So you finally decided to take the plunge into the world of Internet Marketing. Congratulations, you are entering one of the most exciting businesses of the future.
You already know that internet marketing is location independent. You can do it from anywhere. From a beach in Costa Rica, to downtown Hong Kong. As long as you have an internet connection, you are good to go.
But have you started to consider where your business should be based? And why, you might want to consider starting an offshore corporation, right away? Your business is location independent after all. Why does it need to be local?
When you first start your new online business, you are focused on many things. From the products you are going to sell. To your website and Blog. To your social networking accounts.
But, you should also consider where you are going to start your business. Before it is already successful and making you millions of dollars. Because, by the time it is making you millions of dollars, it may be too late to move.
You plan on being successful, right? Well do it right from the start.
Imagine you just produced your first info-product. You studied your niche, you know your market, and you have your big launch.
And it is a success! Let’s say you have a $100,000 launch, just to keep the numbers easy to work with.
Hopefully, you at least thought ahead enough to have some type of a business license, so let’s assume you have a US corporation.
Now, out of your $100,000, you have to pay your corporate taxes. About $40,000. Now, your six figure launch, only works out to be $60,000, left over for you.
But, you need to eat. So, you pay yourself. As a good business person, you leave $20,000 invested in the business, and pay yourself $40,000.
Guess what, that $40,000 is taxed again. So, your real take home is actually $28,000. After all is said and done, you now have $48,000 between your corporation and personal accounts.
Out of $100,000.
Yes, it is a lot more complicated that this in real life. The IRS tax code is something like 60,000 pages. But in reality, this number is actually probably pretty accurate.
In fact, it is probably optimistic. If you are in Europe or Canada, these numbers are extremely optimistic. You will be left with even less.
As bad as this all sounds, it actually gets worse.
So now, you decide that your company is flourishing, so you want to move it offshore. Well, now your business has a value.
Which means, when you want to move it offshore you have another tax. Actually, in practice you are going to have to start a new company. Or at least make a large restructuring.
The company is also going to be a red flag to the IRS and others. You are going to need some very competent legal, and probably expensive council, to try and make the move and keep it legal. Chances are your existing profitable product will never be able to be moved offshore, only new ones.
The biggest problem though, is going to be your anonymity is lost. Everyone knows you have this company. If you are ever sued it will come up. You may still have some asset protection, but asset protection is much stronger if no one knows the company ever had any relationship to you in the first place.
Now, let’s look at the flip side. You start an offshore corporation for your online business now, before it has made a cent. You create it with bearer shares, so you don’t show up as an owner anywhere.
The company makes that same $100,000. But, the company is formed in a country that does not tax income that comes from outside its borders.
That means the company pays no corporate tax. That is a huge savings ($40,000) right off the bat.
You only pay taxes on the income that the company actually pays to you. So, you pay your $12,000 in personal taxes (from the above example) and the after tax assets between you and the company is $88,000 instead of $48,000.
More importantly, you are protected personally. If you are ever sued or a judgement is passed against you, they can’t touch the offshore assets. And, on the other side of that, if for some reason the company ever got sued, which is very unlikely being it is offshore, you are not personally liable. But could be if the corporation was in the US.
If it is done correctly, they are completely bullet proof.
And, if you ever dream of living abroad, in a country with a much cheaper cost of living, you can have the corporation pay you even less. Reducing your tax burden even more.
As a US citizen, you still have to pay the personal tax. Citizens of most other countries, pay tax on their country of residence, not citizenship, so they may get by legally without paying tax at all.
This article is not meant as legal or tax advice. You need to discuss moving abroad with lawyers in your own country. As well as in the new jurisdiction. There are laws about citizens of certain counties owning shares in corporations in tax havens.
But, owing offshore structures and having offshore accounts is legal. And doing it right off the start, is much easier and safer than trying to do it once your company is established and profitable.
If you do it right, you can legally save money on taxes, and more importantly, protect your assets from frivolous lawsuits and corrupt lawyers.
As you making your plans for your new online business, consider setting up an offshore corporation. It is much less expensive than you might think.
If you have any dreams of living abroad or location independent, this makes even more sense. Start making some calls to lawyers in tax and privacy friendly countries like Panama, Belize, Seychelles and Switzerland.
You are in business to make a profit. Structure your business in a way to make, keep and protect that profit as much as legally possible.