Many people associate the word "offshore" with tax evasion or other more serious criminal activities. While it is true that people from this element of society are intimately interested in offshore for the privacy benefits that can shield their illicit activities there are also legitimate and completely legal reasons to pursue the formation of an offshore company.

What is Offshore Company Formation?

Forming an offshore company simply means incorporating a business in a country other than the one you reside in. It does not have to mean incorporating in a tax haven. You could, for example, form a company in the United States which would be offshore to you if you lived in France.

The media at large has had a field day with the offshore industry and in particular, tax havens, seemingly only reporting about them when a serious crime has been uncovered. It stands to reason since these tax havens promote privacy that they really have no recourse to fight back in the media since drawing attention to themselves and their clients is exactly the opposite of their intention.

Why Form an Offshore Company?

There are a number of positive benefits that can be realized through offshore company incorporation. The lion's share of people that are drawn to offshore company formation are seeking greater privacy in their financial dealings, increased layering for asset protection purposes and a reduced tax burden on capital gains.

Forming your business offshore does not preclude you from paying your fair share of taxes on income in your home jurisdiction. The advantage of having an offshore business is once you have paid the taxes in your home country and moved this money to an offshore tax haven, your money can grow there tax free. In general, tax havens will not charge a capital gains tax nor will they tax foreign derived income.

Why Incorporate in Panama?

Incorporating a company offshore also provides many privacy benefits in your financial dealings. Specifically, the Panama IBC, can be incorporated in bearer share form. Ownership of the company is anonymous and the ownership of this corporation can be transferred simply by passing the physical share certificates to another person.

Bearer share corporations can own real estate, boats, cars, bank accounts, trading accounts among other assets. This "anonymous" ownership provides a layer of privacy in that your personal name is not associated with any of the transactions for the business nor in any public registry. Panama also offers the ability to layer asset protection by having a Panama foundation own the corporation. As with the bearer share corporation the Foundation ownership can remain private and is virtually untouchable even by the court system since Panama foundations have no owner.

Depending on what services and level of privacy protection you desire there are quite a few different scenarios you could pursue when considering Panama to form your offshore company.

To get the ball rolling start by performing an internet search with the goal of finding unbiased sources of information about the offshore services industry. As you research you will start to get a feel for the industry in Panama as well as identify potential service providers.

It cannot be stressed enough that incorporating your company through a Panama law firm or lawyer is the best method to ensure your corporation is created in the proper way. Your first and strongest layer of privacy protection can only be achieved if you use a law firm to form your offshore company. Any communications between you and your law firm are covered by attorney client privilege.