Corporate Resource Guide » corporations

Are offshore corporations legitimate and what are the benefits or pitfalls?

Robert Montgomery — Sun, 22 Nov 2009 02:25:06 +0000

Most small corporations should not be looking to incorporate offshore. First, if it is done for tax purposes, you are likely to substantially increase your odds of getting audited by the IRS since there are many offshore tax schemes that are not legitimate.

If you are a US citizen and earn income from an offshore corporation, you are obligated to pay income tax in the US on that income. Trying to hide it in an offshore corporation will likely be viewed as tax evasion.

If you are looking to incorporate offshore for liability protection, there are several important considerations. First, in order to protect assets, you will need to transfer the assets into the offshore corporation, which will likely involve moving them to the offshore country or location.

There are a lot of horror stories about people losing their assets in offshore companies. You need to be very careful about whom you trust and whom you do business with. Secondly, you will be dealing with laws from another (offshore) jurisdiction that may be considerably different than the local corporation laws or US laws that you are used to.

In most cases, the risk and effort in setting up an offshore corporation will outweigh any potential benefits you might receive.

In which states are the most number of corporations formed?

Robert Montgomery — Mon, 09 Nov 2009 00:56:31 +0000

The State of Delaware for many years had the distinction of having the most new corporations each year. Many Delaware corporations tend to be larger companies. Nevada now boasts that it is the state with the most new incorporations each year.

Both Delaware and Nevada have promoted the incorporation business because it is a source of revenue to the state and it provides business and employment opportunities. However, the benefits touted by these states, in many cases, may be more beneficial to larger companies and not as helpful to smaller businesses.

Although Nevada or Delaware may be good choices for incorporation in some cases, the best advice for smaller businesses is usually to incorporate in the state where your business is primarily located and where you do the most business.

For example, if you incorporate in Nevada but your business office is in Oregon and you do most of your business in Oregon, you will have to file and pay fees in Oregon as a foreign corporation (meaning a corporation from another state).

This cost is in addition to incorporating and paying fees in Nevada. This dual filing can be expensive and can result in more paperwork and record keeping which may outweigh any potential advantages.