When you first launched your company, you probably registered it in your home jurisdiction or territory.
For example, when you built your American business, you likely registered it in the good ol’ US of A. But as your brand grows, and especially as you build up an international audience of customers or subscribers, you might turn your eyes to offshore company registration.
In truth, there are lots of advantages to moving your company to a different jurisdiction or forming a new company in a jurisdiction other than the one where it does its primary business.
If you’ve got questions, you’ve come to the right place. We’ll break down both why you would register your company offshore and the benefits of doing so in detail.
Why Consider Offshore Company Registration At All?
Simply put, registering your company offshore means registering it in some other jurisdiction aside from the one where you do most or all of your business. Let’s return to an example with an American enterprise.
You start an American business in 2017. Over the next five years, your business grows. While it’s currently registered in the United States, you could move it to a country like Mexico, New Zealand, Switzerland, or anywhere else. If your primary customer base is still in the US, then that’s offshore registration.
“Offshore” doesn’t have to mean on a different continent or necessarily mean you register your company in an island nation or jurisdiction like the Cayman Islands. It just means you register your company in some other nation aside from where you do your business.
But what's the point? You might know several entrepreneurs or business owners who moved their companies offshore for indiscernible reasons, or even just to "look cool." Those are terrible reasons.
There are good reasons, however. Offshore company registration is important to consider and, in some cases, might even be necessary once your brand grows to a specific size.
Think about it. You might have started off serving a very narrow, geographically limited customer base. But the more popular you get, the more your customer base is drawn from the worldwide market. At a certain stage, it only makes sense to think that offshore registration, especially given the benefits we will break down below.
5 Major Advantages of Offshore Company Registration
Just what are the benefits of offshore company registration? They can be segmented into five major advantages.
Tax Savings and Benefits
For starters, there is the possibility that you could benefit from major tax savings. But before we dive a little deeper, let’s clear up a big misconception: offshore company registration is not a means of tax avoidance, which is illegal and never recommended.
In fact, no financial advisor worth your time and money will consider assisting with tax evasion. It’s unwise, it’s illegal, and you will certainly eventually be caught.
Tax savings are not the same thing as tax evasion. For one, tax savings are perfectly legal. If you move your company to a different jurisdiction with fewer taxes than your original company jurisdiction, those tax savings are legally gained.
For another, tax savings are logical consequences of government bureaucratic systems. It’s a no-brainer to take advantage of them if you can do so.
In the modern, worldwide market, there are many opportunities to reduce your tax and other responsibilities near zero or even zero itself. With the assistance of financial advisors who know what they’re doing, you can save significantly each fiscal year.
At Dominion, we know just how important this is both for your company and in general. Entrepreneurs, investors, and successful company owners always use money from tax savings more efficiently than the government.
It’s in your best interest and the interest of the public that your tax savings get funneled back into your brand. Registering your company offshore could help you do just that.
That being said, remember that offshore tax advantages can vary heavily and depend on things like:
- Where most of your business is done
- How many branches you have opened
- Where exactly you register your company offshore
- And much more
Don’t just register your company in a country or jurisdiction that appears to have slightly lower taxes. There are a million strings attached and a lot of fine print to read through, necessitating the help of knowledgeable legal advisors.
On top of the above benefit, registering your company offshore might lead you to additional revenue opportunities.
When you register your company in a specific jurisdiction, you also open up new business opportunities in that jurisdiction. For instance, you could open new branches, cultivate fresh customer bases, and provide your products to more people than ever.
It’s more than possible that your brand could increase its revenue streams by expanding to offshore capital environments.
Imagine that you set up your business to run in America. However, you want to expand. To do this, you decide to register your company offshore in France.
Not only can you continue to run your business in America, earning profits from your regular customer base, but you will now be in a prime position to offer your products to French and EU customers as well.
In this way, registering your company offshore through an official legal move could be the best way to scale your brand into a worldwide juggernaut for its niche.
Scaling is an inevitability at one point or another, unless you want your business to stagnate. Seen in this light, offshore company registration can almost be thought of as just another step on the road to total market domination.
Legal Protection and Asset Protection via Diversification
Perhaps more importantly, offshore company registration can provide significant legal and asset protection to your enterprise.
Of course, this depends on the exact laws and regulations of the new jurisdiction to which you move. But as a few examples:
- You can place assets in offshore corporations or other overseas legal structures. This may protect those assets from future liabilities, like lawsuits
- You create trusts, investments, and offshore bank accounts and put those vehicles in the possession of an offshore corporation. If a judge in your original jurisdiction orders an asset search, assets within those vehicles might be much harder to find or even impossible to recover. Again, this further protects your business assets and your monetary flexibility
- The privacy offered by offshore company registration can also protect your assets just by reducing public awareness of those assets. It's difficult for a disgruntled customer, for instance, to sue you for a certain asset if they don't know you have it in the first place
In a legal sense, most legal actions against your company will involve an asset search. The asset search’s purpose is to make sure that you have enough money for payments or damages if there is a negative judgment against your brand.
When you form offshore companies and store those assets in those overseas companies, there isn't necessarily a legal connection with your name or original business.
Note, though, that this is far from cut and dried. There are numerous things to be aware of when it comes to protecting assets in overseas or offshore accounts and businesses. For example, it’s usually safer to store valuable assets – both personal and business-related – in an offshore jurisdiction that doesn’t interact with other jurisdictional rules whatsoever.
The bottom line is that legal advisors can tell you what your best decisions are regarding company protections and privacy offered by offshore jurisdictions.
Defense Against Legal Changes
A subsidiary benefit of offshore company registration is extra protection against major legal changes. Say that you have a company in one jurisdiction, like Germany. All of your company and its corporate assets are located in that country.
If Germany changes its laws, your business will be completely beholden to those shifts, whether they affect tax concerns, product manufacturing, etc. In effect, this limits your ability to respond to legislative changes.
In contrast, if you diversify your company and set up offshore, you’ll be much more insulated against legal changes in any single jurisdiction. If you have a company in America, but you moved the company offshore and have other subsidiary companies in other jurisdictions, America’s legal changes will impact your overall enterprise much less directly. You’ll have more freedom, more asset protection, and a better ability to adapt to whatever has changed with the law.
Privacy for Business Owners and Investors
Speaking of privacy, forming or moving your company to an offshore legal environment can provide you and any investors with additional privacy. Depending on the offshore financial center you register your company with, your business movements, deals, and arrangements might not be as easily revealed.
Of course, there are plenty of exceptions when it comes to illegal activities. But it’s still broadly true that offshore company registration typically yields greater privacy for business owners and investors, particularly compared to those who keep their company activities exclusively localized within their home jurisdictions.
Additional Structure Options for the Company
Lastly, when you set up your company in an offshore legal environment, you may open up extra structure options for your business. For example, you can set up your business as a foreign office or as an IBC/International Business Corporation.
As your business grows, you may require a different structure compared to what you started out with. That’s especially true if you want your business as an LLC or sole proprietorship at the beginning. Registering your company in some new jurisdiction makes changing its structure “cleaner” or more straightforward in certain cases.
Is Offshore Registration Always a Good Idea?
It’s clear that there are significant benefits to offshore company registration. But at Dominion, we are not blind devotees to offshore registration by any means. In fact, offshore company registration may not always be the best idea.
There are certainly times when registering your company offshore makes perfect sense (and not doing so could actually be a bad business decision).
If you are running any type of international operations – for example, you have staff abroad, you have investments in various places, or your business is sufficiently large and you have multiple international branches/stores – then registering your company offshore is a great idea.
The bigger your company grows, the more likely this is to be the case. We all operate in a globalized economy. Even though "offshore registration" still carries something of a stigma in the public mindset, it's not at all true that registering your company offshore means any illegal or legally gray activity is taking place.
And, in the long run, maintaining your large corporation in one jurisdiction is a weakness that could set you up for disaster later on.
But what if you recently started a business, or you have a small enterprise and you are totally fixed within a local context? In virtually every case, registering your company offshore will be a waste of time, money, and effort.
It simply won’t be worth the administrative cost to register your company in a different jurisdiction than the one where it operates if it’s still small.
Why Contact Legal Advisors?
Plainly speaking, so you can determine whether offshore registration is a good idea, as we described above! The right legal advisors can take a look at your current situation and make recommendations based on:
- Whether there will be any benefit to registering offshore
- What those benefits might be
- What offshore registration plan you should pursue based on specific tax laws, business requirements, etc.
Make no mistake, registering your company offshore is a big move. It will change your business operations significantly. But it’s also a necessary move as your company grows and becomes as powerful as possible. You don’t want to make that move with anything but absolute certainty.
That’s where Dominion comes in. As multijurisdictional experts in legal matters, we’re the perfect people to contact if you have questions about offshore company registration for your enterprise. Our legal advisors can connect you to the right registration opportunities and much more depending on your needs, so contact us today to get started.