WHY INCORPORATE OFFSHORE?

Because of the increase of litigation in the U.S., professionals and small business owners are forced to focus on ways to protect their savings, investments and other accumulated assets that may be attractive targets for hungry trial lawyers.

In the U.S. Legal System, the deck is often stacked in favor of plaintiffs and against defendants. Because this observation encourages the filing of spurious lawsuits, the average business owner or professional may be sued several times during his or her lifetime, thereby facing the possibility of being on the receiving end of a ruinous judgment. Failing to properly plan for such a situation can result in the loss of a lifetime's accumulated wealth. Once a lawsuit has been filed, or if one is anticipated, the U.S. legal system will not allow assets to be moved. Therefore, acting now, while the waters are calm is imperative.

FINDING YOUR ASSETS

Lawyers for plaintiffs only prosecute cases they believe will pay off, not cases against judgment-proof defendants. How does a lawyer find out if you have something of value? It's really quite easy to do. Many agencies are available that can provide a detailed account of personal and/or business bank accounts, property ownership, investment holdings, income, savings and other facts that relate to your financial well being. The only hope of getting the plaintiff's lawyer to accept a token settlement is by convince the lawyer that the defendant's assets are truly beyond the lawyer's reach.

CORPORATE OWNERSHIP

You can minimize the chances of losing your assets simply by becoming a smaller target. You can do this by shrinking the size of your estate so that you are no longer the legal owner of the assets to be controlled and enjoyed. This is accomplished by getting as many assets out of your personal name as possible. One of the best ways to do this is by transferring money, investments and assets into a corporation, a legal entity that you control.

A U.S. CORPORATION VS. AN OFFSHORE CORPORATION

Most trial lawyers will inform you that forming a U.S. corporation for liability protection and privacy is not worth the certificate it is printed on. U.S. corporate formation documents are public information, and any decent investigating firm can find bank accounts, investments, real estate and other assets that are held by the corporation. The U.S. corporate veil is routinely ignored and lawsuits are filed against the corporation and any of its beneficial owners. However, by forming a corporation offshore you have a legal entity to hold assets of which only you know the beneficial owner. The information-gathering agencies and services assisting trial lawyers, ex-spouses, former business partners and creditors will be unable to find your accounts and assets, thereby making you a poor prospect for a lawsuit. This is how you become a smaller target.

U.S. JUDGMENTS ARE NOT AUTOMATICALLY RECOGNIZED OFFSHORE

An offshore corporation can conduct any type of business in the U.S. that a U.S. corporation can. You sacrifice nothing by having complete privacy and a corporate veil with real teeth in it. For example, should your offshore Bahamian International Business Company (IBC) becomes involved in a lawsuit, the Bahamian Supreme Court does not recognize U.S. judgments against a company incorporated in its jurisdiction. A plaintiff would have to hire a Bahamian attorney (which would be out of his own pocket, since there are no contingency fees) and try to convince the Bahamian Court to hear the case. Historically, the Bahamian Courts will not rule in favor of a plaintiff if it can be proven that the assets were moved before the judgment was filed. Once the plaintiff sees the uphill battle involved along with the enormous cost out of his own pocket, he may either reevaluate the merits of filing a lawsuit or just settle for a fraction of the settlement he may have received in a U.S. Court. Every year, there is an increase in the number of doctors, professional business people and small businesses who go offshore to lower their liability insurance coverage. This alone can save tens of thousands of dollars each year in premiums. Small businesses also go offshore in order to reduce or eliminate state income (franchise) taxes and to grant them other alternatives to insurance coverage that have become too expensive to carry.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.