How to setup offshore company in 2021?

  • September 30, 2021
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Generally, business owners set up an offshore company in a different jurisdiction to enjoy the tax benefits and higher level of privacy offered.

Other popular reasons for setting up an offshore company include penetration into a new market, strong economic growth of the country, a skilled labour force and a conducive business environment. While the specific steps to setup offshore company will differ based on the jurisdiction you are registering your business in, the general steps to set up an offshore company are largely similar:

1. Check the requirements for offshore company setup

Typically, most offshore companies will be in the form of a limited liability company (LLC), but some countries may specifically differentiate between onshore and offshore companies. Depending on the jurisdiction in which you incorporate your offshore company, the requirements can be very different. Generally, you would want to check whether the offshore company setup requires a local resident director or a company secretary. Most countries that do not need a resident director for offshore company setup will usually require a local registered agent. In addition, there may be a minimum capital requirement and number of shareholders needed to set up an offshore company in the country, so do make sure that your company is able to meet the requirements before you proceed to register your offshore company.

Besides checking the requirements for your offshore company, it is also important to check the list of business activities allowed in the country. Some countries do not allow offshore companies to conduct business activities within the country. These offshore companies are only restricted to conducting cross-border commercial activities and are not allowed to sell goods and services to local residents. There may also be a list of prohibited activities for offshore or foreign-owned companies. It is important that you check what business activities are prohibited in the country for offshore companies so that you do not run into trouble during the incorporation process.

2. Decide on a company name

The next step is to decide on your company name. Most countries do not allow names that contain any offensive or sensitive words. Names that may suggest that your company is linked to a government agency are also usually strictly prohibited. After you have decided on  your company name, you should proceed to search for the availability of your company name through the company register. It is also highly recommended that you search through the list of trademarks in the country to make sure that your company name does not bear any similarity to existing trademarks. Once the availability of your company name has been verified, you can proceed to reserve your company name with the relevant authority.

3. Prepare incorporation documents

Now that your company name has been registered, you can start to prepare the documents required for incorporation. Most countries will require the offshore company to have a set of rules and regulations, also known as the Memorandum and Articles of Association. The Memorandum will contain vital information about your company such as the company name, the date of incorporation, the scope of business and the capital contribution of each shareholder while the Articles of Association will set out the rules that govern your company. Other documents required typically include a business plan, qualifications of directors, notarized copies of the passports of directors and beneficial owners and the address of your registered office.

4. Register your company

Once you have prepared the relevant documents, you can proceed to register your company with the relevant government agency. Upon successful incorporation of your company, you will receive the Certificate of Incorporation and certified copies of the company’s Memorandum and Articles of Association.

5. Apply for a business license

Some countries may require you to apply for a business license to conduct business activities within the country. However, this does not apply to all countries so do check whether you need to apply for a business license to trade with local residents. Most countries will also require you to apply for a license if your company falls in a specific industry such as the construction, food and beverage or pharmaceutical industry, so do make sure that you apply for the relevant license if applicable.

6. Complete tax registration

Since most countries have a corporate income tax and a value-added tax (VAT), you will have to register for tax with the country’s tax authority. In the case for VAT, most countries will only require you to submit a tax return for VAT if your annual revenue exceeds a certain threshold.

7. Open corporate bank account

After you have registered your company for tax, you should open a corporate bank account to segregate your business finances. It is important to consider the reputability of the bank, the minimum deposit amount and the services provided by the bank before you decide on the bank to open your corporate bank account with.

8. Register with relevant social service agencies

Most countries have a social security fund that employees or employers must contribute to. It is also mandatory for companies to register for an insurance scheme for their employees for most countries, so do make sure that you register for the relevant social services after you have set up your company.

9. Create a company seal

Some countries may require companies to have a company seal to endorse legal documents. The company seal will usually contain the company name and registration number. If the country you are incorporating in requires companies to have a company seal, you will have to register your company seal with the relevant authority.

Conclusion

After you have successfully set up your offshore company, you can commence operation! It is important that you have someone in your team who is knowledgeable about local policies and able to ensure that your company complies with the country’s law. Do also make sure that you keep accounting records for all transactions that take place so that it is easier for you to file a tax return and an annual report if necessary.

 

 

 

 

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How to setup offshore company in 2021?