Best Offshore Company Jurisdiction

Where to Incorporate Your Offshore Company

Before forming an offshore company, give some thought to where you will incorporate that entity and where you will operate the business. Of course, these don’t need to be the same country…you may do better to incorporate in one jurisdiction and operate from another. The following article will help you select the best jurisdiction for your offshore company.

Offshore Company Tax Tip: If you are an American living and working abroad, the country where you form your company does not make difference. It should be somewhere that will not tax your business and will not require you to file any tax forms. To put it another way: your only reporting requirements should be to your home country of the United States and not to the country where you form your offshore company.

I have developed the following offshore company formation checklist based on my own experiences through the years of operating a number of businesses in five countries, as well as in structuring the affairs of a wide variety of clients around the world.  

The first list are business reasons to select your country of operation:

Offshore Company Tax Issues – Start your business in a country that will not tax your income. Of course, if you open a bar selling beer to the locals in Belize, they will tax you. I am referring to a business that sells a product or service to people outside of your country of operation…usually an internet based business. There are a number of countries that will not tax offshore company foreign sourced income in that case.

Time Zone – One of the most overlooked issues is the time zone. You should operate your business from the same time zone as your clients. If you are selling to the US, then you should be in South or Central America. I can’t tell you how many clients started up an internet business from Asia, only to give up the night shift and move to Panama after a few months.

Banking – Your offshore company can open an account at any number of international banks around the world. The account need not be in your country of incorporation. Of course, you will need a business account in your country of operation. To open that account, you may be able to use your offshore corporation from another jurisdiction, or you may be required to form a local corporation. Never put business income in a personal account…you must use an offshore company!

Tax Tip: I suggest that your offshore company bill your clients and receive payment outside of your country of operation. Then, you should only bring in funds necessary to operate your business, leaving the balance as retained earnings in the offshore structure.

For example, if you operate your business in Panama, bill your customers from a Belize corporation and send only the minimum necessary from Belize to Panama to avoid tax in Panama.

World Image – The way your country of incorporation is perceived by perspective clients might be relevant to some entrepreneurs. This is the country listed in contracts and other documents, so customers will see it. Your country of operation can be kept private, but your country of incorporation will be public knowledge.

Cost of Labor and Office Space – Of course, you will expect labor to be significantly cheaper offshore, but you might be surprised that office space is quite costly. Quality office space in Panama City costs about the same as in my home city of San Diego, California.

Availability of Labor – While cost of labor is low, the demand for English speakers is high. You may find it challenging to hire good people in certain countries. I also note that labor is rather transient in many countries. English speakers are in demand and often move from job to job in search of a dollar more an hour.

Availability of Professionals (CPAs & Lawyers) – One of the most overlooked aspects of starting a business offshore is the need for quality LOCAL counsel. You must have someone nearby who can advise you on leases, employment law, local taxation, and any number of issues. Going in blind, or expecting things to work as they do in the US, is a very common gringo mistake. Don’t be that guy or gal…find a few local experts on which you can rely. We at PremierOffshore.com can get you started, but there is no substitute for local knowledge.

Quality of Telecom and internet – Be sure your office has excellent internet and telecom facilities. You never want to sound like you are in a banana republic!

Availability of Computer Equipment – You might be surprised how expensive it is to import quality computer equipment in to some counties. I have had desktop systems, including monitors, stashed in my large checked cases on many occasions.

In addition to the business checklist above, careful consideration should be given to the quality of life offered in your country of operation. The following are the personal considerations of forming an offshore company and operating a business outside of the United States.

  • Can you learn the language?
  • Is there a community you will fit in to?
  • Can you adapt to the culture / speed of life?
  • Can you adapt to the weather?
  • Is the country accessible by air in 1 day?
  • Can you live with the security concerns?

Now, let’s apply these offshore company criterion to doing business in Panama City, Panama.

For myself and PremierOffshore.com, we decided to form an offshore company in Panama, operate from Panama, and form our offshore corporate billing entity in Belize. While the heat and humidity in Panama City is challenging for a San Diegan, the quality internet and low cost of labor won out. Also, escaping the heat to Medellin, Colombia is only a 30 minute flight!

I hope this article has been helpful and given you some ideas on how to select the jurisdiction for your offshore company and your offshore business. Please contact me at info@premieroffshore.com with any questions or to arrange for a confidential consultation.

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