There are many benefits to starting an LLC in a foreign jurisdiction. It can provide you with enhanced privacy, asset protection, diversification and help you avoid the hassles of international regulation.
If you are looking to create an LLC overseas, there are a few steps and questions to think about before you get started.
Setting up an international LLC can vary from jurisdiction to jurisdiction. Some countries, such as Switzerland and Singapore have more robust reporting requirements that can include a few additional pieces of paperwork, while others have minimal reporting and formation requirements such as Belize and Nevis.
In order to know what is required for you personally, it's always recommended to speak with a consultant in order to make sure you follow all tax and reporting requirements.
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The first question to ask yourself when you are thinking of going offshore is where you would like to form your LLC. A company can be created in virtually any country in the world. What makes one country different from the other comes down to the policies and regulations.
There are many popular offshore jurisdictions such as the Cayman Islands, Belize and Panama in which you can form an international business company. Each jurisdiction has different rules that often encourage certain businesses and enterprises.
For example, Cayman Island has the most hedge funds in the world capturing some 85% of the market, while the BVI's are known to have the most registered entities (roughly at 600,000) more than all the other Caribbean tax havens.
While there are many commonalities, what makes each jurisdiction different is the unique combination of policies that create a unique business environment. For example, some countries require a minimum number of shareholders, minimum paid-in capital, have specific company shares, while others have lower accounting requirements, auditing, or transparency laws.
Some of the more widely known foreign jurisdictions are:
There is no one best country. What is best for you may not be best for another. It all depends on where you live, your passport, what your business is, and the tax laws and CFC laws of the country where you live.
Once you have chosen a specific country; the next step is to gather all the documentation that you will need.
Setting up an International LLC requires the following:
Once you have these documents together its time to get the company documents including:
Other documents might be included depending on the jurisdiction in order to fulfill KYC requirements. Opening a Corporate bank account will also require several more pieces of documentation which can be the more challenging part of the process. More on that later.
Having a registered office address and forming a company outside of where you live (whether that is a different state or country) is what makes the entity an offshore LLC or foreign LLC.
What this does is provide an extra layer of privacy and protection as this creates a separation of powers by creating a separate legal entity. Forming an LLC in a country outside of where you live also gives you a second layer of protection against lawsuits and unscrupulous creditors by giving you a second legal system that helps to ward off frivolous parties.
For a lawsuit to be brought forward against the structure, it has to be filed in the country where the company was registered. This makes it that much more difficult to get at the assets.
For more on the Benefits of an Offshore LLC go here.
A common question people ask themselves when looking to create a structure is should I form a Limited Liability Company or a Private Company?
There are several differences between the two entities that go beyond the scope of the article, but more details can be found here on choosing a Business Structure. Briefly, an LLC is easier to manage and is more flexible, especially if there are a number of parties, whereas a corporation is much more rigid. The second most important difference is that an LLC is a pass-through structure for tax purposes, whereas a corporation is a separate taxable entity.
As international banking regulations tighten in response to AML regulations and KYC policies, opening an offshore bank account is much more difficult. Often, countries require not only a local presence but a corporate entity together with a business plan, professional references, and a bank introduction letter.
For instance, in places like Panama or Singapore, it is required to have a local corporate entity such as an LLC or International Business Company (IBC) to open an account and even then it can still be difficult.
This has largely been a result of the task force led by the OECD which implemented a wide-sweeping set of rules under Common Reporting Standard (CRS) making banks responsible for sharing tax information of foreign persons with their respective governments.
Countries signing the CRS will automatically exchange financial account information, although the United States is not a member, they have their own version called the FATCA, or Foreign Account Tax Compliance Act. So far 108 countries are signatories.
If you are looking to create a company overseas, it's generally a good idea to get help. This is even more important since you are going to be establishing a business in a country that might have different regulations than your home country.
By working with a reputable and experienced firm, you can avoid any potential problems and ensure that your company is set up properly from the start. One of the biggest obstacles and problems that can come if you decide to go on it by yourself is that you may not be fully tax compliant in the country where you live. Even though the country where you incorporate may not have an income tax, that does not mean you are able to pay zero taxes. Tax obligation depends on where you live. Finding a tax consultant or lawyer can be either someone in the country where your company is established or through an offshore service provider.
Starting an LLC in a foreign jurisdiction can provide many benefits. Before reaping the rewards there are a few of things to think about before you get started. By working with a knowledgeable and trustworthy service provider, the process of setting up an offshore LLC can be a quick and painless process.
Why You Need A Plan B
Threats to Your Assets
Global Diversification Planning
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