The following article was sponsored by Nomad Capitalist
The location independent business has become popular among globally-minded entrepreneurs for a reason: working while traveling the world allows you far greater personal freedom than just staying in one place.
Being born in the United States doesn’t mean you should live there your entire life. If you’re treated better in Poland or Romania or Thailand, it only makes sense to go to the place that you like the best.
I’ve consulted with a lot of location independent entrepreneurs and one of the biggest disconnects that I see is that business owners who choose to live in a place that treats them well often afford the same benefits to their company.
There are some great tax and business strategies that many expats don’t even know about.
If you own an internet business or some other company that allows you to work remotely, there is likely no good reason to have your company based in the United States.
Just as you wouldn’t throw a dart at a map to decide where to live, you shouldn’t just make “the default choice” when it comes to setting up your company. Starting an offshore company is a good idea for many e-commerce, internet, drop shipping, and other global businesses.
The benefits of an offshore company
Here’s the good news: you don’t have to be rich to go offshore, nor does your company have to be huge. Even if you’re not a “baller” yet, you can still take advantage of the benefits of an offshore company without spending a fortune.
I imagine that for many online business owners, the prospect of having a corporation in Hong Kong or Malta or the Cayman Islands seems a little crazy, but it’s no crazier than moving to Thailand for better weather or dating a girl from a different culture.
The barrier to entry to starting an offshore corporation is lower than ever. You can set up an offshore structure in as little as one day, and open a bank account without even leaving your home in some cases.
In my work helping entrepreneurs save on taxes and optimize their business practices, I frequently explain five key benefits of using an overseas business structure over a domestic one.
Whether you are currently doing business as a sole proprietor or you have an existing domestic company, it is possible to move your business operations offshore. Let’s explore five major benefits of doing business offshore.
Reason #1: Tax Benefits*
If you’re reading this, you no doubt already believe that living overseas affords you a much better lifestyle than slaving away in the United States. From the cost of living to personal freedom to dating opportunities, life outside of the US is simply a better option for most of us.
US citizens have the distinct disadvantage of having to pay taxes even if they live in another country. The only “opt out” on paying US taxes is to renounce your citizenship. However, if you already live overseas, you can easily qualify for what is called the Foreign Earned Income Exemption.
In simple terms, the FEIE allows you to exempt just over $100,000 in income from US income taxes each year merely by spending the majority of your time outside of the United States.
If you earn less than $100,000 and do business in your own name, your entire income could be exempt from income tax, but you’d still owe Social Security and Medicare tax of 15.3% on the entire amount.
However, there is a loophole: using an offshore company and paying yourself a salary allows you to exempt yourself from most Social Security taxes as well. Even if you earn $50,000, you could save as much as $7,650 per year if structured correctly. Even when you factor in the cost to get your offshore company started, you’d break even in a matter of months.
But what if you earn more than $100,000 each year? An offshore company can potentially help you save even more money. It’s possible to have your company pay you a salary of $100,000 or less and keep any additional profits as “retained earnings.”
Let’s say you run a drop shipping business that nets $200,000 per year and you outsource some of the work. It would probably be fair to assume that you could hire someone to replace you in that business for a $100,000 salary.
Using that assumption, your offshore company would collect all of your profits and then pay you a salary that was exempt from US income tax. The rest of the money would remain in your company at offshore tax rates as low as 0%.
We had a client earning $500,000 a year in a “Four Hour Workweek” style business that was able to reduce his effective tax burden to almost zero by using this system. Your situation may be a little bit different, but the principle is the same.
Basically, you are in control of how your money is taxed and at what rate.
You’ll note that I titled this section “Tax Benefits*” with an asterisk; while the law is clear, it’s always a good idea to get a review of your specific situation to make sure you stay out of trouble. That’s why I offer to bring in a real US tax lawyer to help all of my US clients.
Going offshore is NOT about breaking any laws or hiding, but rather working within the little-known benefits the law allows.
Reason #2: Greater Control
It’s only natural to think that you should set up your company where you live. And in some cases, that makes sense. For example, I know a lot of business owners in California that start Nevada companies thinking they’ll save on taxes. The reality is that a Nevada company rarely offers the tax benefits people think it does.
If every US business was able to merely set up a Nevada or Delaware corporation and then do business in a high-tax state, there would be no California companies. US companies are subject to US tax law no matter which state they are in.
However, an offshore company offers certain advantages that a domestic company doesn’t. For example, Hong Kong companies allow for much more liberal tax deductions. A US LLC or corporation might not allow you to deduct a fancy dinner for a client, while a Hong Kong company would.
Many offshore companies allow you to invest in assets like real estate that US companies don’t allow for. In this way, you maintain maximum control over your company and keep as much money as possible for yourself.
Reason #3: Asset Protection
One common misconception about offshore companies is that you can live in the United States, run all your money through the British Virgin Islands, and pay zero tax. That’s false; US residents always pay tax on their worldwide income, including from foreign companies.
Unless you run a large company with a lot of employees, the most significant tax benefits of an offshore company are had when you as the owner live outside of the United States.
However, offshore companies offer an additional benefit besides tax savings: asset protection. Most US companies protect your assets like a two-foot-tall mesh fence protects your home from trespassers. In the United States, a new business is sued every few seconds.
Basing your company offshore can protect you from frivolous lawsuits. If you run a business that sells physical products, you may be at risk for being sued at some point. And as you may know, US courts tend to favor teary-eyed plaintiffs over “greedy” business owners.
By incorporating in a country like Nevis, you build a fortress around your assets. Rather than being sued in California where any judge would practically help the plaintiff carry the bags of your money out the courtroom door, you would have to be sued in Nevis where plaintiffs are required to post a $25,000 bond.
Additionally, many offshore jurisdictions require plaintiffs to actually pay their own lawyers in advance as well as pay the legal fees of the party that wins. “Pay only if you win” lawyers don’t exist in these places, which significantly reduces frivolous litigation as well as unnecessary legal costs.
Reason #4: Less red tape
I’ve talked to hundreds of entrepreneurs from the UK to Thailand to Ghana, and almost every business owner with a company in the “first world” has a story about some hassle created by the local government.
From having to keep every receipt, to filing complicated tax returns, to the expense of paying tax, US and European companies come with a lot of hassles. Offshore companies do not have many of these hassles.
Companies in jurisdictions like the British Virgin Islands, Nevis, Belize, and Seychelles, no annual filings are required. You don’t have to keep receipts or file annual reports. That’s not to say you shouldn’t know what’s happening in your company, but at least you won’t have the burden of silly paperwork.
Reasons #5: Global Mindset
If your business only sells to customers in one country, you’re likely missing out on a lot of business. This is another mistake I see many entrepreneurs make: they physically move themselves to somewhere in Southeast Asia but continue to sell to customers in only one country.
No doubt, this business model can be very effective. But when you consider the idea that “there’s always a bull market somewhere,” doing business globally can make a lot of sense.
For example, we’ve found that customers in emerging markets are far less price sensitive than customers in, say, the United States. The best market for your products and services may be one you haven’t cracked yet, and having an offshore company will help you build an even more global mindset.
How to Get Started
I’m not an attorney or an accountant, and all of this is basic advice. It may or may not apply to your specific situation, and I can’t stress enough that you don’t want to go into this without the proper preparation.
I know too many guys who called some shady “lawyer” they found on Google only to be told that setting up a company is “easy” and “tax-free.” And, done correctly, it may be. However, US citizens are at a huge risk for government fines and even jail time if they don’t set up and report their offshore business activities properly.
If you’d like to discuss your business and find ways to legally reduce or eliminate your tax bill and enjoy the other benefits discussed here, I can help you plan a strategy and then do the “dirty work” of implementing a structure.
If you have a small business selling digital products, a simple one-company structure with two bank accounts and an offshore merchant account may be all you need.
If you sell stuff on Amazon, you may need a hybrid structure that involves a domestic company and an offshore company.
And if you run a large enterprise with employees around the globe, chances are you may need a more complicated structure with money moving from country to country.
You’ve seen companies like Google use set-ups like the now-defunct “Double Irish Dutch Sandwich” and Cayman Islands companies to pay very little tax, but the reality is that there are solutions for a small business earning $50,000 per year as well as huge multi-national companies.
Our team is well-versed in the issues US citizens deal with when going offshore. If you’d like to apply for a free consultation, click here to learn more.
Gregory Diehl is a world traveler and lifestyle entrepreneur who splits his time between Kuala Lumpur, Malaysia and Vilcabamba, Ecuador. He can be reached here.
When all of this rhetoric about making “the big evil 1% pay their fair share” actually finds its way to law, it only encourages businesses to operate and bank outside of the country.
High tax, big government advocates actually chase businesses and wealth out of their countries.
Pretty much. That’s a big reason everything says “Made In China” nowadays. Companies have taken the path of least resistance and moved their production overseas. Would love to see the effect of 0% corporate tax.
This is why they want to bring everyone under the United Nations one day. If they can place high taxes on business’s everywhere in the world, no one can run. Or make money. Except for the government of course.
Watching the EU disintegrate these days (while the Germans bankroll it all), the OWS (one world socialism) would be the same end.
Human nature never changes.
It would also help if this country knew how allocate and use money instead of implementing socialist welfare programs that throw money away on keeping the lazy and stupid buying new iphones.
But dem poor people need der Obamaphones!
The poor in Asia and Africa alleviate their poverty by opening family businesses.
The poor in America ironically complain how hard they have it and collect welfare.
I volunteered on Skid Row this past summer and and most of the homeless were rocking $300 IPhones, $300 Air Jordan shoes, and nothing but name brand clothes-all paid for by welfare.
I truly believe welfare was instituted to create a permanent caste system- the recipients being the under class, the working class who pay into it, never allowing them to accumulate wealth to challenge the upper caste (the politicians, lobbyists, and bankers).
The social welfare model is promoted by the World Bank and the IMF in all of Latin America. Argentina is the regional model. Small businesses are financing the state, the top of the pyramid just enjoy profits.
Sad thing is that doesn’t even surprise me. I know a farmer who’s majority of his workforce consists of mexicans. They all quit on the same day and when he asked them why they were all leaving they said they were going on welfare. It’s fucking disgusting what this country has been reduced to and the sad thing is that the people who work the hardest and sacrifice the most, the regular working class people who are essentially responsible for making the country run are the ones being exploited and taxed into oblivion to fund all this bullshit. Its going to get ugly when they start waking up and realizing whats going on.
I’m in the lower class; my parents haven’t worked in over a year due to cancer affecting my dad (it’s fading luckily), yet we never did qualify for welfare despite our situation. I believe this is because a lot of lazy people have taken up the majority of space in welfare spots. However, my family is very hard working, especially my dad, who essentially grew up in a crummy street with Italian immigrant parents. He’s back to work now, and we will rise again to a higher standard of living; he said he’ll work until the day he dies if he has to.
Welfare wouldn’t even be needed if it weren’t for corrupt politicians and lazy bums. Despite what some say socialists are definitely not friends of the working people. Capitalism is the most just, I can say at this moment.
I live in Canada, and in a city named Belleville, a short man walks around an intersection area every so often for people in their vehicles to give him change, even though he’s already on welfare; by the way, he lives in a house and has a vehicle himself.
Ahh, this whole socialism crap (not all of it is crap, I suppose) is just feudalism evolved. The peasants would revolt against the high taxes kings placed upon them, only for the nobles to gobble up all the taxes while the peasants remained in poverty.
I’d rather a bunch of businesses competing with each other to give us the highest standard of living to make a profit (capitalism) than one big business that has no competition, no restrictions and doesn’t care as much about how much hell people in the lower class (me) go through.
Tax is theft. The midieval Plantagenet dynasty levied a 15% tax on their peasants to enforce loyalty to the crown. Most Americans today pay 33% of their annual income to government. Let that sink in for a moment.
My retort to the “But without tax, who will pay for the roads???” question:
Before Income Tax was imposed in 1913 as part of the Federal Reserve Act, we had roads, colleges, airports, railroads, automobiles, a powerful military, and an electrical grid that were all the envy of the world-paid for by voluntary free market forces free of tax.
Agreed. Most of our current taxes go to pork spend and welfare.
The only time weve been debt free was when Andrew Jackson ended the central bank in 1832.
I laugh when I hear politicians say they’re going to pay off the debt using tax revenue and printing new money because that’s what caused the debt to begin with.
Actually, welfare is a relatively small portion. The military takes the largest bit (misleadingly ‘veterans benefits’ are reported seperately), and this is underreported because of the off-balance sheet financing of the current war(s) and the fact that some military retirement and benefits are lumped in with all federal pensions. Health care is the #2 expense. Interest on the federal deficit is #3 and will be growing exponentially until it takes over the top spot.
Slash those three categories and you’re looking at a federal budget about 1/4 to 1/3 what it is today, and that’s without reforming the IRS, getting rid of bloat, slashing corporate or individual welfare, bailouts, etc. Do all that and you could easily run the same effective government we have today on 10 to 15% of the budget. Not to mention the productivity gains the country would see when people started working harder, paid for their own housing and health care, etc.
http://billmoyers.com/2014/04/14/the-surprising-truth-behind-tax-day-where-your-taxes-go/
Good points. I would personally argue that veteran’s benefits would fall closer in line to the welfare/Social Security side, but in the end that really doesn’t matter either way. Some things we should cut completely out just entirely on principle, such as sending billions of dollars to other countries; especially the ones that hate us. #3 on your list is the most deadly. Once the interest reaches the point where we can no longer pay anything to the actual principle, we’re fucked.
You link to a leftist front group as your source?
“The founder and current president of Campaign for America’s Future, Robert Borosage, first registered the organization in 1990. The organization did not reach non-profit status until 1994 and formally launched in 1996. At its launch, the Campaign for America’s Future boasted 130 co-founders representing a multitude of liberal and progressive organizations”
Most of the Budget goes to Social security, medicare and welfare.
http://www.google.de/imgres?imgurl=https://upload.wikimedia.org/wikipedia/en/c/ce/Fy2010_spending_by_category.jpg&imgrefurl=https://en.wikipedia.org/wiki/2010_United_States_federal_budget&h=628&w=870&tbnid=yRAG0A71Jn_mSM:&tbnh=90&tbnw=125&usg=__XkimCjko1hymPCtQuaS2yn7yqpo=&docid=0F8s0Qv5DE76OM&sa=X&ved=0CCIQ9QEwAGoVChMI9Oeqj4i2yAIVxOwUCh14mAF9
Nice try.
The discussion above was concerning the US income tax. Social security / medicare is one of the largest gummint expenditures but it is financed by its own separate tax (called FICA). Numbers vary from source to source, but the overall figures are similar. The white house even has their own, if you think you can trust it.
https://www.whitehouse.gov/2014-taxreceipt
I take that back.. the google source posted shows interest on the debt at 4.6%. Every source I’ve seen lists it at 9% or higher. Whether Left wing, right wing, or ding a ling, that’s a bogus number.
Yeah but without our income taxes we wouldn’t be able to pay for all our wars.
Yet somehow we’ve spent a couple of trillion in the Mideast without raising taxes, when we were already running budget deficits…..
Yeah, it’s called debt.
Yes they use the inflation tax now.
…and tariffs, but these days the bankers feel that putting tariffs on Chinese slave labor products is a bad thing that violates “free trade” /s
You know, I think a lot of people believe that peasant revolutions were leftist rebellions against far-right kingdoms, but I’d actually say it was the other way around politically.
Like modern progressives, the kings would demand heavy taxes (eg. poll taxes) from the peasants for the “better” of everyone, yet the kings would keep most of the taxes for themselves while the peasants lived in poverty. Of course, peasant rebellions have happened to combat this system, sticking the heads of nobles on pikes (although they would ultimately lose in the end).
I’m in the lower class (my family could qualify for welfare), and my conservative stance against heavy taxes tells me that it’s just the same situation it’s been throughout history; kings/lefties have been beating their chests about how they’re for “the people”, but in reality they just want more support for themselves.
The peasants may have lost those battles (the main powers were against them, as they are against us today), but we may still have a chance to turn back to capitalism. Not all socialism is bad (socialized healthcare in my country, Canada, is the reason my family can afford medication, although with more unrestricted capitalism we would probably be in a better place and able to afford those medications anyways), but a full system of socialism is essentially feudalism evolved. You’re not alone, brother.
I do all my Kratom production in Thailand. It is easier to harvest the necessary orphan tears.
Absolutely. Now where is krantom guru Mike Chang?
“If you own an internet business or some other company that allows you to work remotely, there is likely no good reason to have your company based in the United States”
Dumbest fuckin thing I’ve heard. Wheras wasteland USA sucks ass with regards to quality of life and decent females, but for the time being it still is good for business. The dollar is still the world currency, getting incorporated and up and running is a pretty quick and easy task. The markets are set up for payment receiving and sending.
Only if one is stinkin filthy rotten rich can one establish all the stuff you write about, not likely to be any of us here.
Can you at least advise on how to become independantly wealthy selling Krantom and time shares?
You didn’t read the article I take it?
I did and I’m not buying what you are selling.
Dodge!!!!
The US has a fairly good economy, insomuch as there are ways to earn a decent wage above and beyond the cost of living. However, if you have an internet business, there is zero reason whatsoever to have it based, taxed, regulated, and under the laws of the USA.
American citizens are never exempt from paying federal income tax. If you don’t it’s called tax evasion.
Simply don’t earn an “income” then.. There is nothing stopping a foreign company from funding your living expenses.
Except in Springfield, where they call it Avoision.
Tread very carefully here. Moving yourself offshore is a no-brainer as you have the FEIC and other tax benefits. However, when you move business offshore it’s a new set of complications. Know why you’re doing it and if it’s really worth the extra complication to your life. I’ve been doing this stuff for years in various countries and the best solution in my future is to completely expatriate and renounce my US citizenship to divorce myself from this out-of-control system.
Going offshore is MORE complicated (as in more red tape) f you’re an American citizen or resident alien who gets caught in the US tax filing requirements. Not mentioned in this article are all kinds of tax traps like CFC’s with subpart-F income, PFIC’s and all matter of other goodies buried in the IRS code. And, don’t forget about all the suspicion you immediately bring on yourself for something as benign as having a foreign bank account. Forget to file your FinCen 114 (btw, the filing date just changed) and you’re looking at an possible civil and criminal penalties. Yes, you’ll have to keep up with the constantly changing landscape of regulation –both foreign and domestic — in addition to running your business and investments.
For every company and entrepreneur who’s ventured offshore, there has been a response by Congress and the IRS to find ways to get as much tax if not more out of the perceived tax dodgers. Add in FACTA, whereby the US is telling sovereign nation to report all American accounts and activity to the IRS and you’ve got a real hassle on your hands. Your guberment is trying to turn every bank, and financial house around the world into an agent to spy on your every financial move.
I’m sure this gentleman is just giving the highlights in this sponsored post, but be sure you know what you’re getting into before you take the leap. Screwing up a simple form filing incurs fines starting at $10,000, and quickly goes up from there. So I caution anyone considering this to really plan correctly. Hint, it will cost you some significant money to do it correctly. If you’re spending less than $10,000 to setup your offshore company and business, you better know what you’re doing. Sure, you can form an entity for much less, but do you really know that you’ve set things up the way you want to avoid trouble down the road with good ‘ol Amerika. Foreign attorneys may know the in’s and out’s of their system, but quickly claim ignorance of how their setup affects your US tax situation, which I’ve learned is the most important planning consideration with asset protection a secondary consideration.
Better to just give up US citizenship altogether.
Be my guest!
Not a US citizen personally lol.
Sure you can. However keep in mind renouncing your U.S. citizenship will have no effect whatsoever on your U.S. tax or military service obligations. *Meaning if you owe taxes or trying to evade a draft, it won’t happen.
Before you can renounce, you also must present your personal tax documentation for the last 5 years for audit by the IRS (the FATCA enactments nail you) and ensure there are no court proceedings against you. Ensure also that you have lined up another country that will issue you a passport (unless you want to be stateless and not due equal protection of law) and then you can proceed to pay (it keeps going up) the $2350 to be “allowed” to renounce your US citizenship.
Don’t ask me how I know.
One has no choice if one is to avoid paying taxes to the government in the future.
Sounds easier to walk away in the middle of the night and wake up without any papers in a foreign nation with no real laws and claim amnesia. It might help if you speak a language other than English of course.
Say what you will about the illegal immigrants, they’re teaching us a very valuable lesson, namely, if you refuse to participate in the system at any level, the system becomes powerless against you.
They are effectively making the world a prison planet in this regard.
American expats are double taxed on income earnings– I think we are the only ones.
Some countries (one I am currently in) put people away longer for tax evasion than they do murder. It lets you know their priorities.
Depends on the country you pull that with.
“..refuse to participate in the system at any level, the system becomes powerless against you.”
Yup. The system will have to resort to violence at some point or it will cease to exist. Which is why I don’t lose much sleep when DC announces another royal decree. Let them enforce it. We won’t comply.
See you on the barricades.
You know because you are John Gault. And divorcing the evil, money spending whore known as Aunt Samantha (aka Uncle Sam) is as difficult as divorcing your whore cheating wife in a community property state. Sometimes, she’s even more so difficult.
Yes, you must file that form 8854 to certify your tax filing compliance. Forget to do it or can’t certify and you’re stuck paying tax for another 10 years after you renounce — after you’re no longer a US citizen! There are other circumstance under which you’ll still be expected to pay tax (aka alimony) to Aunt Samantha after you divorce her ass (make a lot of money or have a lot of assets when you renounce). And the day you renounce she’s going to take an inventory of everything you own on a mark-to-market basis and figure out what part of that is her’s. You’ll have to cash her out and forfeit her “fair share” at that time, whether you have the cash in the bank or not.
It really just like divorce, but you’re divorcing a 1000 lb gorilla that can and will make your new life difficult for years to follow.
Not a divorce. More like a slave trying to leave the plantation (even after you paid off your cost of purchase).
Any expat reading this, if you ever plan to go back to the US I would advise you to talk to a tax attorney before you set back up residence there.
YMMV. I’ve considered doing it. But it comes a a great deal of hassle in and of itself. There are easier ways to accomplish the same thing.
We all have our own metaphors. Having gone through a divorce, the planning was very similar to protect my income assets and future income and assets from grabby hands.
Galt is correct. After you’ve expatriated and return to the US for more than 30 days, you’re back in the IRS tax trap . They’ll consider you a tax resident for the entire year in which you spend more than 30 days in the country (includes territores as well I believe, e.g. Puerto Rico).
My foreign contacts who I do business with are very careful to count the exact number of days they are in the US, even if it’s just connecting through a US airport to reach another country like Canada. Spend too many days here and even foreigners get caught in the tax trap.
It’s a beautiful system we have here, yes?
There are choices left. But they are becoming fewer each day. Ultimately, men of independence will produce nothing that can be taxed in an effort to starve the beast. Then we’ll see the beast for what she really is — a demanding and violent girl who will force men into slave labor to pay her way.
We travel in the same circles of amigos. I think one of the reasons the feds love to fuck over expats is because we have no political leverage to speak of. We are considered “fat cats trying to evade our patriotic duty (of paying US taxes on top of foreign)” despite the net income you and your family are attempting to live on after all the deductions and local cost of living. The system is evil.
Ha ha. Yes it’s Aunt Samantha now for sure. Old Sam pulled a Caitlyn on us and the gynocracy is entrenched. Watch the productivity plummet.
Keep a dress or two in the closet for when you might need to claim that you’re ‘transgender’ in which case you will be treated like royalty and possibly get a monthly stipend just for being a degenerate.
That’s four paragraphs detailing tyranny.
I 100% disagree with your last paragraph.
Remove the social safety net, and these people would be forced to integrate into society and find a job.
One thing I enjoyed living in the third world (Africa and Asia) is that there was no entitled underclass that sat idle.
The poor set up family businesses to climb out of poverty.
Rent prices! People without a top notch education don’t earn shit anymore. Why going to work if you can’t afford your life with it?
Nobody should pay more than 25% of his hard earned income just for a shabby roof over his head, that’s not okay.
Today’s real estate owners act like the old kings. Taking all the money from the mob they can get. More and more and more until the whole system crashes.
Greed is one of the seven deadly sins.
Until the 1950s a man, with a standard job, was able to earn enough money for himself, his wife and up to five children, easily. Try this today.
Be more specific. Virtually everyone owns some property.
I meant real estate of course. Fixed.
Good show.
Owning real estate is too risky for the common man in my opinion. Plus the government knows where to find you. Portable assets are the way to go. Keeps you flexible and allows you to leave the second you spot the heat coming around the corner.
I own property. Have you ever been a land lord? The reason I bought the property is that I saw it as my way out of being one of these other paycheck to paycheck fucks. For now I’m a slave to the bank until I can pay it off. I’ll charge as much for my property as the market allows and get out from under the bank as quickly as possible. Until that day, I own and manage my own properties and I work another full time job. In fact, I’m getting ready to buy more property now (with phony bank money while it’s still cheap). I certainly don’t live anything at all like a king right now. But I hope one day when i get them all paid for and own enough property that I will have a much easier life and a retirement that I can hand over to my kids when I die. The reason I’m working my ass off now is for this. If the people that rent from me and receive some government assistance got off their lazy asses and got a job and improved themselves, they might be able to own, instead of renting from me.
I’d like to add, that most of my renters are great and do have jobs. Just a couple that are on government assistance and don’t actually need it, (ie, would be capable of working mentally and physically.)
People like you are the ones ruining the whole financial system with their cluelessness.
Work your ass off to pay back your debts, whatever. You’re not a landlord, your bank is and they’re laughing about your blindness every single day.
I’m debt free you know? It’s a really good feeling. A feeling you haven’t had for many years, I bet.
My advice? Sell your property and invest in a diversified investment fund.
I agree. Adjusted for inflation, you will need to earn $94,000 in 2015 to equal the average American salary in 1950.
The largest reason for this erosion of wealth is the Federal Reserve inflating the dollar. In 1950, our currency was still attached to gold.
Now, it is worthless and prices continue to soar with every new dollar printed.
Exactly. I live in Asia where 80 year olds are selling shoes on the street and seem happy to do so. The underclass hustles round the clock. Restaurants and shops are open all the time. College girls do all kinds of wonderful jobs to pay for their purses and clothes. In the West, the underclass is treated as a royal, leisure class; chilling in front of the TV, one hand gesturing for cash, other hand flying the bird at the white boys funding their permanent vacations. Fuck it.
$20 trillion debt and 93 Million citizens not working.
Stock up on ammo while you can.
Look how quickly Baltimore was destroyed because an insane guy known for trying to injure himself in police custody for payouts, who just had spinal surgery, broke his own neck in the back of a van driven by a black, after being arrested by a black in a city with a black police chief and a black mayor and a black president….You guessed it!…Racism. Baltimore was destroyed over that ridiculous scenario. Now imagine what happens when those EBT cards are limited and those same obese animals get their first hunger pangs. You saw the destruction resulting from a fantasy victimhood play-acting scenario. Think of those spoiled brats reaction when they have to boil and drink tap water instead of their purple drank.
Expating and off shoring was a great strategy prior to September 11, 2001. After that event the U.S. government strong armed most nations into “mutual agreements” where by the foreign nation would report on and deport expats at the U.S.’s request, and the U.S. agreed not to accidentally bomb the foreign nation into a glowing orange grit.
Almost every single off shore nation folded like a cheap deck chair. Be *very* careful trying this kind of thing these days.
Not quite. It was the FATCA enactments in 2010 by the democrats. If you are expat, you need to read up on that and the implications.
Hint: It isn’t the possible back taxes owed, it is the PENALTY FEES they use to rob you.
I’m not talking about FATCA, but yes, there is that. There were a plethora of “agreements” made pretty soon after 9/11, as I recall reading at the time. Maybe I’m thinking of something different though.
I recall exactly what you are talking about. The UK assisted the US in this. They went after UBS pretty hard as I recall.
Ok. Coud you elaborate?
Unfortunately I can’t, I’m just going off of some reading I did sometime in the mid 2000’s. It’s why I think I may be thinking of something else, however Bob seems to have some recall of this as well.
No problem. I recall mention of international negiotiations ragarding wire taps, apprehensions of suspects and serviellence, but not much detail.
Agreed, I wanted to put some money overseas as a “just in case” emergency plan several years back, and was told by several world travelers and an attorney recommended for this type of transaction that basically due to the Patriot Act that that is no longer an option for American citizens. Banks are now forced to reveal any overseas accounts to the US Fed and if you don’t reveal you are holding money overseas and file multiple paperwork several times in a year you can “forfeit” it all (maybe you lose 50% but still that’s absurd). And this was before FATCA which has gotten most banks around the world to refuse to even open accounts for Americans.
I wonder what would happen if normal people started holding money for others like banks used to, basically for safety and security, and only loaned out money based on held assets, like they used to? No FDIC, no federal monies, no stock/bond trading, just plain old fashioned banks, except truly private?
No doubt it would be illegal in this day and age.
Oh, don’t you know, that person is called a terrorist, a money launderer, an enemy of the state, and is a target for immediate drone striking.
Sure. I actually meant legit though, like putting up a store front type of thing right on Main street. Out in the open. Just don’t call it a bank. Kind of like Credit Unions tried to do. I don’t know alot about Credit Unions, are they basically regulated and controlled like banks now? Or are they somehow different still?
Credit Unions are regulated and controlled, although by different entities than banks are. They are better in almost every way. I am a big proponent of credit unions. Mine pays literally 20 times the interest that my bank savings account does. Basically, everyone with an account is an owner, and the profits after expenses and reserve holding, are paid to the members, not the executives and stockholders. Yeah, that’s a good idea, although I’m sure someone nefarious would magically get caught depositing money there, and then the whole operation would be shut down. Call me jaded and paranoid, I just don’t see the powers that be allowing that.
What about buying a lot of gold, silver, art and jewelry and slowly taking it to your out of the states residency? Is that possible or is that against some kind of new smuggling law? I know it’s a lot more difficult and your risk being robbed. But here you are guaranteed to be robbed anyway.
Yea, they’ve made it very costly to renounce your citizenship…but it’s almost like divorce, maybe better to cut the cord now than later. It’s going to get worse. As the welfare state grows the Dems will grow more powerful and they’ll take more and more of the “wealthy greedy” people’s money in order to buy themselves their benefits. That’s why they’re making it so hard to take your money out of the US with you. The think to consider is, if you can do it now, do you wind up better off in the long run?
I haven’t looked into expating for so long that most of my knowledge is probably woefully out of date. But if I remember correctly, at least at one point in time, if you left the U.S. the Feds still claim your income as theirs for something like 8 years (?) or something like that? The absolute hubris is breathtaking, even the USSR and the Nazis left you alone if you successfully fled their regimes.
Under Obama, a new expat tax was passed, which basically says that on the date you expatriate, all of your total assets are considered as Income, for that year and you must pay taxes on them, even if they aren’t liquid….
That is just fucking unbelievable, that’s pure straight out tyranny.
You can tell they’re getting scared by the desperation of making such a law.
I’m not sure I’d say scared… they’re getting ready to crack the whip and redistribute the wealth and when they start doing it they need to have laws in place to keep people from fleeing with their fortunes. It scares me, especially with the most recent supreme court ruling about targeted taxation. There are many ways around the protections given against unreasonable search and seizure the government could implement and if you can’t get away with your money, they effectively already own it, they just haven’t collected it yet.
“I’m not an attorney or an accountant..,”
So what valuable service are you trying to sell or are you simply an intermediary? How much do you deal with FATCA issues?
I think its probably better just to contact him directly to discuss your personal needs. Fundamentally, it looks to me like he is a business consultant.
Asking for a friend. heh.
Just think of me as a general contractor.
More like a scammer.
Pretty well written article. Makes me wish I owned my own business. I’m in digital technology, unfortunately my name isn’t on the door.
Panama makes it pretty easy to start a business there. Along with it you get a bank account and lifetime permanent residency (with option for citizenship after 5 years). A lawyer to handle it all for you will run about $4k or $5k, and you have to spend about two weeks in Panama City to get it done, though most of that time you’re just hanging out waiting for things to be processed. Pretty painless.
This is terrible advice. What this guy says is true in a way. But it’s what he DOESN’T say that is dangerous.
As a US citizen, creating a foreign company and owning it subjects you to annual rectal exams from the IRS. Penalties for NOT filling out certain ultra-complex forms reporting everything about your overseas entity are $10k a year. That’s right — $10k.
And forget about not reporting your overseas company to the IRS. There’s a little thing called FATCA that the USG is using to strong-arm foreign governments and banks to report financial information on US citizen accounts (Dems love unilateralism as long as it advances their big gubment goals). That includes accounts for foreign entities where the signatory is American. The fact that the author didn’t even mention FATCA strips him of any shred of credibility in my mind.
Also, as an expat the IRS requires you to “voluntarily” report all your foreign bank accounts that had $10k or more at any time throughout the year. If you don’t it’s a $10k penalty.
If you’re married to a foreign woman, one route is for her to own everything. That way you don’t have to report anything. But that comes with its own set of risks.
Bear in mind that guys like the author make money when you use their services to do things offshore. They don’t care about you — they care about their fees. I’m not saying they are dishonest. I’m just saying that they have their own interests which are not the same as yours. Just follow the money.
A word about tax attorneys and advisors — from my experience they are on their side and not yours. They have powerful interest to scare the crap out of you so you pay them more fees. Plus generally they are paid hourly so instead of solving problems they drag them out and/or create new ones.
Do your own research before talking to any advisor. There certainly are times to hire one, but it helps to educate yourself as much as possible before you do.
I’ve found that spending time to research and do my own expat taxes is time well spent.
Spot on. As an US guy this FATCA legislation was the worst thing that could have possibly happened. Brain dead.
This article is valid for the rest of the world. If you are from any european country you can simply keep your passport and live somewhere else and you dont have to report anything to your home country. An offshore entity in a low tax jurisdication makes perfect sense.
Passport from country A, living in country B and banking+corporate in country C is then as good as it gets. Starve the beast and work your passive value up is the name of the game.
As one who’s been looking into the wisdom of starting an offshore company for quite awhile, I find comments like this all of the time. “Forget about not reporting your overseas company to the IRS…” and “…the IRS requires you to “voluntarily” report all your foreign bank accounts that had $10k or more…”
Well…of course. I see these sorts of comments used to discourage offshore companies all the time, but is anyone out there (advisor/accountant/attorney) actually suggesting you NOT report your company or bank account? I’ve found none–even among those advisors I don’t really trust. NO ONE is suggesting an offshore company gets you out of reporting to the IRS or allows you to hide money, but instead that there are several tax advantages for having one. And while I appreciate the strong warnings about the consequences of failing to file properly, isn’t this simply addressed by…ahem…filing properly?
I see and hear lots of caution about the increased scrutiny that an offshore company may create, but I’m not finding any specific examples. This is what I’m most interested in hearing about. I guess the question is, for someone who is very carefully following the rules, is this or is this not possible and thus a good idea?
Sure, it’s possible to follow the rules and stay out of hot water. The big question is “Is it worth it?”
The IRS reporting obligations and classifications related to opening a foreign company are pretty ambiguous, complex and can be costly (in time and money). I spoke to several expat-focused accountants and a tax lawyer when I was considering it. No one gave me a straight answer “Yes, you can do X and here’s exactly how it will work.” They all hemmed and hawed “Well it might be this way or it might be that way.” They still charged me plenty of money though.
I may be wrong, but my understanding of the biggest benefit to having an offshore entity is to use the Foreign Earned Income Exclusion and avoid social security taxes. You are an employee of the foreign company. Up to $100k of salary paid by the foreign company to you is excludable from US taxes with the Foreign Earned Income Exclusion. Since the company paying you is foreign it doesn’t have to pay SS taxes and neither do you. The foreign company has to have an active business, otherwise the IRS may classify it as as a “PFIC” (passive foreign investment company) which will turn your offshore adventure from a tax advantage to a tax anvil hung on your neck.
I recall the tax attorney I spoke to giving me about 30 caveats about everything he said, “the code is unclear about X,” “the IRS may reinterpret the code,” “Congress may change laws.” It was a waste of time and money talking to the guy, and he was supposedly an expat tax expert. Added yet another to the many reasons I dislike lawyers.
Basically my takeaway was there’s no free lunch. The IRS and USG are getting pretty damn good at closing loopholes and squeezing you for tax no matter what you do.
The other commenter had it right — you had better be damn sure what you are doing if you create a foreign entity. Otherwise it’s quite easy to spend time and money and actually create additional tax liability for yourself.
Thanks for your comments, Lucius. Actually, taking advantage of the Foreign Earned Income Exclusion has nothing whatsoever to do with the foreign company. Any US citizen who is living outside of the US (and meets one of the two standards legitimizing their foreign residency) is able to take the exclusion–whether they are a Sole Proprietor or they work for a foreign or US company. So I’d say 3 good motivations for starting a foreign entity are… 1) Not needing to pay Social Security & Medicare (which for those making around 100k or so is $15-16,000.) I won’t pretend to know how SS & Medicare plays out, but do consider it foolish to pay that much money while believing it will be there for you 20 years or more down the line. 2) The increased privacy and greater impediment to lawsuits. And 3) Having a non-US bank account, especially one much better capitalized and for many reasons less risky. I also like the combination of “non US bank” and “ability to spread funds across more currencies than just the US Dollar.”
Crying about people avoiding paying their “fair share” of tax, is like rape victims spending their time hating the one girl smart enough to carry pepper spray – rather than the actual rapist.
High taxes make people miserable. I’m not for complete abolition of taxes though, as they are important to maintain certain services (eg. road ice clearing).
You have to be pretty careful with all this offshore stuff nowadays, cross border anti avoidance is flavour of the month (in case you couldn’t tell) and penalties can be punitive. This article is nicely written but makes the whole thing sound way too simple. Sure you can do offshore structuring cheaply and simply but you risk exposing yourself to a whole heap of problems. Anything involving offshore needs an expert (with proper indemnity insurance) to look at it so you have some protection if things go wrong, and they don’t come cheap.