Offshore IBC or LLC question

[Jill]

This really belongs in the Asset Protection sub-forum. But I'm paranoid, so I'm posting it here in the Private Forum.

I recently read Bobby's (Global Wealth) blog post about Joe' T-Shirt business. I won't steal his thunder, so you can read it there. I've read about strategies like this for years and always found this concept fascinating, but never did anything about it. So my question is, if hypothetically, one had a business setup like this, but it was a "products" business, how would he go about doing order fulfillment?

Joe wouldn't want to ship his T-shirts internationally, because it would be cost prohibitive, right? So could he contract a fulfillment center Stateside to store and ship the product? His bank, admin offices and servers could still be offshore, right? Could he start his own domestic fulfillment center that would be paid by his offshore company? Or would that constitute "repatriation" of capital?

 

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[andviv]

I wish I knew enough as to answer part of this...

My only comment/question is, this needs two companies, one in US and another one off shore... otherwise I don't see how the strategy would make sense, I just don't get it.

 

[Jill]

Well, as I understand it, the second scenario would indeed require that Joe set up a second, US business which would be paid a fee-per-unit for shipping, handling and customer service. But joe's profits from the sale of his Tshirts, would stay in his offshore acct because his bank is offshore. Right? Or, if he were afraid of getting nailed for repatiation of funds, he could just hire a 3rd party fulfillment company to handle it for him... I think.

Bobby?!?!?

 

[Jill]

...then again, the more I think about it, this strategy may only work for Joe's int'l (non-US) customers?

 

[GlobalWealth]

Jill,
This is a bit touchy of a subject as you need to be cautious about not violating the laws related to transfer payments. Basically, that means you can't create a 'shell' offshore company that makes all the money and the US company operates at a breakeven or a loss. This is a common trick and the taxman is well aware of this scheme.

However, with proper planning, you can accomplish what you are trying to do. Large public companies do this all the time. For example, Hanes sets up a factory in Mexico to make underwear. The Mexico factory is operated as a separate company (corporation) and thus is taxed in its own tax home - Mexico. As long as the profits stay in Mexico, the company does not pay US taxes. If the Mexico company repatriates the income back to the US parent company - Hanes - it would then pay US taxes.

In my hypothetical example, Joe would form a offshore company, like in Belize as the sales agent for any non-US sales of tshirts. Joe could also form a US company for production and fulfillment of tshirts which it would then sell to the Belize company (at a profit, just as it would any other client).

The Belize company could then sell its tshirts around the world and all profits would flow to the Belize corporation. As long as profits stay in the Belize company, there is no US tax due (or Belize for that matter).

The US company would owe tax on the income generated from the sale of shirts to the Belize company, that's all.

It is important to note that the Belize company would need to have no physcial ties (nexus) to the US. To be safe, I would have no US office, no US banking, offshore hosted website and email, etc.

Does this answer your question? If not, let me know.

BTW, if your company (corporation) is valued at $500,000 or more there is an even better option using life insurance, especially if you plan on selling the company. You can basically eliminate all taxation with the insurance option. If this is of interest, we should probably start a new thread. Let me know.

 

[Bond]

It is important to note that the Belize company would need to have no physcial ties (nexus) to the US. To be safe, I would have no US office, no US banking, offshore hosted website and email, etc.

By this you mean we could host it anywhere but the US, right? Or it would be best to have it in Belize? I think hosting there must be crap, if anyone knows something about it, please say...

 

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[GlobalWealth]

By this you mean we could host it anywhere but the US, right? Or it would be best to have it in Belize? I think hosting there must be crap, if anyone knows something about it, please say...

You wouldn't want to host your website or email in Belize. They aren't exactly known for their tech environment. Eastern Europe is a good place for hosting that is cheap and quite good. Australia as well.

Belize is an offshore tax haven and a pretty good banking jurisdiction. Other than that, tourism. But I wouldn't do much else there.

 

[Bond]

You wouldn't want to host your website or email in Belize. They aren't exactly known for their tech environment. Eastern Europe is a good place for hosting that is cheap and quite good. Australia as well.

Belize is an offshore tax haven and a pretty good banking jurisdiction. Other than that, tourism. But I wouldn't do much else there.

Any good hosting you know so we could check it out over there(Eastern Europe).

 

[GlobalWealth]

Any good hosting you know so we could check it out over there(Eastern Europe).

there are lots, but one here in Estonia is https://www.zone.ee/en/. I have no affiliation with them so I don't personally endorse them, but Estonians are some of the most tech savvy people I have ever met.

 

[Bond]

there are lots, but one here in Estonia is https://www.zone.ee/en/. I have no affiliation with them so I don't personally endorse them, but Estonians are some of the most tech savvy people I have ever met.

Thanks. Will check it out.
Do you have any advice regarding this?: http://www.thefastlanetomillions.co...t/26508-online-business-offshore-hosting.html

 

[GlobalWealth]

Thanks. Will check it out.
Do you have any advice regarding this?: http://www.thefastlanetomillions.co...t/26508-online-business-offshore-hosting.html

already on it.

 

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[Jill]

So what if Joe lives in the US full-time. But his llc (or IBC), bank, manufacturing, servers and admin offices are offshore. What options are available to him if he want to sell his Tshirts to US consumers? Can he hire a fulfillment center in Memphis to do distribution for him to those US customers? What else could he do (legally, of course!!)

 

[GlobalWealth]

So what if Joe lives in the US full-time. But his llc (or IBC), bank, manufacturing, servers and admin offices are offshore. What options are available to him if he want to sell his Tshirts to US consumers? Can he hire a fulfillment center in Memphis to do distribution for him to those US customers? What else could he do (legally, of course!!)

The owner can live in the US, no problem. Just don't pay yourself a salary or that could be considered nexus and could reclassify all income as US taxable. Just pay yourself a profit distribution as necessary and keep as much of the income in the offshore entity as possible.

If Joe wants to sell his tshirts to US consumers, there are 2 options, depending on US volume. This is a bit grey areas so I advise caution. If you are just selling 'some' of your items stateside, this shouldn't be an issue. But if you have significant volume in the US, I would open a separate US company as the US sales agent.

 

[Jill]

I think that Joe would want to keep all of his profits offshore so he could invest in real estate, gold and whatever else he found interesting for purposes of diversification.

Thanks for the clarification.

 

[GlobalWealth]

I think that Joe would want to keep all of his profits offshore so he could invest in real estate, gold and whatever else he found interesting for purposes of diversification.

Thanks for the clarification.

I am sure Joe would want to keep as much as possible offshore, but Joe still needs to eat and live indoors.

 

[Jill]

Nah. Joe prolly has a real job Stateside. He sells Tshirts for fun money.

 

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[GlobalWealth]

Nah. Joe prolly has a real job Stateside. He sells Tshirts for fun money.

touche