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What is Incorporation and what are the benefits? Incorporation is
the establishment of a legal entity otherwise known as a
Corporation. Corporations may enter into contracts, open financial
accounts and is generally afforded rights and privileges similar
to a person. Asset Protection and tax exposure reduction are the
two primary reasons that people choose to incorporate, or organize
as Limited Liability Companies (LLC) and Limited Partnerships
One advantage of Incorporation is that it provides beneficial
owners, known as the shareholders in a corporation or members in a
LLC or Ltd. Partnership, the means to reduce their risk exposure.
Shareholders are not personally liable for activities of the
entity. This is referred to as the provision of Limited Liability.
As you are aware, in this litigation oriented society no one is
immune from the threat of attachment of assets; whether it be
through frivolous lawsuits or misguided judgments. Through
incorporation, one may preserve their anonymity, as shareholder
identities are protected in various jurisdictions. Incorporation
provides the first level of asset protection that allows
individuals to form business ventures, expand existing operations
and secure accumulated wealth.
The second main consideration is the effect on tax exposure.
Corporate entities can typically lower their taxable income
through the deduction of expense items involved with the operation
of the entity. A professional tax accountant can provide guidance
as to what is generally acceptable according to IRS guidelines.
Significant tax savings may further be realized by incorporating
in tax-free jurisdictions. For example, Nevada imposes no state
income taxes and The Bahamas does not impose any taxes or filing
requirements for International Business Corporations (IBCs).
PRIVACY & DIRECTORS AND FOREIGN ACCOUNTS
Most jurisdictions require disclosure of the names and addresses
of the president, secretary, treasurer and/or director(s) of the
corporation. While being an officer or director does not
explicitly imply ownership, you as the shareholder may not want to
be publicly listed in connection with the corporation.
Directors for offshore corporations is imperative to the
preservation of one's anonymity. The United States Department of
Treasury requires form TD F 90-22.1 (Report of Foreign Bank and
Financial Accounts) to be filed by all US persons, citizens or
residents, natural persons or legal entities, who have signatory
authority over a foreign bank or financial account. Through the
utilization of a director, your IBC may establish bank and
financial accounts while alleviating you from the reporting
requirements of form TD F 90-22.1. The US Department of Treasury
also requires the filing of said form by all US persons who are
the owner of record on a foreign bank or financial account. The
issuance of bearer shares of the IBC precludes the notion of an
owner of record. Please consult with your tax advisor or contact
NFH for further information regarding reporting compliance through
the use of a Director. At the IL's, we provide
director services for an annual fee for these purposes.
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