Where do you want to create your company? In the United States? In Cyprus? What about Isle of Man? What about Hong Kong? Where is best? Where is best for asset protection? What about Privacy? What about cost?
There are many potential decisions behind where is best for you to incorporate–and it becomes complicated on a few different fronts–every client holds a nuanced situation. Maybe incorporating in a high tax country and qualifying for a specific tax regime is worthwhile. Maybe creating an LLC for each and every asset is the best path forward. Today however, I wanted to talk about how the offshore incorporation company is shaping up.
Right now, there are some jurisdictions on the cheaper end of things that some may advise against setting up. There are two main reasons why:
- Difficulty to receive banking and;
- Reputation (some transfers to companies domiciled in a certain jurisdiction will raise flags with high tax jurisdictions)
Many have thrown in the towel and given up on some jurisdictions as there’s too much pressure to provide paperwork and details such as phone numbers or utility bills just to operate; the cost savings add up on the other side of things.
This, if you’ve spent time looking at this, won’t be news for you. You’ll have idea of a sort of “tier” system as to what jurisdiction is most pristine and sought after and which ones are low-level or called “shady”. I’m not saying I agree with it… just that the industry has made up its mind that certain jurisdictions are hardly worth touching any longer.
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The Other Half
The other half that is never fully appreciated is due to a hot bed of regulation, oversight, policy making and frankly, cowardly, weakness to not upset their tyrannical overlords.
I’ve received these replies after inquiring about incorporating in some jurisdictions (even after presenting a good business case and why the location is a fitting place).
“…We can then risk assess the proposition to establish whether it is within our risk appetite and commence our new business procedure“
At this stage we are unable to consider the proposal further as it lacks detail to explain what the benefits would be to the island country, what the risks might be and how these may be mitigated.
“…The risk appetite of the states as a small, responsible Government is low…”
Let’s never risk creating new businesses so we never have any problems with business
In effect, these places have dried up the market for new innovations and ideas, ironically, to preserve their market of existing innovations and ideas. What this means for a bright new entrepreneur on the block is that it’s simply not worth it trying to convince someone your idea is great who is determined to reject you for the sake of the status quo. Some corporate service providers view you as a problem, not a customer.
Imagine an event planner ceasing to take new reservations on the chance that somebody gets too intoxicated; a ship that sales to transport cargo on the chance that it sinks; a baseball pitcher who has a no-hitter going but quits while he’s ahead. Do you think this business model is sustainable?
Ultimately, this comes down to a different way of viewing the world–one where people are no longer allowed to assume personal risk themselves. They have to be hand-guided through a series of permissions and licenses that allow one entry to take risk (and hence, reap rewards). These low-no tax (or as they like to be called for semantics, “tax neutral” countries) are shooting themselves in the foot by destroying the type of mindset required for creating new, interesting businesses.
When the going gets tough; the tough get going–I don’t think the tough want to linger around checking boxes all day
Dynamic for You
We have a set up where it’s no longer practical to set up in a “shady” backward 3rd world country due to lack of banking and operational headaches; but also, it’s no longer feasible to operate in a glistening tier-1 jurisdiction any longer because of their cowardly behaviour on not wanting to “make a mistake” by on-boarding you.
To me, there’s something that rubs me the wrong way since upon day 1 they view my ideas, my behaviour, my interests, my goals I am trying to pursue are deemed risky or a mistake. It feels like you attend a party and someone says, “boy was it a mistake inviting him here…” Being judged as inadequate by those other than a customer base I am targeting seems unnecessary.
Closing
If you search long enough in the offshore world, you’ll quickly find yourself obsessing over the question of “where do I create my company?”. It’s kind of enjoyable [I think] trying to answer that question and studying what place is best for what. Unfortunately, European policies are making the answers far more clear for us, but ignoring this, many have previously been cautious in some jurisdictions that were “tainted” with having a bad reputation.
What is not spoken about (or fully appreciated) by so-called experts in this field is the fact that a jurisdiction that strives to be whiter than white has the same amount of futility. If you’re not allowed to do anything (or it requires consistent evidence before doing so) it’s the functional equivalent of setting up in a so-called sketchy jurisdiction. In both circumstances, you’re assumed to be guilty from Day 1.
Many of these island countries hold zero tax for corporations but between a mix of permits, other taxes, fees and forced regulations, they make it very expensive and cumbersome. It may shock some, but in the world of big government it means some of these zero tax locations are indeed anti-business.
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