… And that you may find interesting.
License and Regulation
In order to form an offshore company, a local registered agent or trustee is required. You can (almost) always find a list of all licensed registered agents and trustees on the jurisdiction’s financial services commission’s (FSC) or financial intelligence unit’s (FIU) website. I’ve gathered an incomplete list here: https://www.streber.org/more/links/.
For example, if you are looking to form a company in BVI, only the entities listed here under Registered Agents are permitted to do so: http://www.bvifsc.vg/en-gb/regulatedentities.aspx.
Most offshore service providers (OSPs) are not licensed and instead have a partnership with one or more licensed registered agents and trustees whose services the OSP resells. You, as a customer, approach the OSP, pay them, send them your document, and they then pay their partner and pass on your personal information to them for incorporation. The registered agent forms the company and send all the document back to the OSP.
When it comes to pricing, the reseller has to pay its supplier, which in turn is paying the government fees. Both tiers of course have their own margins. However, there is no guarantee that prices are higher with a reseller OSP just because they have their margins and pays someone else’s margin. Registered agents will charge a reseller less than they would you directly because they reseller will take care of you as a customer. Licensed service providers are often law firms or accountancy firms, or otherwise have higher staff costs, which need not be passed on resellers.
Because your OSP is probably not a licensed entity in the jurisdiction where you wish to register your company, form your trust, or establish your foundation, they are most likely not present there.
For the very (and perhaps overly) privacy-cautious, this can be a problem. You may be forming a company in the Seychelles but if your OSP is located in a low-secrecy jurisdiction and happen to have copies of your personal information and company information, this is a weak link in a structure that relies on confidentiality.
Be especially cautious about an OSP that doesn’t list an address or which just lists the address of its licensed partner.
Advisory vs. Sales
So many times, I’ve heard from people saying that they consulted with an adviser who told them to set up a Seychelles IBC and Belize bank account in order to avoid taxes, protect assets, and so on.
This almost invariably means that the person googled “offshore company belize”, clicked a couple of the top-10 results, and sent an email to the one with the nicest-looking website and lowest fees.
Let’s be clear about something. Most OSPs do not employ tax advisers, lawyers, accountants, or otherwise qualified professionals. The person answering your emails is not equipped to answer most of your questions regarding taxation or asset protection. They will just regurgitate a sales pitch they have been taught and push a package on you in a very one-size-fits-all kind of way.
You’re not necessarily guaranteed to be dealing with a qualified professional by going with a licensed registered agent instead of a re-seller.
This is a prime example of getting what you pay for (with exceptions). Chances are you won’t be talking to a qualified professional if you’re paying 600 USD for an IBC. A business wouldn’t be able to operate on such low margins while employing high-quality staff.
If you want to be sure you’re getting qualified advice, you are going to have to pay qualified-advice pricing. You can find law firms and accountancy firms in all offshore jurisdictions, many of which are also licensed registered agents. For example, Mossack & Fonseca, which are present in most corners of the world.
Because OSPs tend to operate behind offshore companies, it can be virtually impossible to find out who is behind the company.
From experience, I know that a lot of OSPs are one-man operations, meaning there is just one person operating under a company. This poses an enormous risk, in case that person for whatever reason becomes unable to operate the business. You suddenly have no one to turn to for support. Turning to the underlying licensed registered agent will only work based on the good will of the registered agent, as there is no previous agreement between you and them.
If your reseller goes away, the supplier has no obligation to help you.
When you open a bank account for your company, the OSP will charge you a fee of usually around a few hundred USD/EUR.
With a good OSP, this fee includes advisory on best bank suitable to you, handling of forms, certification of corporate documents, and of course a margin.
What is less spoken about is the kickback banks pay to OSPs for referring their clients. The kickback is either a fixed amount upon account opening or a percentage of fees earned on the client. Fixed amount kickbacks are usually in the area of a few hundred up to a couple of thousand USD/EUR, depending on type of bank and type of client.
The practice is ethically questionable. Can you be sure that your OSP is recommending the best bank for your needs or just the one with the highest kickback? Not all banks do this and not all banks that do it do it all the time, though, and short of asking your OSP (not that they have an obligation to tell you) there is really no way of finding out.