Setting up an offshore company isn’t about evading taxes or even hiding money from the government. If you want to internationalize your assets, moving your business overseas is a crucial step. You can help save on taxes and even some expenses that you can’t normally claim if your business is outside of the US.
How it normally works is a company starts a company in another country, where corporate taxes are lower (in some cases, none at all). Once this happens the company does not need to pay US taxes on foreign profits. This has gotten so popular that large companies such as Chiquita Bananas have merged with foreign companies and moved their headquarters overseas.
And yes, there are legitimate ways to go about this. For smaller folk like you and I, setting up your company in Hong Kong makes sense because it offers a relatively low barrier to entry.
No longer do you need to be rich and powerful to enjoy the many benefits that operating a company in Hong Kong has to offer. And no, you don’t need to operate in Hong Kong once your company is set up. If you plan on staying in the US, it’s perfectly legal to do so.
Here are some benefits to starting a company in Hong Kong:
#1. Tax Rate is 0% for Transactions Outside Hong Kong
While you may not pay taxes in Hong Kong (assuming your transactions are outside Hong Kong), as an American (if you’re not, check with a qualified accountant in your home country) you still need to pay taxes. It doesn’t matter if you are overseas.
Yes, this can get complicated, but you’ll be able to save on corporate and sales taxes, since you only pay personal income taxes you earn from your company. Considering that it is a 35% corporate federal tax rate, I don’t see why you wouldn’t want to save on that.
#2. You Don’t Need a Physical Address
There are many services out there (do your research!) that can help you with setting up a holding address, which can save you tons of cash. No longer do you feel like you have to pay rent just to hold down your business license.
#3. It’s Pretty Cheap and Easy
We all know that growing a business isn’t easy. And while you’re thinking about how you are going to save money on corporate taxes, you might as well think about how much you can save on setting up an offshore company. Sure, it might sound scary, but setting up in Hong Kong is much easier than you may think.
There are many companies that offer services to help you set up a company, and you’ll be ready to get your company started in a few weeks for less than $1000 USD. There are a lot of these services out there, so do a lot of research and make sure you go with a company that can answer all your questions and concerns. For much of the process you don’t even need to be in Hong Kong to do it.
The only major expense might be that you will need to be physically in Hong Kong when you open a bank account (which you obviously need for your company). Save yourself a bit of money by not traveling during peak seasons, and take advantage of budget hotels or even sites such as AirBnB to help out. You can even make a holiday out of it, and you don’t have to stay long, as it takes less than half an hour to set up an account.
#4. Hong Kong is Globally Recognized
Hong Kong is generally regarded as one of the safest and reliable global cities. It truly is a great way if you are looking to diversify your assets outside of the US.
Having a company Hong Kong most likely won’t land you on any IRS blacklists (as long as you’re not doing anything illegal), unlike some other countries. Also, it is pretty easy to transfer money into various currencies, as banks in Hong Kong is used to handling multiple currencies safely and efficiently.
Despite all these financial benefits to starting a company, make sure you take due diligence and consult a tax attorney, particularly one that understands international tax law before proceeding. Also understand that rules a jurisdictions can change, so make sure you do your research.
Save yourself from a lot headache and ask as many specific questions that pertain to your situation to make sure opening a company in Hong Kong is right for you. After that, it’s just a matter of days before you have your very own company.
What are some other places in the world that are great for opening a business?