Offshore corporations have several advantages over incorporating in the country you do business. These include asset protection from lawsuits, increased privacy, confidentiality, dramatically reduced taxes, a global presence, and more flexible business laws than in your home country. Thanks for sharing.

Thanks
Sofia.

I have a ton of comments on the tax stuff, but I think they will be mostly already covered in the next post – so I will wait until I have read that one.

The entity may also allow some tax savings from family income shifting; gifting some stock to family members in lower tax brackets.

Good accounting for a small corporation should be no more or less than good accounting for a sole proprietorship.

In regards health insurance, the best bet is a c-corporation, which would allow a complete deduction. S-corporation health insurance for its owners must be separated, but should be fully deductible as the so-called “self-employed health insurance deduction”.

Finally, state taxes on corporations vary tremendously; some almost kill any federal tax benefit with additional state taxes at the entity level.

I don’t think anyone meant to imply that you’re afforded complete protection with an LLC… You’re absolutely right in that you’re still responsible for your actions – that’s why I said in my post that you can’t just write, promote or do what you want and be protected. This is especially true with writers and bloggers because largely, you ARE the business.

There’s this idea in law called “piercing the corporate veil” which is when lawyers try to hold members or shareholders of companies personally liable for damages. In those circumstances, the argument is generally that the individuals inside the company were just using the company as a shield for their individual actions. However, there are still some protections if you operate your business properly.

The same is true inside the US when it comes to incorporation – despite what folks claim, it’s rare that you can significantly reduce your tax burden legally by, say, incorporating in Nevada or Delaware.

One example that does work is by separating your intellectual property out of your company and licensing it to yourself – but that tends to be above the scope of what makes sense for freelancers (not to mention the costs). I can’t stress enough how important it is to consult with a tax pro before making a decision to minimize your taxes by incorporating somewhere else – depending upon the industry, your location, etc., it may not work for you.

We provide free online consultations on offshore services at http://www.isla-offshore.com/ – feel free to contact us.

Thank you, Darren, for the great article!

Rick

Great article. I’m looking forward to part 2.

We recently incorporated (S-Corp election) and have gotten quotes on health insurance. They were actually cheaper for an individual rate. Of course that’s before taking our history!

My question is, if the corporation pays for health insurance, can it write it off?

There is no distinct advantage beyond being cool with that Inc. at the end of the name.

Also, the cost of accounting would rise sharply (at least, in Canada) so the advantages on savings would get poured back into maintaining the books. Paperwork goes up to once each three months for reporting versus once a year.

Add legal fees, notary fees and more, and it would cost me to be an Inc.

Short story – not smart, even for a six figure business. Long story? Not yet. The time will come, he mentioned, when Inc. does make sense.