Most smaller companies should not be looking to incorporate offshore. First, if it’s for tax purposes, you are likely to substantially raise your odds of getting audited by the Internal revenue service because there are many of offshore tax techniques that are not legal.  If you are a U.S. resident and earn money from an offshore corporation, you are obligated to pay income tax in the U.S. on that income. Attempting to hide it in an offshore corporation will likely be considered tax evasion.

If you’re looking to incorporate offshore for liability protection, there are various significant issues.  First, in order to safeguard assets, you will need to move the assets into the offshore corporation which could most likely involve moving them to the offshore country or location. There are plenty of horror stories about individuals losing their property in offshore companies.  You’ll need to be cautious about who you trust and who you do business with. Next, you will be dealing with laws from yet another (offshore) legal system that could be considerably different than local corporation laws or U.S. laws that you are used to.

In most instances, the risk and effort in creating an offshore corporation, will outweigh any potential benefits you might receive.

In some cases, an offshore corporation or LLC might be justified if the business person is familiar with the laws and knows the people they will be working with.  It might make it more difficult for creditors to find or locate assets if they are held offshore or are owned by an offshore company.  This possible benefit must be weighed or compared with the potential dangers discussed above.