One of the pillars of running a successful, profitable company is to be continually looking for ways to maximize profits and minimize liabilities. While some companies need to be located in a particular area, some can be set up as an offshore business that outsources the bulk of the work. For the companies that are in this position, setting up an offshore model can result in immense rewards (and profits).
However, it isn’t quite as simple as it sounds (otherwise everyone would do it, and do it successfully!). In order to help you make your offshore company dreams come true, here are the three most expensive mistakes to avoid when setting up a company offshore.
1. Having a lack of understanding about offshore companies
There are a lot of benefits to be had from setting up an offshore company, such as lower taxes, more reasonable banking expenses, more accessible customers, and cheaper proficient workers, which are most likely why you are interested in doing it. However, a lack of understanding about what it means to run this type of company, as well as a deficiency in the time you invest in planning, can result in significant issues.
You need to approach opening an offshore company just as you would any other company. Invest just as much time into developing the core of your business, so that you are operating on a stable footing. Additionally, just because it isn’t running on your home turf, doesn’t mean your company does not require a thorough business plan.
Keep in mind that the most popular models of offshore companies are the international business company and the limited liability company. They have their advantages and disadvantages that may or may not be fitting for your business model.
Approach the development of your offshore firm just as you would if it were located down the road from your home.
2. Selecting the incorrect location to set it up
After deciding what your business is going to do, the next important decision is to select where you are going to set it up. Depending on your niche, there may be more obvious choices. For other business types, it may not make a significant difference.
However, each offshore financial center carries its own set of pros and cons, and it is up to you to thoroughly research these and decide what is essential and necessary for your company. You will want to choose a destination that is tailored to your particular requirements to make things run as smoothly as possible.
For example, some destinations are known for simplicity, ease of administration, and privacy, while others are touted for their asset protection or maximum transparency. Not all offshore jurisdictions are the same, as each has distinctive corporate requirements, exchange limitations, public filing and yearly obligations, administration charges, and corporate administration customs. For example, offshore banking in India is going to be different to that in Estonia, and so on.
Only you know what is essential for your business and what is going to save you hassles and challenges down the road.
3. Building an incompetent offshore team
No matter what type of business you are running, the people you employ are the most significant indicators of its success. Therefore, you want to be assured that you are employing people who know what they are doing, who have your firm’s best interest at heart, and who are committed to working towards its growth.
This may mean working with reliable partners in your chosen country who have plenty of expertise in the ins and outs of running an offshore company in that particular locale.
For example, if you are looking to open an LLC company in India, opt to work with a business that advises on the soundest solutions for business set-up in India. By building your firm with an organization that already comprehends the “how-to” of forming a new company in India, you will discover that establishing your offshore company will be considerably more efficient, and it will decrease the likelihood of you committing an expensive mistake.
Thinking outside the box
With several attractive benefits to be had such as opportunities for tax minimization, asset protection, high returns on investments, lower setup and maintenance costs, lower capital requirements, and reduced administration, it’s easy to see why setting up an offshore company is a direction that many businesses are happy to consider.
Taking the business to a different corner of the globe allows you to cater to new markets and gain fresh ideas for approaching conventional operations. And overall, this dynamic move can give you that much-sought-after edge over the competition.
Have you ever set up an offshore company? Are you considering offshore company formation? Let us know where you are in the process and what you are finding challenging in the comments below!