Most business owners know that they need to form either a corporation
or LLC to protect themselves from the risks associated with running
businesses in our modern world. Alas, most don't think through the
process to its logical end when evaluating these risks. As a result,
they often don't realize that they may need two, not one, business
Let's start with a simple question. Why do you form a business entity?
Yes, there can be tax reasons, but most form them to protect themselves
from the risks associated with being in business. These risks include
being sued for a ton of money or having creditors come after the company
to collect debts. Business entities are great at creating a shield
between you, the owner, and these debts. The question is whether that is
enough. For many businesses, it is not.
So, what is the problem? The problem is most of your valuable and
critical assets are actually owned by the corporation. This means they
are exposed to the risks of running the business. Consider an example. I
own a hosting company for websites. I incorporate it and business goes
really well. Everyone knows "Chapo's Hosting". I have a trademark, logo
and the whole nine yards. My servers get hacked in the first week of
December and all the sites of my clients are down for the first 10 days
of the month, the busiest on the web. I get sued for millions. While I
am not going to be personally liable, I am going to lose all my servers,
equipment, trademark and logo to the companies suing me. Once I lose
all of those, it is just a matter of time till I can't meet my personal
bills and lose my home, car and so on. We are talking about a nightmare!
Saving on taxes is something almost everyone wants to do. However the majority of countries have tax laws that mean we must pay our taxes if we want to stay on the right side of the law. Yet there is a way to legally reduce the level of taxation you or your business are subjected to by forming an offshore company.
An offshore company is known officially as an International Business Company (IBC). Even though IBC’S are created in the world every day, many are still unaware of the advantages of forming one and worried that it may not be a legitimate way to save on taxes. But be assured there are multiple reasons why incorporating an offshore company could be of benefit to you and it is definitely a legal and very smart business move.
Incase there is still some confusion between the concepts of tax evasion and tax avoidance, let me explain. Tax evasion is the refusal to pay due taxes, by means that are considered illegal within the law. In contrast, tax avoidance refers to utilizing the provisions within the taxation laws of a country to one’s advantage so that savings on taxes can be made. It is the latter regard that forming an IBC will assist.