The Real Story about Americans Going Offshore by Bowman Offshore Bank Transfers

Reader Question today… An Internet Entrepreneur from the US is concerned about getting sued and wants an incorporation that protects against lawsuit liability, aka asset protection.

I am interested in asset protection I am also just starting out my business and want to do asset protection and plan for tax liability before it becomes an issue. Here is a little breakout of what I have and what I’m planning on doing.

I have some Adsense sites that bring in a small income – I would like to move those off shore (hosting, domain register, Adsense account, etc.) I had some issues with branded sites that cost me a ton in legal bills because they were registered to me personally (stupid I know I bought some domains in bulk and was assured there were no TradeMark or Copywrite issues).

I am in the process of creating some information products and would like to launch them on Click Bank or a network like that, again I want to avoid personal liability I know you can do this with a US LLC or

Corporation but it seems like people are less likely to file a frivolous suit if you are off shore. Are there any issues with CB and say a BVI company?

I am also planning on launching a few eCommerce site selling digital products for now, then drop ship down the road. So I’ll need to do/support payment processing

My concern is the IRS is there any red flag for offshore how do you handle them without getting in trouble or raising any flags?

Going offshore for asset protection purposes is a very intelligent and prudent move. Unfortunately most people only consider this after they are ‘burned’ so to speak. Usually it takes a lawsuit or legal proceeding to wake people up to the reality of doing business. Business is risky, in and of itself. If you are doing business in the US, you are doing business in a developed society with millions of lawyers willing to work on contingency fees.

Going offshore is a great way to protect you from a liability standpoint for several reasons:

Out of State, Out of Mind… I’m Just Plain Harder to find…

Your assets will be harder to find, and will most likely not appear in a preliminary domestic asset search. The way they will be able to find you is by examine your tax returns during a discovery phase of a lawsuit. Ideally you never reach this point because your creditor sees you are offshore and you don’t appear an attractive target because…

Foreign Courts and Laws… You understand? Tu comprendes? Est-ce que tu me comprends?

If someone decides to move forward with a lawsuit, they need to sue you in the jurisdiction in which your legal entity registered. Let’s say you have a company in a Spanish or French speaking country – now they will have to lodge a lawsuit in a different language.

Want to sue me? I’ll see you in Nevis.

Courts in Nevis, for instance, won’t recognize foreign proceedings, and the parasite trying to take your money has to journey to Nevis. When they do, they will be far, far away from home dealing with a lawsuit dealing only with your business assets (and those held in the LLC), and not your personal assets.

Want to Sue Me? Pay For My Lawyer.

For illustrative purposes, let us play devil’s advocate and drag out the lawsuit vignette to its full conclusion. Say for instance a parasite finds your assets held offshore, and the evil person who is suing is so infuriated he follows you all the way to Nevis. Not only does he has to pay for his lawyer, he is also forced to pay for your lawyer, and needs post a bond to file the lawsuit.

A far cry from the US system where lawyers often will take a case on contingency, where there is no money exchanged up front, but they are likely to take 50% or more if successful with the lawsuit.

Fact: You are much less likely to receive a frivolous lawsuit if you set up your business offshore.

No matter what your business, you are far less likely to be sued if you set up in a different jurisdiction. This is because as previously mentioned; your creditors will need to journey to the distant and faraway land to sue you. It effectively places your business outside of the millions of American lawyers and courts.

Make Sure You Properly Transfer Your Assets Offshore

You will want to transfer the intellectual property to the offshore company. The company must legally own the assets – and if you transfer them they must be sold to the company at fair market value. This is complicated tax stuff so I won’t get bogged down on it for the moment, but you want to keep records, and hold paper on these interactions.

Let’s say that you own a series of websites that you want to transfer to an offshore company in Nevis, because you have heard that Belize is the best place for Internet Entrepreneurs to set up offshore.

This means that you need to create a bill of sale to the company, properly conveying the web properties. You’ll also want to have the billing flow to an offshore bank account (so that all parts of the business are offshore) and You should also host offshore, and if you want to take the last step, transfer the domains to an offshore registrar (ie. get them out of Godaddy’s control).

These are the 5 points of doing business offshore:

1.        Websites (property, the business etc)

2.       Bank Account

3.       Merchant Account

4.       Hosting

5.        Domain Registration

Get all 5 points offshore (outside the high liability country) and you have properly structured your business outside your jurisdiction.

A Word on Merchant Accounts

Everyone I talk to about moving offshore has concerns with 2 payment processors: Paypal and Clickbank. While there are some set ups that afford these companies – these are US companies (primarily) that somewhat defeat the purpose of going offshore in the first place. There are literally thousands of different merchant accounts, payment processors, payment gateways etc for all countries, legal entities and so forth.

You’ll oftentimes even get a better deal on rates and keep a bigger percentage of your profits by using an offshore merchant account if you are an internet entrepreneur.

How to avoid red flags and stay on good terms with the taxman:

Since move your assets offshore is completely legal if it’s done for asset protection purposes – the main thing you will need to do is properly report the offshore legal entity, and the offshore bank accounts with the proper forms.

You will have to keep proper records and report all of your earnings and financial information to the IRS each year.

In addition to the company forms (which vary, and you should discuss with an accountant) You should be very careful to file your FBAR forms as well – which is a yearly form filed to the treasury if the cumulative holdings across all foreign accounts exceeds $10,000. This is form TDF 90-22.1

In layman’s terms: if you have more than 10k in foreign bank accounts, you need to file an form called an “FBAR” to Uncle Sam to let him know about your bank accounts.

As long as you file the correct forms (which are relatively easy) and you properly report your income, then you are well within your rights to journey offshore for asset protection purposes. Once you journey offshore you can enjoy doing business in an environment where you can take risks to generate profit, rather than wait in anticipation of the next frivolous lawsuit…

Three of the best places to incorporate offshore:

1.        Form a BVI company

2.       Form a Belize Company

3.       Form a Nevis Company