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Every business either at the time of incorporation or at the time of scaling up has to take a major decision of choosing between an offshore and onshore company. Both are popular business models for expanding business operations. Having an insight into an offshore and onshore company is the first move toward deciding which one to choose and this blog provides exactly that!
Table of Contents
An offshore company is a company set up outside the domestic jurisdiction of the investor company. The transactions in an offshore company are conducted outside the jurisdiction of the domestic company. The purposes of incorporating an offshore company are mainly to expand the global business integration, save costs, to take tax benefits from low to nil-tax-rate countries. Thus, offshore companies are usually located in specific jurisdictions where it is beneficial for companies to establish their business like countries that provide preferential tax treatment, favorable business laws, etc.
The major advantages of incorporating an offshore company are as follows:
Apart from the numerous advantages of offshore companies, there are a few drawbacks of having offshore companies which have to be kept in mind. The disadvantages are as follows:
When a company sets up another business entity within the border of the country in which it is registered, then it is known as an onshore company. It is a legal entity incorporated in a country to operate a business within that specific country border. The transactions and dealings between two entities are conducted within the country and are subject to state corporate regulations and taxes.
A company usually prefers to have an onshore company if the country has a developed economy and strong financial markets. Onshore companies carry on a sizeable amount of business within the country of their registration.
One of the major differences between an offshore and onshore company is that the former company is incorporated in one country and has the license to carry out business in the country of its incorporation as well as in another/other countries whereas in the latter the company is incorporated in one country and carries out business activities in the same country. For better understanding, a deeper discussion on the differences between an offshore and onshore company is done below:
After understanding the difference between an offshore and onshore company, a company has to decide the type of business model most suited to them. The decision I is usually based on the business purpose, objective, financial status, and products and services. Irrespective of the trend, a company must choose wisely by weighing the benefits against the pitfalls. Further, when choosing between an offshore and onshore company, various ramifications and protocols relating to privacy, assets, and taxes have to be considered.
Also Read:Why start an offshore company in Canada?Offshore Company Incorporation in Malaysia: A complete Procedure
Ankita is an Advocate and has joined Enterslice as a Legal Researcher. Her work focuses on General Civil and Commercial laws, Corporate Taxation Laws, Labour and Employment Laws and Dispute Resolution. She is a law graduate from School of Law, University of Petroleum and Energy Studies. Prior to joining Enterslice, Ankita has the experience of practicing law in Delhi and Odisha.
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