a dodge or a scam. Im setting up a legit business, but as my own residence will change from time to time, I want something that wont complicate my permanent residence change too much.

Cheers :)
Scott

[Essex_boy]

Try the company corporation in Delaware USA ive used.