Offshore Company Incorporation: Mistakes to Avoid

Opening an offshore company can help your business to access a larger market, protect its assets, and catapult it into a global brand. With most offshore administrations providing a long list of incentives for companies that go to their jurisdictions, you are sure of fast growth and success. Offshore operations also come with tax incentives, which allow investors retain the bulk of the profits from their businesses. However, some investors find it very challenging to go and operate offshore because of the mistakes they make. Here are some of the common mistakes and how to avoid them when incorporating a company offshore

Failing to Select the Right Jurisdiction  

When going offshore, the success you can achieve largely depends on the jurisdiction of choice. Therefore, selecting the wrong country can easily compromise your goal for the offshore firm. For example, if you aim to expand your company rapidly but pick a jurisdiction with high taxes, it might be impossible or take too long to achieve. So, how exactly do you pick a good jurisdiction? 

The jurisdiction you pick depends on the needs of your enterprise. So, it is prudent to clearly define the mission of the enterprise and research the jurisdictions that can help achieve it. The services of an agency of experts would also come in handy to help you identify a good jurisdiction. Some good options that you might want to consider are Hong Kong, China, the USA, Mauritius, and United Arab Emirates. 

Not Knowing the Local Laws

Just like back home, business operations offshore are guided by specific laws. If you fail to understand these laws, there is a risk of doing things the wrong way. Note that every jurisdiction’s set of company laws are different. Take the example of Hong Kong. To incorporate a company in Hong Kong, you need to start by understanding the Companies Ordinance, which defines all the documents that must be prepared, and how to file them. If you are unsure of these legal procedures and applications, it will be a good idea to work with a legal expert for assistance. Professionals with experience in company registration would also come in handy. 

Staring Without Enough Capital 

Even though the benefits that come with incorporating a company offshore are attractive, it can be a huge mistake to jump into the new market without ample capital. Even when the targeted jurisdiction promises to offer some support, it is rarely enough to get the company up and running from the time of registration to operations on the market.  If you have a business back at home, profit from past years can be used to start a company offshore. Other sources of capital can be: 

  • Money from shareholders. 
  • Personal savings. 
  • Borrowing from banks. 
  • Donations from friends. 

The rule of thumb when opening an offshore company is to have resources ample to run the enterprise for about one year or until it becomes self-sustaining. Remember to also create channels that can be used to raise additional funds to cater for financial shortfalls. 

Failing to Research the Target Market Well

When opening an offshore company in countries such as China, the USA or UK, some investors think that it is a single uniform market. However, this is a misconception and mistake that can easily result in failure. For example, although China is a huge market of more than one billion people, you need to be specific on the actual target. For example, do you target urban, rural, young, or older clients? 

These are only a few of the common mistakes that people make when incorporating their companies offshore. Therefore, you need to understand them and follow the right procedures. One of the best ways to avoid these mistakes is to work with experts in offshore company incorporation like ICD Fiduciairies. They not only help with registration but can also guide you for easy entry into the new market and taking advantage of all facilities, such as inland container depot (ICD) and ports.