What Types of Businesses Lend Themselves to Going Offshore?

Investors who are considering investing in offshore businesses may have trepidation regarding the type of business to invest in.

Additionally, tax implications can arise if the business is not managed in a manner that gives it enough offshore presence in terms of its time and effort.

Knowing the type of business to invest in and the tax implications of this offshore business can help business owners to maximize their investment value.

Foreign Trust Entities

Going offshore works particularly well for certain businesses. For example foreign trust entities perform this function well. A holding company owns offshore real estate investments in the form of a foreign trust. This type of business works because the investor is not a direct developer or builder, but is providing the necessary capital for the business.

Success of Real Estate Businesses Offshore

Real estate companies also work well as offshore businesses. An active condominium development complex or other commercial real estate company can be a solid offshore businesses. They work well in this capacity because they solve the problem of the time lag that occurs between the initial investment and the return on this investment. This type of business can center on capital gains, making them an effective offshore business.

IRS Offshore Business Rules

The IRS tax code has specific rules regarding offshore businesses and the taxes associated with these types of investments. The Internal Revenue Service often focuses on whether the business is a permanent establishment and its nexus to the United States.
 
If an offshore business owner is actively managing, operating and deciding important choices while in the United States, the offshore company must file a United States tax return. However, there may be other circumstances in which the nexus can be cut off from the United States or by operating, managing and deciding important choices in the offshore location.
 
Its logistical headquarters may be located offshore and business owners may be able to operate the business completely offshore. If a company creates a product in one location and sells its products in another country, it can typically defer the income from the sales on the corporate tax return until the company makes dividends on the sales.
 
For more guidance and advice on the business opportunities available offshore, please click here to contact Nagel & Associates.

IRS Circular 230 Notice:The Statements contained herein are not intended to and do not constitute an opinion as to any tax or other matter. They are not intended or written to be used, and may not be relied upon, by you or any other person for the purpose of avoiding penalties that may be imposed under any U.S. Federal tax laws or otherwise.