Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 6 down vote favorite
1

I am looking into setting up a company for a business I'm bootstrapping, that I plan to finance by doing consulting/freelancing. So I would like to set up a legal entity to do business.

The main issue is that I don't necessarily want to incorporate in my country of citizenship. I'm currently living abroad and plan on moving around the world in the next years.

The hurdles of incorporating in the origin country have to do with the necessity of having an office space, accounting, and lots of administrative details that I would like to minimize, at least for the beginning, until this actually turns into a profitable business, or there's actually a need to hire people.

Based on my research of incorporating offshore I don't see major disadvantages of following this route, but at the same time offshore companies don't seem to be popular.

I was wondering why this is. I understand that some of the benefits of zero tax are non-existent any more for a lot of the western world (because of new legislation), but other than that, what are the disadvantages of incorporating offshore? Or why should I not incorporate offshore?

Also if anyone has first hand knowledge with this I would be very interested in their experiences.

Momentarily Seychelles seems the most attractive to me.

share|improve this question
check out the responses I received to this question: answers.onstartups.com/questions/20838/… – Kenneth Vogt Mar 27 '11 at 20:23
Thanks Kenneth. What did you end up doing after all? Did you incorporate in Seychelles? – Mircea Grelus Mar 27 '11 at 22:07
I am still considering my options. I wish more people would post answers to your question and mine. Don't make us go to Quora, people! – Kenneth Vogt Mar 28 '11 at 16:00
I would think the accounting would be more complicated. Also getting services from Amercian companies like banks would likely be more complicated and would require some type of foreign incroporation in the state that you would do your banking in. The rules for creating the legal entity of a business is state by state. So the advantages and disadvantages are more complicated to communicate. I'm no expert on this though and you would likely need to discuss with both an attorney and an accountant. – John Bogrand May 18 '11 at 19:51
Have a look at these (partially) related discussions: answers.onstartups.com/questions/22196/… answers.onstartups.com/questions/20716/… – Jesper Mortensen♦ May 19 '11 at 19:19

1 Answer

up vote 3 down vote

You need to understand two separate concepts exist about companies in "most" legal systems: place of incorporation, and place of domiciliation. Domicile generally determines questions of taxation and jurisdiction.

Accordingly, if you want your company to domiciled in the Seychelles, you will need local directors to run your company. This can be awkward for a trading company, and will certainly cost money.

Secondly, offshore jurisdictions usually require you to hire some sort of local agent for the company, and frequently to have locally-based auditors.

If you were going to hire these professionals anyway, then clearly it makes little difference. The advantage of a local incorporation is that it is frequently less hassle in a place with a well-developed and efficient legal system and government. It seems like you have decided that would not describe where you live.

One last consideration is that some people may hesitate to deal with a company incorporated in an offshore jurisdiction, particularly one that is outside of Europe. For that reason, I would suggest that you consider Cyprus, Gibraltar, or any other tax-advantageous jurisdiction within the EU, especially if you are within the EU. You may decide that nowhere in the EU meets your needs, of course, and that you are not that afraid of other suppliers refusing to deal with you.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.