The staff of INTERNATIONAL OVERSEAS SERVICES are always pleased to receive any questions from clients about incorporation of companies or details of additional services. At the same time, our experience shows that a sufficiently large number of questions that we receive from our clients are of a typical, standard nature. As a result, we decided to create this section, thereby allowing entrepreneurs easily to find answers to questions of greatest interest to them.

In this section, we have set out those questions to which the answers cannot be found in the principal areas of our site and are not included in the 'terminology' section. In the event of your not finding the answer to your question in this section either, we shall be glad to give you a reply during an individual consultation.

• What is an "offshore zone"?
  In the classic sense of the term, an offshore zone is a country or territory that does not subject companies incorporated there to tax - either altogether or where certain conditions are satisfied. In the majority of cases, only companies not carrying on activities in the given jurisdiction, qualify for this advantageous regime.
  We should immediately emphasise that, although when speaking of international tax planning, many people will immediately have classic offshore zones in mind, in actual fact nowadays these jurisdictions comprise only a minor part of the broad choice of possibilities offered to business people by international legal practice. At the present time a large number of countries, including also those that are industrially developed and known throughout the world as jurisdictions with standard levels of taxation, offer privileges to particular types of companies incorporated there, providing the possibility of using them in a tax-free capacity.
• Who can become the proprietor of a non-resident company?
  Any person can become the proprietor of a non-resident company, including a tax-free company, regardless of his or her nationality, citizenship, office or employment, or other factors.
• Do I have to travel to the country where my company is being incorporated?
  It is certainly possible if the proprietor wishes, but it should be understood that a personal visit is not the most rational way of spending one's time or money. In such an event, a trip would have about as much meaning as a personal journey to Japan to buy a Sony video recorder. Nowadays all registration and incorporation services can be provided both professionally and qualitatively by experienced company registration agents.
  It is an entirely different matter where the legislation in your country of residence is insufficiently liberal, and you wish to resolve all the issues associated with the incorporation of your company outside the borders of your country. Undoubtedly, this is a significant factor and it then remains to choose that particular registration agent in another country, with whom you can develop the best mutual understanding. Both the absence of a language barrier and an understanding on the part of the agent of the particular entrepreneur's requirements and priorities play a significant role in this decision.
• Does the proprietor have to sign the founding documents for incorporation of an offshore company in person?
  In the event that a proprietor incorporates a company independently in the country of incorporation, then there is provision in the register of enterprises for the company's foundation agreement, memorandum and articles of association to be drawn up in the appropriate form. Where the incorporation of your company is to be carried out by I.O.S., then all the founding documents will be professionally drawn up by our legal staff, entered in the appropriate country's national register in the correct form and then handed over to you fully completed. There is also an alternative procedure, namely to acquire a 'ready-made' company that has been previously incorporated, from the I.O.S. companies list. The list offers a daily choice of no less than 150 companies, ready for immediate transfer to the client.
• Does having a bank account in any country give rise to a claim that the company is carrying on business in that country and is therefore liable to tax there?
  No. The banking legislation of most countries does not make any kind of distinction between the maintenance of bank accounts by resident companies on the one hand and by non-resident companies on the other. If a non-resident (offshore) company has chosen a particular country in which to open a bank account and service its financial transactions, this simply indicates that this particular country (or particular bank) was chosen as the most suitable for the particular non-resident company. As a positive aside, we should like to draw attention to the banking system in Latvia, which has, on account of its well developed services and progressive banking legislation, managed during the last years to attract a relatively large amount of non-resident clients to its banks.
• Does an offshore company have to open a representative office in the country in which it operates?
  We should obtain a more precise definition of what is meant by "the country in which it operates". For example, in the event that an offshore company supplies goods from abroad into a country, exports goods from that country or even renders services to a resident of that country, it carries out those economic operations in its capacity as a non-resident, and this bears no relation to activity on the territory of that country. Accordingly, there is no legislative requirement for a representative office to be opened in that country.
• How long does incorporation of a company take?
  That depends on the particular jurisdiction in which the company is to be incorporated. In the majority of classic tax-free countries, and also in most states of the USA, the actual process of incorporation does not take more than 2-3 days. At the same time, however, a certain period is required for such technical procedures as preparing the documents necessary for incorporation, obtaining the compulsory notarial and other verification, appointing directors, legalising powers of attorney, delivering documents etc. As a consequence, the whole process of incorporating a company 'from scratch' takes 3-4 weeks on average in most jurisdictions.
  Considering this, 'ready-made', previously incorporated companies can be transferred to a client within an extremely short period of time. In particular, INTERNATIONAL OVERSEAS SERVICES has more than 150 ready-made companies on its list daily, ready to be transferred to clients without delay.
• How is a company's life prolonged annually?
  That depends on the jurisdiction in which the company is incorporated. In most classic tax-free countries, a company continues its existence simply by paying an annual registration fee to the government. The local registered agent will also need to be paid for his services and for providing a registered office in the country of incorporation.
  A different situation takes place where the company is incorporated in a taxpaying jurisdiction (i.e. in most European countries, Australia etc.). In such instances, the required financial statements and tax returns have to be prepared and filed, and appropriate tax has to be paid, in addition to the aforementioned procedures.
• What is needed in order to file an auditor's report?
  Firstly, we should emphasise that this question is of relevance only in those jurisdictions where the filing of an auditor's report is required by law (in particular, Ireland, Cyprus etc.). In any case, preparation of an auditor's report begins with the provision by the client of a bank statement detailing the financial transactions of his or her company for the accounting year. After familiarising himself with the bank statement, the auditor informs on the documents additionally to be made available to him, normally including copies of contracts, accompanying by explanatory letters etc.
• How does a 'ready-made' company differ from a company that needs to be newly incorporated?
  From an objective point of view, there is absolutely no difference. The price of a company that needs to be newly incorporated is identical to that of a 'ready-made' company in the same jurisdiction; also, in both cases the set of documents is the same. The only difference is in the name of the company - where a ready-made structure is being purchased, a name needs to be chosen from those contained in the current list of 'ready-made' companies. For example, the names of companies in the I.O.S. 'ready-made' list have been carefully chosen by our legal staff and our linguistic section, and they therefore allow for the most suitable and sympathetic choice of name for practically every customer.
  It can be said from experience that entrepreneurs most often choose to purchase 'ready-made' companies, in order to save time. In its turn, the incorporation of a company 'from scratch' takes place in those cases where the customer has specific requirements as regards either the name or the corporate structure of the company to be established.
• My power of attorney has come to an end. How do I extend it?
  Extension of a power of attorney is carried out at the same time as the general extension of the company's life, when annual payment is made for continuing its registered office, for the services of the registered agent and on account of the annual duty payable to the state. In this way, the power of attorney is a some kind of certificate confirming the fact of the company's continuation, and cannot be issued without the payment of the corresponding renewal fees.
  In turn, a power of attorney is issued without any additional fee during the period of the company's existence and serves to confirm the fact of the company's continuing activity.
• Can a company continue to operate without being in 'Good Standing'?
  An offshore company loses its 'Good Standing' status if it fails to pay the fees for the annual maintenance in good time, or to file the financial statements required by law. In the event that these requirements are not met, the company will not be immediately struck off the register of enterprises in the majority of jurisdictions; however, it will forthwith lose its 'Good Standing' status. For a company to continue its activity in such a situation would be dangerous, since:
  
  1. any business partner may require the production of the Certificate of Good Standing in order to conclude a commercial transaction with the company;
  2. the company's bank may block transactions on the company's bank account if it cannot provide proof of its 'Good Standing' status;
  3. a company deprived of its 'Good Standing' status will not be able to defend its title as the plaintiff in potential litigation;
  4. the commercial activity of a company without 'Good Standing' status can be interpreted by its business partners (or the regulatory authorities) as a deliberately deceptive or even illegal undertaking and accordingly, the company (or the person acting in its name) could become liable to prosecution.
  In the event that such a company has not yet been struck off, its 'Good Standing' status can be immediately renewed on payment of the necessary duties or on filing the required statements, and also the payment of a fine, where this has been imposed.
• What should I do if I no longer need a company and my work with it has come to an end?
  That depends on the jurisdiction in which the company is incorporated. It should be understood that the most legitimate way of proceeding in any jurisdiction is to pay all the appropriate duties to the state at the time of cessation and then to carry out the official liquidation procedure for the company. At the same time, in most tax-free jurisdictions, no sanctions of any kind are envisaged against proprietors of companies that have not undergone the official liquidation procedures. In these jurisdictions, if a company ceases to pay its annual fees, it is simply struck off the register of enterprises after a certain period of time by the country of incorporation, without the taking of any further steps against the proprietor.
  The situation would be entirely different, if the company were a taxpaying company (i.e. incorporated in the typical European jurisdictions or Australia etc.). In such instances, a company no longer required by its proprietor, must not be simply "left as it is", that is to say, without paying fees and charges and filing reports and statements, since the absence of tax returns and non-payment of taxes in these countries is not only an administrative offence, but in some cases also a criminal offence. In these jurisdictions, it is always necessary to file the appropriate reports and statements and then to carry out official liquidation procedures.
• On what does the price of a company depend?
  Each jurisdiction has its own established rules concerning fixed duties and other payments due by companies incorporated in that country. Each jurisdiction will also have its characteristic set of regulations with respect to commercial activity of companies incorporated there. Therefore a potential proprietor should not conclude that, say, a company in Switzerland that costs USD 15,000, is "15 times better" than an American company costing USD 1,000. Quite the reverse - a universal and easily managed American LLC may serve as a far better vehicle for day-to-day activities than a relatively specific Swiss company.
  Along with local duties and other fixed charges, the cost of a company in any particular country is also determined by the cost of the services of a local agent in the place of incorporation, i.e. a licensed lawyer in the given jurisdiction, who is directly entitled to incorporate a company in that country. In actual fact, entirely on the accumulated experience of the local agent and his reliability and competence depends the secure and stable maintenance of the company's future activity, the issue of powers of attorney at the proper time, the absence of errors in these and other documents etc., and at the end of the day, whether or not the agent will disappear at all within a year.
  Experience shows that excessively low rates charged by an agent should give cause for concern - for example, there are cases known to us where it became necessary to transfer companies originally incorporated by a 'cheaper' agent to a more 'expensive' but more reliable agent. I.O.S. always approaches the choice of registered agents in country of incorporation with great care, and therefore we can currently guarantee the legitimacy and utmost good value of all our companies at any time.
• What relationship does my offshore company have with the legislation of my home country?
  There is no relationship whatsoever. An offshore company is a foreign legal entity incorporated in another country and carrying on its activity according to the legislation of that particular country. The company has therefore no relationship whatsoever to the legislation of its proprietor's home country.
  It is another question whether any country can by law regulate the commercial relationships between companies resident in that country and foreign, non-resident companies, restricting, for example, monetary transfers from resident enterprises to non-resident companies from particular countries.
• Can it be claimed that restricting the activities of tax-free companies to the maximum extent possible is in the interests of any country?
  We should wish to say exactly the opposite. On the one hand, it is true that the offshore sector has always operated to defend the interests of entrepreneurs and not those of the governing authorities. Furthermore, the interests of the latter are diametrically opposed: to collect the maximum possible amount in tax from their taxpayers, and this has been, is and will be invariably the case in any country. Therefore the least farsighted civil servants can even consider that it would have been better if the offshore sector had never existed at all.
  However, any rationally thinking country understands perfectly well that by giving its entrepreneurs the opportunity of working under favourable conditions and thereby allowing them to gather strength, the country can only gain in the long run. It is the entrepreneurs, as precisely the most active and rationally thinking sector of society, who can act as the financial bulwark and the main source of revenue for any country. Accordingly, the stronger and more vigorous a country's enterprises, the more affluent the country itself will be.