offshore company

What is Required to Form an Offshore Company

Quality jurisdictions are asking for more and more information on those setting up offshore companies. If you’re going to structure an international business or an IRA, you’ll need to collect a number of documents before you can form an offshore company.

There are a 4 primary offshore company structures. They are:

  1. Offshore corporation,
  2. Offshore trust or foundation,
  3. Offshore Limited Liability Company (LLC), and
  4. Offshore IRA LLC

Each of these structures has a different purpose and slightly different documents will be required.

An offshore corporation is generally used to hold an active business. This is because a corporation can retain earnings and is this a valuable tax planning tool.

In contacts, a offshore Limited Liability Company is a pass-through entity. An LLC can’t regain earnings and is best suited to passive investments. Some small businesses also select an LLC.

For example, if you’re living abroad, qualify for the Foreign Earned Income Exclusion, and won’t net more than $100,000 in your business an LLC is a good choice. A business that has no need to retain earnings tax deferred might choose an LLC for the lower compliance costs.

An offshore IRA LLC is a unique and complex version of a standard LLC. When structured properly, and IRA LLC allows you to move your retirement account out of the United States and installs you as the manager of that account. Once complete, you have total control of the investments of your retirement account.

When you need asset protection and estate planning for passive and active investments, you need an offshore trust or an offshore foundation. These entities are similar, but the trust has a lot of advanced features compared to a foundation. For a comparison, see: Offshore Trust or Panama Foundation?

Some countries (such as Panama) maintain a public database of the officers and directors of their structures and some do not. You can use an LLC in conjunction with an offshore company to build a bearer share company.

With this in mind, here’s what you will need to provide to your incorporator and resident agent.

  • Your name and any names you’ve used in the past
  • Your date of birth
  • Social Security / National Insurance Number
  • Current primary residence and whether it’s leased or owned
  • Landline phone number at your home
  • Other phone numbers
  • Country of citizenship
  • Passport number and country
  • Profession
  • Details, if any, of any arrests/indictments or convictions  (Exclude minor traffic offenses)
  • Details, if any, of any proceeding brought involving the SEC, FTC, Federal Reserve Board, a Stock Exchange or their equivalents elsewhere, to which you or any associated business was a party
  • Details, if any, of any known investigation of yourself by a government agency or regulatory entity
  • Details, if any, of any search warrant issued with regard to your home, office or other premises occupied
  • Details of any past or current litigation
  • Details, if any, of any subpoena to provide records or testify in civil proceedings
  • Details, if any, if you or  your businesses has ever declared bankruptcy, including date of discharge
  • List any Outstanding Judgments against you or your associated businesses
  • details, if any, of any liens, attachments, garnishments, receiverships or other orders filed against you or any business with which you are or were associated
  • List professional or charitable associations of which you have been a director, trustee or member
  • Details, if any, of any professional organizations from which you have been expelled, suspended or disciplined
  • List all political parties of which you have been a member
  • List any government or political office ever held by you or an immediate family member
  • Details of any expulsions, suspensions or disciplinary actions in respect of a government position held by yourself or an immediate family member

That’s quite a list, and we’re just getting started. You will also need to provide the following documents in original (by courier):

  • Certified copies of Passport of every Director and Shareholder of the Company
  • Original Bankers Reference for each Director and Shareholder of the Company
  • Original Legal or Accountant and professional references for each Director and Shareholder of the Company
  • US or Non US tax declaration
  • Notarized copy of a utility bill reflecting the name and home address of each Director and Shareholder of the company
  • US tax forms as applicable such as W-8 or W-8BEN (actual form varies based on your citizenship)

Only after all of these documents have been received, and your name has been cleared through a database like World Check will a company be formed.

I hope this list of the information required to form an offshore company has been helpful. For more, and assistance with an offshore corporation, LLC, IRA LLC, trust or foundation, please contact me at or call us at (619) 483-1708. 

IRS Offshore Voluntary Disclosure Program

IRS Offshore Voluntary Disclosure Program for 2017

The IRS Offshore Voluntary Disclosure Program for 2017 offers taxpayers with undisclosed offshore accounts the ability to come forward voluntarily, file their returns, disclose their assets, pay the resulting taxes and penalties, and receive a clean slate. This article covers amendments to the Offshore Voluntary Disclosure Program through February 9, 2017.

As of 2017, the IRS Offshore Voluntary Disclosure Program has collected about $8 billion in taxes and penalties from US persons with undisclosed offshore accounts. The last official number reported by the Service was $6.5 billion taken from 45,000 taxpayers as of June 2014. Unofficial estimates put it at $8 billion today.

The OVDP first came out in 2009 when the IRS was putting pressure on the Swiss bank UBS to turn over account records of US citizens. The IRS claimed that UBS was illegally helping US citizens to hide money from the tax man.

When the dust settled, UBS bowed to the US government. The bank agreed on February 18, 2009 to pay a fine of US$780 million to the U.S. government. This ransom payment broke the back of Swiss privacy and lead to the situation we have today where US persons have zero right to privacy in their financial dealings.

The IRS Offshore Voluntary Disclosure Program allows taxpayers with undisclosed accounts to avoid criminal prosecution and to “come into the fold” as it were. The OVDP is designed for US persons who voluntarily report their foreign accounts and avoid the draconian penalties the IRS will impose if they catch you.

  • A “US person” is any US citizen, green card holder, and resident of the US. The definition can include anyone who spends more than 183 days a year in the US and doesn’t usually include non-resident aliens, but exceptions apply.
  • For a detailed list of penalties and charges you can face if you’re caught with an offshore account, and don’t voluntarily come forward, see FAQs 5 and 6 here.

Before I get into the terms of the IRS Offshore Voluntary Disclosure Program for 2017, note that this program is sometimes referred to the 2012 OVDP or 2014 OVDI. The last major changes to the program came in July 1, 2014. There have been several comments and clarifications from that date to February 9, 2017. This article was written in May of 2017.

The following applies to US persons with undisclosed foreign bank accounts. You were required to report any bank or brokerage account(s) outside of the US with more than $10,000.

This is the combined balance of all your foreign accounts. For example, if you had $6,000 in an account in France and $6,000 in an account in Switzerland, your combined balance was $12,000 and you had a filing obligation.

This filing requirement is based on the highest balance in the foreign account for any one day of the year. It’s not your average balance during the year or year-end balance.  

Let’s say you were buying an apartment in Belize for $200,000 in 2015. You opened a bank account on the island and transferred the purchase money to that account. One day later you wired the $200,000 out of your Belize account and into an escrow account. You had a reporting requirement for 2015 because you had more than $10,000 offshore for that one day.

If you’d sent the money directly from a US account into an escrow account, you would not have a US reporting obligation. This is because an escrow account is not in your name and not under your control.

That is to say, you are required to report any offshore account in your name or under your control. Having a nominee on the account doesn’t eliminate the filing requirement because you still maintain control.

The focus of the IRS Offshore Voluntary Disclosure Program has been offshore bank accounts. There are many other filing deficiencies can be cured through the OVDP. For example, you should be filing Form 5471 if you hold shares in an offshore company. Then there’s Forms 3520 and 3520-A for foreign trust and Form 8938, Statement of Foreign Financial Assets.

Bottom line, if you had an interest in a foreign bank account or structure, you probably had a US filing requirement and should consider the IRS OVDP.

IRS Offshore Voluntary Disclosure Program for 2017 Settlement Terms

There are two flavors of the IRS OVDP, the Streamlined Offshore Voluntary Disclosure Program and the Traditional Offshore Voluntary Disclosure Program. Clients with a low risk of criminal prosecution, and a valid cause for their failure to report and pay, will usually select the streamline option.

Those who are coming forward after their foreign bank entered into an agreement with the IRS, or who’se financial advisor made a deal to turn over their client list, will need to go with the more expensive traditional program. Likewise, those with no valid cause for the account, or who took steps to hide the account from the IRS, should go with the traditional program.

Traditional Offshore Voluntary Disclosure Program

The penalties under the traditional OVDP are as follows:

  1. A 20-percent accuracy-related penalty on the tax due with the filing of your amended returns for all years. If no tax is due with the filing, then no accuracy penalty will apply;
  2. Pay failure-to-file and failure-to-pay penalties, if applicable; and
  3. Pay, in lieu of all other penalties 27.5% of the highest aggregate value of your foreign assets during the period covered by the voluntary disclosure.

If your bank is under investigation, a 50% penalty might apply rather than the 27.5% above.  Remember that the purpose of the program is to convince Americans to come forward voluntarily. If the IRS believes they’d have caught you eventually without the disclosure, they’re going to hit you hard.

The 27.5% penalty applies to all foreign assets which you failed to disclose. If all you had offshore was a bank account, the penalty is based on the highest value of the account during the OVDI period.

In my example above, a client had an offshore bank account that held $200,000 for only one day. In that case, the standard OVDI penalty is 27.5% of $200,000, or $55,000.

If you have other reportable assets, such as foreign real estate, an offshore trust, and a brokerage account, the penalty can apply to the highest value of these assets combined plus the highest value of your offshore bank account.

The OVDP penalty is often assessed on the highest value from a few years back because that’s when you were making money offshore. Since that high-water mark, the brokerage account may lost money, the bank accounts depleted, and the real estate has gone to foreclosure… I even had a client that had all his money stolen by an offshore scammer. None of these losses matter. The penalty is on the highest value and later losses are disregarded.

See FAQ 8 and 31 through 41 on the IRS website for more details on how to calculate the standard penalty.

Streamlined Offshore Voluntary Disclosure Program

The streamlined filing compliance program is available to those who can certify that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. You must state, and should be able to prove, that you didn’t intend to use the offshore account to avoid paying your taxes.

That is to say, you must state under penalty of perjury that your conduct was not willful. That the failure to report all income, pay all tax and submit all required information returns, including FBARs was due to non-willful conduct.

Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

The risk with the streamlined program is that the IRS doesn’t buy your claim of non-willfulness. If they have evidence that you intended to hide money from the Service, or that you lied on the streamlined application, they will come after you with guns blazing.

The reduced penalties under the streamlined OVDP are as follows:

For US persons living in the United States:

  1. File original or amended tax returns, together with all required information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) for the last years properly reporting your offshore accounts, assets, and income,
  2. File original or amended FBARs for the last 6 years, and
  3. Pay the tax, interest, and a miscellaneous 5% penalty with the filing of your OVIP.

The streamlined penalty for US residents is equal to 5% of the highest aggregate balance/value of your reportable foreign financial assets. For this purpose, the highest aggregate balance/value is the highest year-end balance… which might not be the highest balance for the year.

In our example above, you had $200,000 in an offshore account for one day. Assuming that wasn’t December 31, you’re streamlined penalty won’t include that deposit.

A foreign financial asset is any asset that should have been reported on the FBAR (FinCEN Form 114) or Form 8938. The most common examples of foreign financial assets include:

  • Bank and brokerage accounts held at foreign financial institutions;
  • Bank and brokerage accounts held at a foreign branch of a U.S. financial institution;
  • foreign stock or securities not held in a financial account;
  • foreign mutual funds; and
  • foreign hedge funds and foreign private equity funds.

Note that the streamlined OVDP penalty applies to foreign financial assets while the traditional OVDP applies to all foreign assets.

If you’re eligible for the Streamlined Domestic Offshore Voluntary Disclosure Program, you can avoid  accuracy-related penalties, information return penalties, and FBAR penalties. In most cases, the 5% miscellaneous penalty will be the only penalty assessed.

For US persons living abroad:

If both you and your spouse are non-residents for US tax purposes, you might be eligible for the zero penalty version of the streamlined program. If you’re living abroad, and otherwise qualify for the Streamlined Foreign Offshore Voluntary Disclosure Program, the IRS will allow you to file or amend your returns without the 5% penalty.

Keep in mind that your failure to file or pay taxes must have been non-willful. This criteria is the same for both domestic and foreign filers.

You’re a US citizen “living abroad” for the streamlined OVDP if you were out of the United States for 330 days for one of the last three tax years. If you’re OVDP filing covers tax years 2014, 2015 and 2016 (it is now 2017), then you must have been out of the country for 330 days during one of those years.

If you qualify for the foreign streamlined OVDP, you must submit your last 3 years of returns, 6 years of FBARs, and pay any tax and interest at the time of filing.

The purpose of the foreign streamlined program is to allow American’s living abroad to get back into the system without a penalty. The IRS has determined that, on balance, US persons who are out of the US for 330 days, and thus have few ties to this country, are the most innocent when it comes to their failure to file and pay taxes.

And, when you take the Foreign Earned Income Exclusion and the Foreign Tax Credit into account, most American’s living abroad pay little or no US taxes on their income. In that case, you will pay little to nothing with your foreign streamlined OVDP.

A US citizen who is a resident of a foreign country, or is out of the US for 330 days during any 365 day period, qualifies for the Foreign Earned Income Exclusion. The FEIE allows you to earn about $100,000 in salary or business income free of Federal income taxes. For more on the FEIE, see: Foreign Earned Income Exclusion for 2017

You also get to deduct any foreign taxes paid on your US returns, even when those returns are filed as part of an OVDP. You essentially get a dollar for dollar credit against any taxes paid on your US return.

So, if you’re living in a country with a tax rate equal to or higher than the United States, you shouldn’t owe any US tax on your foreign income. In that case, you’ll pay nothing with your foreign streamlined OVDP.

If you’re living in a zero or no tax country, or aren’t required to pay local tax to your country of residence, then you’ll pay some US tax with your OVDP. If your salary exceeded the FEIE, you will owe US tax on the excess. If you have capital gains, they’ll will be taxable when you file or amend your US returns.


The IRS Offshore Voluntary Disclosure Program for 2017 allows US persons to come out from the cold and get back into the good graces of the US government. No matter the reason for your failure to file, and I’ve heard them all, the OVDP is your best path forward

I hope you’ve found this article on the OVDP for 2017 to be helpful. For more information, please contact us at or call (619) 483-1708. We’ll be happy to assist you to file a streamlined or traditional Offshore Voluntary Disclosure and negotiate the best settlement available.

take your IRA offshor

Here’s how to take your IRA offshore in 6 steps

In this article I’ll list the steps necessary to take your US retirement account offshore. Whether you’re looking for asset protection, privacy, or investment diversification, here’s how to take your IRA offshore in 6 steps.

Step 1: Determine if your IRA is eligible to go offshore

Before you can move your cash, you must determine which of your retirement accounts are eligible to go offshore. Only accounts that are vested can be moved out of the United States.

A vested account is one that’s under your control. In most cases, an account vests when you leave your employer and take the IRA with you. So, a vested account is typically a retirement account from a previous employer.

It’s possible that a portion of your account with a current employer has vested. If you’ve been working at the same company for 10+ years, you might be able to move a portion of the account offshore. You should speak with HR to see if any of your IRA has vested.

You can also take certain defined benefit plans offshore. If the plan can be converted into an IRA, and in doing so becomes vested, you can move that plan offshore. Eligibility will depend on your defined benefit plan documents. You’ll need to check with your administrator.

Step 2: Move your IRA to a custodian that allows for offshore transfers

Once you know which accounts are eligible to go offshore, you’ll most likely need to move them to a different custodian. Most US firms make money selling you investments. They earn a commission managing your IRA account and don’t want you to move it out from under their control.

There are a few custodians that allow for offshore IRA LLCs. They charge a fixed annual fee of $400 to $600 rather than making money selling investments.

Note that this move must be done as a transfer and not a rollover. If you have multiple accounts, recent changes to the IRS rules make the rollover a problem. However, you can make an unlimited number of transfer of your retirement account (moving it from one custodian to another). Remember that a transfer is not a rollover.

We’ll be happy to introduce you to a custodian that supports offshore accounts.  

Step 3: Setup an offshore IRA LLC owned by the IRA

Once you have an account number at your new custodian you can form an offshore IRA LLC. The owner of this account will be your IRA… not you personally and not the custodian.

For example, if your custodian is Midland IRA, the owner of the IRA LLC might be as follows: “Midland IRA, Inc. FBO John Smith #55-5555555” with  the number representing your account at Midland. FBO = for the benefit of.

The offshore LLC must be formed in a zero tax jurisdiction, one that allows for single member limited liability companies. The single member of your IRA LLC is your IRA account.

We also focus on countries with strong asset protection laws. For this reason, I like the Cook Islands, Nevis and Belize. The final selection will depend on your banking needs and other factors.

If you’re very concerned about asset protection, you might read the following on using the Cook Islands for maximum protection: Protect Your IRA by Converting it into an Offshore Trust

Step 4: Draft a custom operating agreement establishing you as the manager of the offshore IRA LLC

Now we need to establish you (the beneficial owner of the IRA account) as the manager of the offshore IRA LLC. This is done by drafting a custom operating agreement which lists in great detail your rights and responsibilities.

The bottom line is that you must manage the money in the IRA LLC just as a professional investment advisor would. You should make decisions based on what will maximize returns to the IRA… and those decisions should not benefit you personally.

For example, you can’t borrow from the IRA LLC, can’t use it to buy a home to live in it (even if you pay fair market rent), and can’t use the funds to pay personal expenses

Likewise, you can’t guarantee any of the investments of the IRA. This means you can’t guarantee a loan made to your IRA LLC. All loans taken out by the LLC must be non-recourse secured only by IRA money without a personal guarantee from the beneficial owner.

Step 5: Open an offshore bank account for your IRA LLC

Your IRA is sitting with a custodian that allows for offshore investments, your IRA LLC is incorporated in a secure offshore jurisdiction, and you have a detailed operating agreement giving you control of that LLC. Now it’s time to open an offshore bank account.

The bank selected will depend on the size of the account. If you plan to invest in real estate, and will thus maintain a minimum balance in your offshore account, I recommend Caye Bank in Belize. This bank has high fees but low minimum balances. For more, see:

For accounts of $20,000 and up I recommend Capital Security bank in the Cook Islands (

  • Because CSB does not have branches in the U.S., they have a good handle on FATCA, focus on U.S. clients, and offer a wide range of investment options, I often suggest clients plant their first flag offshore with these banks and then open brokerage accounts or diversify from there.
  • Another benefit of Cook Islands is that you do not need to travel there to open the account. All of the recommendations below require you visit the bank in person.
  • Finally, CSB is unique in that they don’t lend against client funds. See CSB Low Risk Profile.

In Panama, I recommend Banistmo (, Uni Bank (, and Multibank ( I also suggest Banco General (which is our bank), Santander, Banesco,  if you have a local office.

For private vault storage, I recommend Best Safety Boxes in Panama. See

For managed accounts over $2m, I recommend Andbanc in Androa or their branch in Panama (

If you prefer a financial advisor and bank in Europe, I recommend Swiss Partners in Geneva. Their website is The minimum account size is about $2.5 million.

Step 6: Transfer your IRA cash from the custodian to your offshore bank account

Once you’re account is opened, the custodian will send a wire from their bank to yours. This will move some or all of your cash out of the United States and into an international account that’s under your control.

  • You can chose to move all or a portion of your IRA offshore. You can leave some cash with the custodian if you want to make US investments or are new to international banking and want take it slow.

As the manager of the LLC, and the only signatory to the offshore bank account, all investment decisions rest with you. You’re the only person who can send a wire or write a check… which is why we call this an Offshore Checkbook IRA LLC.

This also means that it’s your responsibility to follow the various rules of IRA management. Here are a few articles you might find useful:

If you have a Defined Benefit Plan that you might want to convert to an IRA, see: Maximum Asset Protection for a Defined Benefit Plan

You will also find that there are many tax benefits for sophisticated IRA investors which are only available offshore. For example, the ability to use a UBIT blocker to eliminate US tax in your IRA from leveraged investments. Also the ability to own a portion of an active business, which is operated outside of the United States, whereby the income from the business flows into your IRA tax free.

Of course the main reasons clients take their retirement accounts offshore is to diversify out of the United States, invest in higher returning opportunities, and protect their assets from civil creditors and uncertain times. These are the core principals of the offshore IRA model and goals we can assist you to achieve.

I hope this article on how to take your IRA offshore in 6 steps has been helpful. For more information, please contact us at or call (619) 483-1708. We’ll be happy to assist to structure your affairs abroad.