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Offshore Company Formation Guide

Updated on May 4, 2013

Seychelles Islands Offshore Company Mecca

The Seychelles, along with sporting spectacular physical beauty is home to one of the few remaining bearer share corporations, along with panama and the US Marshall Islands
The Seychelles, along with sporting spectacular physical beauty is home to one of the few remaining bearer share corporations, along with panama and the US Marshall Islands

'What's the perfect offshore company for me and my situation?'

Your choice for where to incorporate your offshore company will depend on your goals. Is your primary goal tax avoidance, asset protection, or general wealth management?

Let's examine some of the different offshore companies and discuss why and in which circumstances each of them become most useful.

Offshore Corporations, also known as limited companies or IBCs.

Offshore corporations are the most common variety of offshore company. Offshore corps are often used for tax-free trading, royalties holding, patent or copyright holding (asset containers), or investment vehicles in stocks (equities), commodities (futures or physical), forex/currency trading and real property holdings -- specifically overseas.

Offshore IBCs and LCs are also used to shield the identity and enhance the privacy of the beneficial owners of offshore bank accounts. The company would be named the owner when opening an offshore bank account.

The offshore company that provides the highest degree of privacy is the 'bearer share corporation'. In a bearer share corporation - much like in bear bonds - the physical possession of the instrument in question is all that is necessary to claim ownership. Traditionally, owners are listed on a public document.

Despite the incredible benefits bearer shares bestow on their owners in regards to privacy, or perhaps more accurately, *because* of them, bearer share companies are becoming increasingly hard to find. Bearer share corporations have received a bad rap and are currently the target of most high tax regimes and are associated with money laundering, political corruption, drug trafficking and even terrorism -- basically anything to get public support for their destruction. Most offshore IBC's can be incorporated within a few days.

Offshore Limited Partnerships

Offshore limited partnerships,which are aka limited liability partnerships (LLPs). The objective of a limited partnership is to separate the functions of ownership and control - which makes them great for asset protection. A limited partnership is managed by the GP, or general partner. The General partner is saddled with unlimited liability, and limited partners who are only liable for what they have invested in the partnership...much like the stockholder in a given firm.

In situations where structures have been created to utilize the LP, an offshore company often becomes the general partner / general manager in order to protect teh assets of the partnership's investors. In addition, limited partnerships offer better asset protection, specifically against seizure from creditors, than a traditional offshore company.

Offshore Limited Liability Companies

Offshore Limited Liability Companies, or offshore LLC's, are a relatively recent entity which combines the simplicity of a limited partnership and the limited liability of the corporation.

Shareholder interests are protected like in an offshore limited partnership, and there are guaranteed safeguards against seizure from third party creditors. Offshore LLCs can be managed by managers who may or may not be members, further increasing their asset value as an asset protection vehicle.

Offshore Protected Cell Companies.

Offshore Protected Cell Companies has often been characterized as some of the strongest asset protection vehicles available.

These offshore companies are extremely useful for financial services companies -- for example, those in insurance and investment. These are also known as an incorporated cell company.

How it works is this: assets are separated into a given number of separate cells. Then, the assets and liabilities of each individual cell company are separate from those in every other cell, and the parent company.

In addition, the ownership, and even the management of the protected cell company can be different from every other cell and from the company itself. These offer an incredibly useful structure for those who have business models where aggregating capital in one legally liable structure do not make sense due to the risks of a one small part of the organization bringing extraordinary losses to the company as a whole.

Offshore Specialty Companies

Offshore Specialty Companies are created if the formation of a specialist company is required. This includes the formation of an offshore financial services company, such as, offshore banks, offshore insurance companies, offshore investment funds, or offshore trusts or trust companies. Each of these particular offshore companies requires special licensing.

Offshore Trusts or foundations

While offshore trusts and foundations are not technically companies at all, they are often used in estate planning, or to protect assets in advance of anticipated attack by third party creditors. In addtion, they can also serve asa great tax-free investment vehicle for holding an offshore company.

In summary, there are many different ways to set up your own offshore company - so it's a great idea to narrow down your list of possible solutions, and then look for experts to assist you that specialize in the jurisdiction in question or the structure you are interested in. Not all company formation agents will be experts in all areas, and obviously, will be likely to steer you towards the company type that fits their expertise the best -- whether or not it's perfect for you.

A quick online search will reveal many more offshore company types, offshore company formation, prices and general advice.


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    • offshorebanker profile imageAUTHOR


      9 years ago

      no. it just depends on what it is you're trying to accomplish. so, like many things, it depends.

    • profile image

      Company Formations 

      9 years ago

      Is it tru that the best location for ecommerce trading is Hong Kong?

    • offshorebanker profile imageAUTHOR


      10 years ago

      obviously, this is a pretty broad topic as the quirks and rules for any given jurisdiction can be different -- and rules apply differently depending on where you are from for each non-resident company.

      This is NOT something me or my company specializes in, we do a little bit and outsource a lot to local experts. If anyone has questions about a particular area or a particular need, comment here and i'll research it and get back to you. given the depth of the info, I may produce a few more hubs as well to flush out details on a couple of different offshore financial centres.



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