• October 2018
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Why don’t all companies incorporate in foreign tax havens?

My answer to Why don’t all companies incorporate in foreign tax havens?

Answer by Raad Ahmed:

Erik is exactly correct in stating it is not always a win to incorporate in a foreign tax haven. In theory, the idea of the utilizing an overseas tax haven may seem more attractive due to how the benefits of such a move are often glamorized due in part to the obvious tax savings but do not consider the incidental costs and risks that are attendant to such a move.

For a startup one of the more compelling reasons to not incorporate in a foreign tax haven rests in the fact that cost to incorporate and administer a foreign corporation is justified in that the normal startup at the time it needs to incorporate is not bringing in revenue so dumping money into a foreign tax haven incorporation really does not make sense. Further, although it is not illegal, per se, to incorporate overseas to reduce tax liability your company will incur a great deal of unnecessary scrutiny from the IRS. Unless you are a Fortune 500 company who could save millions in tax payments, why bother? Further, if the structuring and administration are not done properly legal and financial risk is not justifiable.

If you’d like to consult with a corporate lawyer about more specifics, feel free to check out the LawTrades platform. It’s a marketplace that connects business owners to highly vetted business formation attorneys for on-demand legal work. The process is simple: 1) tell us what you need, 2) connect with a lawyer, 3) pay an affordable flat-fee at the end. Feel free to shoot me a message if you have any more questions.

Why don’t all companies incorporate in foreign tax havens?

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