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Offshore Corporation Strategies

Incorporate Offshore!

Before we take a close look at how to use an IBC for profit, protection and privacy, let's define some commonly used offshore expressions which are related to IBCs.

What Is A Corporation? A corporation is an entity recognized by law as a separate "person" with limited liability. A corporation has the option to sell shares, the right to sue and be sued, and has perpetual existence.

What Is An IBC or Offshore Corporation? An IBC is a usually tax-exempt corporation which can do business all over the world except in the country where it has been incorporated.

How Are Offshore Corporations Used? Offshore corporations may be used to own and operate businesses, issue shares, bonds or otherwise raise capital, guarantee obligations, hire employees, buy goods and services, sell goods and services, make contracts, rent office space, maintain checking and saving accounts, and maintain retirement plans for employees. Although most offshore corporations are private and closely held, some are publicly traded on major stock exchanges.

What Are Articles Of Incorporation? The Articles of Incorporation is the document which establishes the corporation and contains basic information such as the name, share structure, and purpose of the corporation.

What Are By-Laws? The By-laws, or in some jurisdictions "Articles of Association", are rules the corporation creates for its shareholders, officers, and directors. By-laws are adopted by the Board of Directors as one of the first organizational steps in setting up a corporation. Upon instruction, we can adopt a standard set of By-laws for a new corporation. Unlike Articles of Association, By-laws are usually maintained internally but may be publicly filed if requested.

What Does A Corporate Search Reveal? A corporate search will reveal the name of the corporation, the date of existence, amendments, and any other publicly filed document. Under many offshore jurisdictions, there is no requirement that the names of corporate officers, directors or shareholders be filed in any public registry. In other jurisdictions, nominee officers can be used. Therefore, the actual beneficial owner's identity remains a secret.

What Are Bearer Shares? Bearer share certificates do not indicate the name of the owner. The certificate is endorsed in blank such that the person having physical possession of the document is the owner. Bearer shares facilitate the transfer of assets because transfer of ownership is accomplished simply by the transfer of the certificate.

What Are Registered Shares? Registered share certificates indicate the name of the owner on the document. The name of the shareholder is also recorded in the internal corporate records of the company. Although the registered owner is recorded in the corporation's internal records, no public registry of shareholders is maintained in either Panama or the Marshall Islands. The share registry is an internal corporate document available only to directors, officers and shareholders, under conditions specified in the jurisdiction's corporate statute.

What Are Off-The-Shelf Companies? Off-The-Shelf Companies are ready-made, never used corporations that have been created to meet a client's immediate needs. Shelf companies are available for Panama only.

What Is A Registered Agent?A Registered Agent is required to ensure that the corporation has an assigned representative at a known address to receive all service of process (legal notices) on its behalf. The Registered Agent forwards these documents to the address of record of the corporation.

The ABC of IBCs

The offshore world is fraught with hard choices. How best to protect money and assets in an ever changing world? How best to make profitable use of offshore structures? How do you know which strategy is best for you?

Once you've got your offshore IBC and bank account set up - what do you do next?

Here are a few ideas to get your creative thinking process going - and stimulate that "money-centre" in your brain!

Strategy A

Using an IBC (International Business Corporation) as a shield for your financial affairs is well worth exploring. For with this structure you can receive money from offshore and send money offshore in perfectly legitimate and mostly "tax-free" ways.

Let's say you're an independent real estate agent and you're looking for a way to place some of your substantial commissions offshore - without attracting undue attention.

One way is to become a franchisee of your offshore company. Keep in mind that this IBC is not legally yours - you are not the director, or even a registered/recorded shareholder.

This offshore company - "International Realty Corp" - has a franchise programme which independent realtors can join - from anywhere in the world (a bit like Century 21). Naturally, you see the benefit of being part of their "global" network and hook your business up to it.

Like all franchises, the Franchisor requires an ongoing percentage of your sales - in return for being able to use their name and marketing strategies. So each month you remit 15% of your gross commissions to "International Realty Corp".

This money is a legitimate cost of your business - and would be tax deductible, thereby reducing the amount of tax you pay in your home country. At the same time this 15% franchise fee is accumulating in the bank account of "International Realty Corp". And guess who has access to the funds in their bank account?

In this way you can accumulate say 15% of your earnings offshore - and expatriate it as a cost of your legitimate business. Meanwhile, that 15% can accumulate tax free in your preferred offshore haven.

This same strategy could be applied to many different types of business using licensing fees, royalties, trademark fees and other forms of legitimate business expenses.

Strategy B

Let's reverse the process - and imagine that you have money in your offshore IBC/bank account, and you want creative ways to bring it back onshore so you can spend it - without having it considered as taxable income.

One way is to become an "employee" or agent of your offshore corporation. Perhaps this company needs a representative in your part of the world, to conduct various business dealings on a contract or consultancy basis.

The company may decide to provide you with a credit card to cover company related expenses - like your accommodation, your car running expenses - or even taking clients out to dinner. Naturally, if it is the company you work for that is paying for these things, then you have no need to report such expenditure as your income. After all, the company is not you (!)

This method would allow you to repatriate funds (from the account you have power of attorney over) as and where required, and to use such funds as you desire.

The company may also decide to purchase property - and make you the property manager. This "job" would no doubt provide the "perk" of free accommodation in return for services rendered. The company would also provide the funds for the upkeep of their property investment.

If the company wanted to pay you a salary - then such money would be taxable in your jurisdiction, but this amount could be considerably less than what you are really earning.

Strategy C

You can create a "remote" business which can earn money for you offshore. For example: imagine you sell computers and you decide to set up another "profit-generating" business in tandem with this. Your existing business is retailing, and you decide to get into leasing (financing computers over the lifetime of their usefulness).

Naturally, this new leasing business is conducted by the offshore company whose account you have power of attorney over. And the scenario works like this: You sell computers and also lease computers. To those customers who choose to lease, you arrange the contract on behalf of the leasing company. This company pays you the agreed upfront amount on computers so leased - and the leasing fees from your clients go to the offshore leasing company.

The end result is that all the leasing profits (the difference between the upfront computer cost and the full term lease income) remains with the offshore company.

There are many ways to structure your existing business affairs - using an offshore company. With forethought and planning, you can accrue tax free profits, tax free spendable cash and other benefits just by thinking outside the square.

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