When it comes to company formation, it is crucial to take into account where you wish to register, and whether offshore or onshore is best in fit with your company. It should also be noted that offshore or onshore can refer to different kinds of jurisdictions where you incorporate your company, and they will lead to different possible results in terms of taxes, assets and even privacy. You therefore should get the picture on each and make the right decision. Still uncertain about the differences between offshore and onshore? Take a look below.

Let’s start with what onshore and offshore company mean. An offshore company refers to an entity that is incorporated in zero or low tax jurisdictions, and engages in offshoring activities. In other words, the company is typically prohibited from conducting business in the jurisdiction in which it is incorporated or registered.  In addition to tax benefits, offshore countries, more often than not, offer companies a range of financial and privacy related advantages – i.e., minimal financial and auditing requirements, no monetary control, no obligation for company owners to reside in the offshore host country and many others. What is more, offshore companies normally are required to pay a fixed annual fee.

An onshore company, on the other hand, is an entity incorporated in a country with the sole purpose of doing business within that particular jurisdiction. Also, there will be not any kind of preferential tax options offered to onshore companies, and generally, most companies which onshore are registered in an economically developed country in which they are subject to a fairly high tax rate. One highlight advantage of onshore is that you can minimize hassles of cultural and language barriers.

As seen from the definitions, differences between onshore and offshore companies are obvious. Beside tax rate which is the key distinction between two types of company, incorporation process is another discrepancy that you need to consider. Offshore companies are quite simple to incorporate as compared to onshore companies. The process of offshore company registration does not take much of your time and money to get through, whilst you need to spend more money for starting your onshore company.

Privacy can be an important factor that contributes to your big decision of where offshore or onshore is suitable. Typically, onshore company owners have les privacy than they are in offshore host countries. This is because all information of beneficial owners and of the onshore company must be disclosed. By contrast, offshore jurisdictions are more likely to offer a high level of privacy and confidentiality which onshore companies do not have.