Financial Benefits Of An Offshore Business
28 Sep 2016 in Business
The process of starting any new business raises a number of questions and concerns. Many of these questions will involve the proposed tax structure, business setup, and business capital. Even if the founder of the business does not immediately ask these questions, investors, lenders, and other financially involved parties definitely will. When the business is organized in an international setting, the number of questions only increases and they become more important to answer.
A Question of Offshore Accountancy
Way before a company decides to form in a far off jurisdiction such as Hong Kong, Mauritius, or the Cayman Islands, it’s important to know why it’s beneficial to start outside the United States in the first place. First, an offshore business allows the owners to take advantage of low corporate taxes under straightforward tax laws. Many of the best offshore jurisdictions around the world have developed their tax laws in a way to incentivize foreign business owners and reward companies who choose to create an offshore business.
This is true for the island nation of Vanuatu, which is located in the South Pacific to the east of Australia and New Zealand. While relatively unheard of as far as tourism and travel, Vanuatu has become a booming place to organize a business because Vanuatu business set up allows for offshore businesses to be governed by simple tax laws. However, this does not mean that business owners should go alone when forming a company in a place such as Vanuatu. Accountancy advice is essential to taking full advantage of the tax laws.
A Question of Start Up Costs and Starting Capital
Second, in addition to the more favorable tax laws, an offshore business requires less starting capital, and needs less financial resources for growth and maintenance. The financial investment required to start a business can be massive, even seemingly impossible. There might be start up costs related to product development, initial marketing, and the purchase or lease of commercial real estate. These numbers begin to quickly add up.
The opportunity to cut some of these initial costs can be the difference between getting off the ground quickly and complete failure. With the right guidance from accountants and attorneys, setting up an offshore business is still expeditious and efficient. As well, popular offshore jurisdictions such as Vanuatu and the Cayman Islands have lower initial capital requirements, meaning that there can be less cash and fewer assets in the business from the onset.
A Question of Eliminating the Administrative Costs
Time and time again, entrepreneurs and established companies cite the red tape and the prohibitive, administrative steps that must be taken in developed countries to start a business. What these innovative and risk-taking individuals want to focus on is their business model and core concept, but the filings, forms, and other paperwork are in the way. This builds frustration as legal and professional costs increase just for a business to begin, much less grow.
So, many are opting out of this system and getting these associated costs off their books. They are doing this through offshore jurisdictions. In turn, offshore businesses eliminate many of the costly bureaucratic stipulations that are required within the United States, and therefore eliminate many of the resulting costs.