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Six Pitfalls to Avoid When Forming an Offshore Company

Turner Little are experts at helping you set up an offshore company. Here are 6 pitfalls all companies should work to try and avoid:

1. Don′t buy cheap…

It is true that some incorporation agents offer very cheap offshore company formations and the saying ‘You get what you pay for’ is very true when it comes to company formation.

Cheap companies are invariably missing something over their more realistically priced counterparts, whether that is:

  • Vital Documentation
  • Ongoing Support
  • Banking Arrangement
  • A lack of expertise from the incorporation agent

Buying a correctly structured and priced company will ensure that you receive everything you need, with no hidden extras or surprises after purchase.

2. Don′t use an Unregulated Agent…

Company Formation Agents are nowadays required to be registered with and licensed by HMRC. If using an agent in the UK do make sure that they are Regulated as this affords you a considerable degree of comfort as to their methods of working and the legalities of what they do.

3. Corporate Nominee Directors or Shareholders…

Some incorporation agents take the cheap option when providing Nominee Directors or Shareholders to their clients. They do this by incorporating an offshore company themselves on which they act as Shareholders and Directors and then appoint this company on all of their client companies, calling it a Corporate Nominee Service.

There are a number of downsides to this approach, including:

  • If the Directors of the Offshore Nominee Company are resident in a high tax jurisdiction then your offshore company could be liable for taxes in the Nominee Directors country of residence.
  • Incorporation agents using these practices are often unwilling to identify themselves to banks and other organizations who will invariably need to ID all parties in the company structure which means that your company is then unable to open a bank account or enter into agreements etc.

Using local jurisdiction based individual Directors and Shareholders will offer considerably greater privacy and you will find most individual Nominee Officers understand a need to be identifiable.

4. Banking with Major Banks…

One of the most common reasons for incorporating an offshore company is a desire to maintain your privacy. Banking with major international banks who appear on the high street worldwide can significantly reduce your confidentiality as these organisation are generally leading the way in sharing client data either internally or with external organisations. Private banks tend to offer greater confidentiality and are less likely to share your information with all and sundry.

5. Don′t be Fearful of Anti Money Laundering and Know Your Client Regulations…

We have all noticed the dramatic changes in anti-money laundering and know your client legislation in recent times and fully identifying yourself to an offshore company formation agent may seem to defeat the object. In reality, by identifying yourself you are showing a willingness to comply, showing that you are not ‘up to no good’ and this in turn protects the information that you share with the agent as they can be confident that you are a legitimate client. Once accepted as a client, regulated firms such as Turner Little will do their best to protect and maintain your privacy.

6. Don′t panic when banks ask you to evidence transactions…

Nobody wants to be party to money laundering or terrorist financing and proving that financial transactions are genuine is now part and parcel of everyday life. Banks need to get to know you just like any other business partner and one of the ways they do this is by trying to understand your methods of trading and financial requirements while at the same time satisfying themselves that your transactions are for a genuine and legitimate purpose. Doing this not only means that the bank will help to protect your personal data because you are a valued and reliable client but it means that they can also ensure they provide you with the best possible service.

Turner Little

Turner Little can assist with the formation of companies around the world. For assistance or to discuss your requirements, please feel free to contact us on +44 1904 783101 or visit our Offshore Company Formationpage.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.