In all jurisdictions, it is absolutely impossible to find the definition of the word “offshore company” in their Company Acts or Company Ordinances or Rules. Each country has her definition of the type of companies according to her laws. You may come across a lot of words such as Llc or Inc in USA, Limited or Ltd in UK, Sarl in France, Srl in Italy, Gmbh in Germany, etc. They may classify companies in terms of local company or overseas company, group company or individual company, listed company or unlisted company, limited company or unlimited company, private company or public company, holdings company or subsidiary company. In fact, offshore company can be found only in common practice for those professionals who provide offshore services for international business. In my understanding, offshore company is a company registered in other jurisdictions in which the local authority of your country has no ruling powers. Ruling power means government cannot enact such laws to control or rule over other territory of another jurisdiction. In you find from encyclopedia, you can see that an offshore company is defined as a company which is incorporated outside the jurisdiction of its primary operations.
Why go offshore ?
Many international businessmen prefer to register an offshore company instead of registering in local companies, there are indeed some advantages. Some of which are outlined below:
a) Tax benefits - if the business operations are arranged carefully the profits from the operations may become zero profits tax or a little profits tax.
b) Simplified set up procedure and requirements – some offshore companies can be registered within the same day, other offshore companies may require only one person registered.
c) Public undisclosure – some offshore companies allow public search, other offshore companies cannot get public search.
d) Costs and the fees – some offshore companies cost a little money, only a hundred of dollars, other offshore companies may cost thousand of dollars.
e) Reporting requirements – some offshore companies require periodic financial reports being filed, other offshore companies need not filing anything at all.
f) Limited liabilities – almost all offshore companies are private limited company in nature, the investors who subscribe the shares of the offshore company are limited to contribute up to this amount (of the shares), and no more.
However, there are some drawbacks which must not be overlook.
a) Financing – offshore companies are difficult to get lending from their local bankers even they are profitable or provide pledge of personal assets and personal guarantee.
b) Opening an offshore bank account – as the public records are not available, it is difficult to open an offshore bank account. Some bankers even say that they will not open bank accounts for offshore companies.
c) Types of business being done – offshore companies are common formed for such businesses as consulting, international trading, holding shares of other companie;