Three Mistakes to Avoid in Setting up an Offshore Forex Company

Sept. 21, 2010 - PRLog -- There are three basic mistakes to avoid in setting up an offshore Forex company. These mistakes have to do with the initial choice of an agent to assist in the matter and the choice of jurisdiction. The other mistake is neglecting to put sufficient planning and expertise into how the day to day operations will be run and an eventual exit from the business. An offshore Forex company can be a very profitable undertaking in a world where trillions of dollars in currency are traded every year. Considering that the Forex company earns commissions and fees on every trade it is often more profitable to be a Forex broker than a Forex trader, so long as you avoid the three basic mistakes.

1) The first mistake to avoid is picking the wrong agent or advisor to set up an offshore Forex company. There are lots of jurisdictions and lots of agents. Unfortunately many agents only deal in one jurisdiction and only provide a limited number of services. The individual wishing to set up operations in the most advantageous jurisdiction using the most advantageous collateral offshore solutions will want to deal with an agent who can and will work across borders. Avoid getting pulled into a ring of associates who only refer to each other to the exclusion of other and better choices for the client, you.

a) Typically an offshore Forex company is owned by another offshore entity such as an international business corporation, offshore trust, or offshore foundation. It is common to use a mixture of these vehicles to assist in developing the asset protection and privacy features that offshore businesses typically enjoy. Dealing with a company with the ability to work in several jurisdictions, the willingness to do so, and the expertise necessary to devise professional solutions is crucial in avoiding the first of three common mistakes in setting up an offshore Forex company.

b) In the vast majority of business operations there is no reason to “reinvent the wheel.” That is, there are common business practices, computer software, accounting practices, and other customs in all nations. Having a competent and trusted agent, when starting an offshore Forex company, will speed the process, save money, and put the business on the path to ongoing profits. Dealing with an agent only interested in gaining money from referrals to the same associates in the same limited jurisdiction is a bad mistake.

2) The second mistake that those setting up a Forex business offshore all too often make is not spending the time and effort necessary to pick the most advantageous jurisdiction. There is no single “best” offshore jurisdiction for an offshore Forex company but there are many that vie the dubious distinction of being the worst choice. Among the “best” choices the individual or corporation will wish to investigate a number of issues in choosing where to set up business.

a) One of the reasons individuals and corporations set up businesses offshore is because of tax advantages. Tax advantaged jurisdictions typically do not subject the business to double taxation providing that the offshore Forex company does its business outside of the host country. In constructing a list of possible jurisdictions for an offshore Forex company the business owner should start with listing the most tax advantaged jurisdictions.

b) Offshore jurisdictions typically require less paperwork and engage in less onerous oversight for companies that do their business offshore from the host nation. This is the second item to consider and will shorten the list of desired jurisdictions. The person or company setting up offshore should consider not only initial paperwork and complications but just how easy difficult it will be to maintain the business or grow it as more business comes in. Make sure that the local law does not reduce a company’s “scalability” by changing the laws as the company grows and prospers. Consider the matter of paperwork and “red tape” in reducing the length of the list of prospective jurisdictions. Getting buried in red tape when you don’t have to is a mistake.

c) Many offshore jurisdictions offer cheap labor but may not provide the skilled labor force needed for technical operations. In this case the individual or company wishing to set up an offshore Forex company can outsource parts or all of the business activity, depending upon the rules and regulations of the host nation. A big mistake in picking a disadvantageous jurisdiction is getting locked into having to employ a large local staff, even at low wages, and having to deal with complicated labor laws and practices. Consider the matter of where to find the necessary talent and the ability to outsource as needed when further reducing the length of desirable jurisdictions for setting up an offshore Forex company.

3) In can be daunting to set up a business far from ones home nation. Individuals and corporations will leave their homelands in search of better business conditions overseas but can find that “foreign” rules and regulations are confusing and difficult. What is important here is to keep the final goal of an ongoing, profitable business in mind. This brings us back to the initial choice of agent and jurisdiction but leads forward to business scalability, choice of outsourcing versus hiring or growing skills at the home office.

a) An offshore Forex business is potentially very lucrative. Considering that trillions of dollars are traded every year and that every trade means a commission for the broker it is important to think long term and to think big. Although the business may start small it should be scalable which means having scalable computer software, data storage, and banking relationships allowing for the efficient flow of capital and availability of credit at crucial intervals. A growing business can be stunted by poor planning and a growing business can flourish with good long term planning. Don’t make the mistake of thinking small even if that is how you start out.

b) A word to the wise in setting up an offshore Forex company or any offshore business is that such businesses can end up being very profitable. A “mistake” for someone wishing to retire in an offshore location and run “a little business” on the side can turn into continuing full time work. Whatever reason a person may have for wanting to get out of a successful offshore business it is wise to structure the various offshore entities involved so that assets are not lost or dealt with inappropriately in an eventual transfer. Don’t make the mistake of not thinking long term.

# # #

http://userbancorp.com

An offshore formations and banking specialist offering offshore structures, formation of companies, foundations, banks and financial institutions, incl government issued financial licenses.

Mail: geir.holstad@userbancorp.com