Offshore Funds: Benefits & Challenges

Offshore Funds: Benefits & Challenges

Due to the ongoing fight against money laundering, banks are facing increased pressure from government agencies of different countries to disclose information about their clients. Every year it becomes more and more difficult to maintain 100% confidentiality by opening accounts in tax havens. So, what's the solution? One of the possible ways of handling this predicament is to register an offshore fund.

Being a more profitable alternative to a trust, an offshore fund is a legal entity registered in an offshore zone & capable of opening & managing bank accounts. Registration of an offshore fund also enables its owners to conduct business with whichever 3rd parties they wish. Another advantage of registering an offshore fund is that information about its owners doesn't appear anywhere; hence, total confidentiality & anonymity are guaranteed.

Please, keep in mind that the main purpose of creating an offshore fund (or an investment fund, a mutual investment fund, a hedge fund, etc.) is to make & preserve profits.

By setting up an offshore fund, you get the following advantages:

  • little or no taxes;
  • quick registration & minimal paperwork;
  • ease of asset management.

Assets managed by offshore funds include securities, bonds, stocks, real estate, collection wines, corporate rights in other companies & more.

Other Benefits of Offshore Funds

Those looking to set up an offshore fund are primarily interested in maintaining complete confidentiality & keeping their assets from being involuntarily disposed of by their heirs or 3rd parties. And that’s exactly what they get. Once their property has been transferred to an offshore fund, they no longer own it, which means that if they go bankrupt, it cannot be transferred to any 3rd parties.

Other advantages of an offshore fund include having to pay no taxes on deposits, hassle-free retrieval of funds invested in an offshore fund & development of public relations (via charitable foundations).

An Offshore Fund: Structure

Offshore funds have a rather specific structure. In addition to having a BoD responsible for making key decisions, they must also ensure the presence of:

  • beneficiaries - individuals benefiting from the activities of an offshore fund;
  • founders - individuals that have made financial or any other contributions to an offshore fund;
  • guarantors - individual exercising control over over ongoing operations of an offshore fund & actions of its senior management;
  • BoD members - individuals responsible for managing an offshore fund & monitoring achievement of its goals.

Those interested in establishing an offshore fund should keep in mind that they won't have to have trustees, participants & shareholders. Hence, setting up an offshore fund will require them to spend much less time & be far more simple.

The most common formula used for setting up an offshore fund is: a management company (in the form of a partnership or LLC) + a fund.

What Jurisdictions are Suitable for Establishing Offshore Funds?

The most popular jurisdictions include the Bahamas, the Seychelles, the BVI & the Caymans. Should you decide to register an offshore fund in the Cayman Islands (or any other of the aforementioned jurisdictions), you’ll need to know every little detail of doing business in this jurisdiction. By enlisting the services of our company, you get the help of highly qualified experts who will analyze your needs & assist you with choosing the most suitable jurisdiction for your offshore fund (e.g. the Caymans, BVI, Bahamas, Belize, Jersey, etc.).

As mentioned earlier, registering an offshore fund in tax havens (e.g. establishing an offshore fund in the BVI, setting up an offshore fund in the Bahamas or creating an offshore fund in the Caymans) provides its owners with a number of tangible benefits. However, it may sometimes cause far more difficulties than it would if you were to register an offshore fund in any other jurisdiction. Please, keep that in mind.

IMPORTANT

Once you’ve taken care of all the formalities associated with registering an offshore fund, you will have to renew its registration annually. Please note that our experts can help you set up an offshore fund and extend its registration.

Looking to register an investment fund in an offshore jurisdiction? Please, consider contacting YB Case by using the Contact Us form on our website.

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