An offshore company is one that is incorporated in a foreign country with a view to reaping the benefits of flexible tax structure and fertile business prospective. Besides this, offshore company formation can provide one with some or the other benefit that an onshore company cannot provide.

With the world becoming a small village and opportunities for easy and quick exchange of information, starting a company offshore has become quite easy. So, it has become a complementary process. The concerned country makes all the necessary arrangement for businessmen to launch a company easily so that they can be benefited from the presence of these companies. On the other hand, companies find it convenient and profitable to form an offshore company and run their business there.

The convenience of operation is probably the most tempting force behind offshore company formation. In an offshore company, the operating restrictions, auditing and accounting requirements and standards to which the business and its employees and directors must adhere to are often far less restrictive than an onshore company. This becomes quite evident when one considers the jurisdiction and the type of business activity to be conducted under the company that is to be incorporated.

However, the most important reason behind offshore company formation is to reap the benefit of reduction in taxation. By incorporating a company offshore, in a low or no tax jurisdiction, one can potentially save substantial amounts of money legally. As a rule, a company can operate tax-free if it is incorporated in a particular jurisdiction, and never derives an income from the local economy.

Simple reporting system is yet another reason that prompts people for offshore company formation. The reporting requirements of an offshore company are far easier than an onshore company. By incorporating a company offshore, one can also ensure higher asset protection. He can position his assets far away from the reach of any potential litigious action. Personal privacy protection is yet another reason behind offshore company formation. In an offshore company, the personal information of directors or shareholders is exposed less than it is done in an onshore company.