Why do Startups Prefer to Offshore Business?

By October 15, 2018Offshore Formation
offshore company formation and licenses

As a startup, being advised to go offshore might sound like offbeat advice. However, offshoring is actually becoming a legitimate way to scale results and optimise resources for those who follow a lean startup mindset.

Simply put, offshoring refers to when a business operates in a jurisdiction other than its own. While it can be difficult to get into the nitty-gritty of local laws, accounting and procedures, there are many expert professional agencies that can assist you in the process.

Offshore can be an opportunity for startups

When your business is offshore, you pay fewer taxes, build your brand internationally and can even reach the break-even faster. Despite those benefits, we recognise that startups come with their own risks and moving offshore can be a tough decision to make. In this article, we explain how being offshore can bolster and support your startup in such a way that your business takes off quicker.

The global market is slowly consolidating as needs and behaviours of consumers are becoming more universal. Startups these days are looking to expand out from local markets, which is exactly what an offshore location provides. Moreover, relocation isn’t even necessary, as most businesses perform just as well with remote teams constantly engaging with each other through video conferences and email exchanges.

Here are some reasons why startups prefer offshore sites:

#1 Offshoring is cheaper, and allows you more time to start-up

Sure, starting-up in Silicon Valley can seem like a dream come true. But realistically speaking, the cost difference of setting up there compared to a location such as Hong Kong or Singapore can be drastic.

When you’re spending lesser on office leases and saving on taxes, your capital will last longer, giving your startup more runway. For instance, a sum of money such as $20,000-which will last you 3-4 months in the United States – can be worth an entire year or more if you move to a cheaper country.

#2 You save on taxation

Corporate taxes elsewhere can be much cheaper than your home country, allowing you to save on taxation. This bears plenty of repeating, as it is a major reason why startups choose to be offshore. Most offshore jurisdictions offer external businesses zero taxation. Places such as Hong Kong have no foreign exchange controls and encourage businesses from other countries.

#3 Asset protection in a stable environment

While operating out of an offshore location, it’s important to pick a location that has a stable political and economic climate. Starting a business in a stable law system environment will ensure that you can stock your assets without fear in the future – especially if conditions aren’t quite right in your home country.

#4 If you’re an international team, you’ll do better and more

Especially if your start-up team is from different parts of the world, a set-up in another location makes sense. This allows you to network across the world, and diversify your team and perspective. It also builds a more international team culture which will only benefit their commitment and productivity.

#5 Ease of patenting in some offshore locations

If you’re a business that requires patenting, consider an offshore site in a location where intellectual property rights are more lax. Cyprus, for example, is a respected location which is famous for offshore businesses looking for easier patenting rules.

#6 Easier to find angel investors

Some locations are already more favourable for businesses in certain sectors. If you start-up such offshore locations, the probability of finding good funders increases, as they are already well versed with the domain and trust similar businesses in the area.

#7 If you’re a niche business, you’ll find it easier to fit in

Legislation in some countries is more permissible to certain kinds of businesses. So if your business is niche, an offshore location in a country with good legislation makes complete sense for you.

All aside, it is crucial to be well versed with legislation laws, accounting and taxation in the jurisdiction where you decide to set up your offshore business. While it is possible to do your homework, it is advisable to use a professional agency, such as Ocfam.

At Ocfam, we are experienced professionals who have expertise in setting up your offshore businesses. We assist you right from the time of setting up a bank account to helping you audit and account. We provide tailored solutions for financial services in global licensing, compliance and risk management, payment solutions and taxation. Moreover, some offshore jurisdictions only accept company registrations from trusted agents.

Give us a call, send a message, or visit any of our offices to know more about our solutions for your business, today!

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