With advances in telecommunication and rising labor costs in many parts of the world, businesses are increasingly looking at how to set up an offshore company. Whether you’re looking to offshore software developers or transition your company to a remote distributed workforce, the benefits of offshoring – from better tax environments to cheaper labour costs – are clear.
How to set up an offshore company sounds complicated. Laws that apply suddenly become foreign, regulatory environments might be completely difficult and even business cultures are sometimes worlds apart.
But offshoring business doesn’t have to be mind-blogging – it can actually be straightforwardly easy. Interested in knowing how to set up an offshore company? Read on to find out and make sure you don’t make any of these mistakes.
Why set up an offshore company?
Before we look at how to set up an offshore, let’s take a quick look at why you should set up an offshore company first.
Offshoring and outsourcing isn’t a niche industry anymore, nor is it just confined to software development. Even back in 2018, global offshoring and outsourcing was already an $80 billion-dollar industry. Why should companies offshore and outsource?
1. Take advantage of strategic locations. Some countries are situated on major shipping lanes. Others are finance, trade or manufacturing hubs. Depending on your business needs, moving your business overseas enables you to reap the comparative advantages certain
countries enjoy and empower your business to tap on new opportunities at the same time.
2. Save on overhead costs. Most companies consider offshoring because it’s a great way to save on labour costs. Hiring a programmer in, say, India is a lot cheaper than hiring one in the USA.
3. Enjoy more favourable tax systems. Some countries have pro-business policies that impose a lower corporate tax rate on offshore companies. Others might offer tax breaks, or even a brand new passport if you set up your business overseas within their jurisdiction.
How to set up an offshore company
Step 1: Always consult with an international corporate services provider first.
The first step in our quick guide for how to set up an offshore company is simply this – check in with the professionals before anything else.
While offshore software development and outsourcing services have indeed become a lot more accessible to businesses and going the DIY route can work, there are legal and commercial differences that can easily leave you and your business in a tangle without the right support.
When considering how to set up an offshore company, you will need to answer key questions such as any ambiguities with financial and contractual delivery processes and who has the right to make decisions. Making sure that all stakeholders share a mutual understanding of a business contract is also important.
If you don’t have any background in international law and lack experience offshoring companies, it is highly recommended that you check in with a company that offers international corporation services first.
Step 2: Choose your preferred offshore jurisdiction and incorporation
Here’s another question: How can you know how to set up an offshore company if you have no idea which jurisdiction suits your business best?
Your preferred offshore jurisdiction should suit the kind of business you are doing. If you’re offshoring to simply hold assets, less complex incorporations like International Business Company (IBC) should suffice. If you’re planning to do business in a major financial or trade hub, you may have to consider more complex incorporations like Limited Liability Company (LLC).
When you’re thinking about how to set up an offshore company, you also need to remember that it isn’t simply about choosing a great place to offshore. The legal and commercial relationship between your home country and your intended offshoring destination also matters. Are there any tax treaties between jurisdictions? Or any business restrictions?
Step 3: Decide on a name
When setting up an offshore company, not any name will work. Some countries have laws and regulations that explicitly prohibit the use of certain words for naming businesses. Some of these words include:
In other countries, cultural and religious sensitivities may further limit the choices you have when naming your business. If you intend to offshore in a popular jurisdiction, there’s also the problem of someone else already using your intended name.
Step 4: Prepare and provide due diligence
Step 4 in how to set up an offshore company is to get the required documents. Generally, you will need to submit a certified copy of your passport and / or driver’s license, a copy of your residential address, and brief details of your business activities.
In certain jurisdictions however, a greater amount of due diligence may be necessary. Singapore, a prime location for offshoring and outsourcing, requires the following:
- Name of proposed company
- Brief Description of business activities
- Shareholders’ particulars
- Directors’ particulars
- Registered address of the company
- Company secretary’s particulars
- Company constitution
Any other documentary requirements as may be required by the registered filing agent
Step 5: Set up communications with your offshore team
Now that your application has been successfully submitted and approved, actual offshoring can begin proper. Settling on office space might be of paramount importance, but equally so is keeping in constant touch with your offshore team.
When setting up communications with your offshore team, always take note of time zone and cultural differences. Choose an appropriate time for virtual meetings so as to accommodate everyone, and be aware of certain social behaviours that your offshore team might find awkward or even inappropriate.
Fragmentation of business processes can pose challenges to efficiency and achieving business success. To reap the full benefits of offshoring, be sure to also use project management tools like Jira and Asana to keep everyone on the same page. This is particularly important if you intend to offshore software development and hire a team of offshore software developers.
If your offshore employees need to make frequent international calls, consider getting the team local phone numbers so that your business doesn’t have to splurge on expensive international call fees.
Offshore with success together with Phoner
Here’s where Phoner comes in.
With Phoner, you have access to unlimited phone numbers around the world you can immediately use without needing to get a second phone or SIM card.
Need to make frequent calls to your offshore team? Or does your offshore team need to make frequent calls to customers in the country where your home office is based in? Our phone numbers reliably receive calls and messages, and help you save on expensive international call fees so your business can fully invest in offshoring for success.
That was our quick look at how to set up an offshore company. Get Phoner now and reap more returns on offshoring your business today!