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One of the most important steps in starting a business is choosing the type of company to establish.
flowcomm / flickr
Most of the time, investors must choose between onshore and offshore companies in order to simplify their decision.
Both types of companies have their advantages and disadvantages, but the most important aspect to consider is the purpose for which the company is created.
As an example, one of the best jurisdictions for opening offshore companies is Seychelles. Setting up an offshore company in Seychelles attracts many tax benefits, however, there are also advantages when creating offshore and onshore companies.
Let’s see what the main differences between onshore and offshore companies are.
As mentioned earlier, the main difference between onshore and offshore companies resides in the purpose for which the company is established.
Onshore companies can complete activities in the country they are registered and also outside their country of residence. From this point of view, opening a company in the Netherlands can bring substantial benefits to those who want to set up both onshore and offshore companies – onshore companies can be set up in the Netherlands, while offshore companies can be registered in the Dutch Antilles and Curacao.
Among the advantages of onshore companies, we can mention the fact that the regulations applied in their case are safer even if more stringent.
Also, even if the taxes applied in some onshore jurisdictions are higher, they are not much higher than in countries representing well-known offshore jurisdictions.
Most of these taxes can be deducted against double tax treaties signed by many countries.
Onshore companies will be able to complete more activities compared to
Compared to onshore companies, offshores can only complete activities outside the countries they are registered in. Most of the times, offshore companies will benefit from improved confidentiality and privacy related to ownership, but also from very low or zero-rated taxes. However, there are countries which impose certain restrictions on offshore companies, which must be carefully reviewed.
Offshore companies are usually created for asset protection reasons; however, they can also engage in commercial activities, therefore the industries they can operate in can be as extensive as the ones in which onshore companies activate in.
However, more licenses could be required for the former, depending on the countries they will work with.
Choosing the country and the company to open implies a lot of research from the investor because both onshore and offshore companies have their pluses and minuses. While onshore companies will provide for better regulations, offshore companies will offer enhanced protection and better tax benefits, therefore the choice should be made in accordance with the requirements of the businessman having to decide on a business form and the reasons for which it will be created.