What is the difference between an offshore company and a traditional company?

What is the difference between an offshore company and a traditional company?

Posted by on Nov 19, 2021 in World |

You wonder about the interest of opening an offshore company, but especially try to understand what are the differences with a traditional company? This article will then bring you an answer! Indeed, we are going to explain you what is the difference between one and the other and the different advantages existing for both.

What is the difference between a classic and an offshore company?
If both exist and can be comparable they have some differences.

The offshore company

The offshore company is by definition a company in a country whose legislation allows to establish it, which is offshore. It can therefore be located in different Caribbean islands, such as the Bahamas or Panama.

In general, companies established abroad have an advantage over those in their country of origin: they benefit from lower taxation and do not need employees. In addition to this important point, we will also see all the other differences between these two types of structures regarding shareholders, directors, addresses but also legal ownership

The classic company

As its name indicates, a classic company is simply a structure existing on its territory and subject by definition to local laws. It must therefore respect French law in terms of corporate governance (e.g. statutes), business forms (SARL, SAS) and taxation.

In addition to these two types of companies that we have just presented, there are also others such as the general partnership or the SCI (Société Civile Immobilière). Each form is characterized by specificities in terms of management and finances that make each one suitable for certain projects. For example, an offshore structure may be preferred if your business is subject to tax constraints.

In brief

The difference between an offshore company and a traditional company lies in its location but also in the applicable legislation. Indeed, an offshore company is subject to a different tax and legal regime than its French counterpart.

What are the advantages of choosing one or the other?

There are many advantages to creating an offshore company rather than a company in France in a classic way. Among them:

  • Offshore companies benefit from a light taxation, where classic French companies impose large taxes and many taxes.
  • They cannot be sold but must be liquidated in case of sale or transfer.
  • The beneficial owner does not appear on any public document, which protects his anonymity until he wishes to reveal himself, for example by buying a property with it. However, this principle can also have disadvantages as some countries are known for their lack of transparency regarding foreign capital gains.
  • The constitution of an offshore company is faster and less complicated than that of a classic French company.

What are the disadvantages between the two?

It goes without saying that depending on the structure chosen there will be disadvantages! If there were only advantages it would be too good! The classic company in France has many disadvantages, that’s why some people often choose to go offshore. Too many taxes, too many taxes, complex regulations and a legislation too strict and sometimes too vague.

But don’t be fooled, an offshore structure also has its drawbacks! An offshore company must respect the laws in force in its country of residence, which can be both expensive and time consuming for it to ensure compliance. In addition, due to their assumed anonymity, agreements between two parties who do not know each other are difficult to conclude if they do not have a traditional business relationship or if they are already known by one of the parties

The user benefits from this type of structure by being able to find legal forms adapted to his projects but without necessarily having specific expertise. Indeed, he will always rely on professionals such as lawyers or accountants who regularly deal with this type of transactions.

In conclusion and advice

In conclusion, it will be up to you to see according to what you expect from a company! However, you should know that different structures exist depending on their location if you decide to go through company formation in Hong Kong in Asia or in Delaware in the USA, but also depending on its activities. Do not hesitate to contact experts on the subject so that they can help you find the best solution for your project!