Q.  There are many people that view the idea of "offshore" with great suspicion.  How do you answer those people that say offshore banking or the idea of an offshore company is only for the wealthy or for criminals?

A.  You have touched upon the biggest misconception that unfortunately some people do believe.    The fact of the matter is, a great number of people have found that they can use some of these structures and ideas to both reduce their tax burden and offer real protection with regards to law suit or other matters.  Suprisingly enough, it is not that expensive or costly.  In fact, we are talking about less than $ 2,500.  In addition, when we bring the topic of banking into the discussion, clients have the opportunity for a whole new world of investment options, not to mention far better customer service.  American banks treat their customers as if they are doing them a favor, but this is not the case elsewhere.  Why not earn up to 10% or more tax-free on your US Dollar deposits, and get better service in the bargain?  What is wrong with that?

With regards to the "criminal" question, what can I tell you?  My experience working with clients is that these are all hard working average people.   They pay their income taxes, they go to work everyday, they try to lead a normal life, and they are not involved in anything illegal.  And you know what else?  They are also simply fed up and tired.  They are tired and disgusted with the tax system and they are fed up with the legal system.  Some have already seen just how bad things can be, and want to make sure it never happens again.  Is it possible that there are some people involved with offshore structures that may be involved with  "illegal" activities? Sure, that is most certainly possible, but it does not mean it is the vast majority. 

Let us take another controversial topic as an example, ownership of handguns.  Not everyone that buys or owns a handgun is a crook.  Crooks do buy handguns with the intent of committing robbery, but this does not mean that every handgun owner is a crook.  You cannot paint everyone with the same brush, simply because there are a few people out there with ill intent on their mind.  That's like saying, "Drug dealers all use cell phones, therefore anyone that uses a cell phone must be a drug dealer".  How ridiculous is that sort of thinking?

Also, it is very important the you understand something.  It is perfectly legal to set up a trust, foundation or incorporated company.  It is perfectly legal to own a bank account, real estate or investments in another country.  I am speaking about US citizens, but this applies to almost every other country on the planet.  The real issue is that the tax authorities do not exactly like the idea, but it is not illegal.  In the case of US citizens, it is perfectly legal, the only thing is the IRS wants you to report what you have and where you have it so they can hand you a tax bill. Since there is honestly no way for the tax authorities to track what you have once it "leaves town", they are frustrated with people that do in fact have such arrangements, but it is not against the law.  Not yet anyway. 

Q. So, what is the real reason or benefit for someone to move their assets offshore or form an offshore trust or company?  Why would someone be interested in this?

A.  There are two main reasons.   One is of course taxes, and the other is asset protection.  With regards to taxation issues, there are countries in the world that either do not tax their citizens to death, or in the least, they allow for companies to operate in such a way that they do not have to pay local tax on profits or earnings with certain kinds of structures.  In addition, there are many countries that do have a tax code whereby account holders may enjoy bank account interest 100% free from local taxation.  In my opinion, these are the smart governments, because more disposible income equates with more money to be circulated in the local economy.  If we are talking about foreign investors that maintain such accounts, then what you have is a case where there is money in the banking system for the benefit of that country.  Who is the fool here?  The country that says you must pay tax on every penny in interest that you earn, or the country that allows for tax free banking?  The bank wins, the country wins, the investor wins, and everyone is happy.  Who loses? The country that taxes their citizens to death.  If you break it down to the most simple of terms, we can say this is the free market economy at work.  We normally think of a "capitalist" or free market economy with regards to open and free competition amoung companies or businesses.  But what about competition amoung countries for investment capital?  The US is a hypocrite, because they say they believe in the free market system, but they do not like it when the "shoe is on the other foot".  Many countries offer tax free banking as an incentive for investors.  Why not?  The US could change the tax code and offer tax free banking for both their own citizens and foreigners alike, as many other countries already do.  They do not want to. 
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The case of asset protection is another matter, and perhaps even more compelling reason to think very hard about getting your money out of danger.  Let me provide some very real scenarios or examples for you.

I recently spoke to a person from the US that owns a small business.  Very nice guy.  He built up a small business from scratch, he paid his taxes every year, he does all the things one is supposed to do.  Your average normal law abiding citizen that justs want to earn a living and go about his business.  As it turns out, Mr. "K" received a nice little notice from the IRS saying he was being audited.  He thought, "no big deal - I will call my accountant and we will get this taken care of".  What he did not know was, the IRS had frozen all of his bank accounts.  He did not even have enough money to pay his telephone bill because they had frozen everything.  Can you believe it? I can't tell you how may stories I have heard like this.  When I tell people these things, they think it's a "sales pitch" or that it cannot never happen to them.  In any event, the story gets even better, or worse depending on how you look at.  He goes down to the IRS office with his accountant and he gets a "clean bill of health".  They tell him everything is in order.  He had all of his receipts, plus the accountant kept very good records.  Great news, right?

As it turns out, it took him almost two years to get his accounts un-frozen.  Two years after they said everything was fine.  What do you think he did after all of this nonsense was settled?

I can tell you true stories about small businessmen being sued over nothing, homeowners that were sued, people involved in car accidents where the plaintiff simply wanted to make a "quick buck".  It's endless.  I can also tell you about people that sought expensive legal advice and set up family limited partnerships or US domestic trusts, only to find out that a judge somewhere ordered these structures invaded to settle suits.  It is endless and ridiculous at the same time.  The problem is not the fact that someone wants to sue you.  The problem is a legal system that permits someone to present a $ 1 Million Dollar lawsuit for "emotional damages".  One client was sued because the plaintiff claimed they were traumatized by the car accident they had, and as a result could not have sexual relations with their spouse.  You think I am kidding?  You may say that such a thing is ridiculous.  Well, the plaintiff was awarded $ 50,000 of the client's money, all from a "fender bender".  It was not even a serious accident and the plaintiff had no physical injuries.  You tell me.  Is this a legal system that makes sense?  People laugh when they hear stories like this.  But when it happens to them, then they realize it's no joke. 

Q. So people should move their assets to an offshore structure or move their assets offshore to prevent themselves from being sued?

A.  There is nothing to stop you from being sued, but since everything is about money, and not justice anymore, the best way to protect yourself is to get your assets out of reach.  You want to stop an ambulance chaser cold?  Tell him that you are broke, that you have nothing in your name.  Tell him that he has to take the case to Afghanistan, Poland, Italy or "tim-bok-too" because thats where the money is or that's where your company is incorporated.  Most of these guys work for 30% of the "winnings".  You think the person suing you is going to cough up a twenty thousand dollar retainer?  Hell no.  He thought you were an easy mark, and that he could make a quick killing.  Chances are, if he sued you in a US courtroom, he probably could.  He could still sue you and win a judgement, but it's awfully hard to get money from a poor man.  It's also awfully hard to try and get that judgement enforced in a foreign court, especially if it is a civil law jurisdiction where they do not tolerate such nonsense.  Think about it.

What is the specific benefit to a small business with regards to an "offshore" company vs. a Delaware Corp., Nevada LLC or Sub-Chapter S incorporation?

A. The basic premise behind an incorporated company is to seperate the business from one's personal assets, and to possibly gain some tax benefits in the process.  In the US, unless we are discussing a Sub-Chapter S, the profits earned by an incorporated company are taxed twice.  Once directly when the company files it's tax return, and a second time when funds are paid out to the shareholders in the form of dividends.  However, there are a number of tax deductions available to the incorporated company that are not available to the individual.

Even so, why would you keep your money in a country where an incorporated company, a trust, or family limited partnership means nothing?  What I am referring to are some previous lawsuits brought into US courts where judges have basically thrown the seperation of assets "benefit" out the window.  These structures have been invaded to settle divorce, lawsuits and other matters even though the written law would seem to indicate differently.  This is the major problem with common law jurisdictions, and we are now seeing some of this in the Bahamas as well.

Let us take the tax issue.  It is possible to operate your business 100% tax free in another jurisdiction.  You can physically run your business out of a "free zone" in the Dominican Republic, Panama or elsewhere.  If you have an internet business, or any business involved with mail order, or services, such as a travel agency for example - you can operate this business as a tax-free company.  So, you tell me? Where would you rather be?

There is nothing wrong with a US incorporated company, nothing at all.  The problem is taxation, but more importantly it is the legal system.  Namely judges who want to address their own personal or political agendas.  Why is it the same laws are on the books, but all of a sudden now those laws are "interpreted" differently.  What changed?  If the laws are "bad" or should they need to be changed then change them.  But how is it possible that it takes a democratically elected governing body to pass a law, and only one man to throw it out the window.  This is a problem that you will not see in a civil law jurisdiction and why quite frankly I would prefer to incorporate in a civil law country. 

Q.  This brings up another question that I was saving for later.  You made a comment about the "new immigrants" or expatriates.  Are people really leaving?  Why are they leaving? Is this a large "movement" or sentiment felt by many people?

A.  First of all, let me ask a question.  Why would the US congress pass an expatriation tax a few years ago, if this were not an issue?  Politicians are reactive, never proactive.  They only pass laws when some issue comes up or when there is a problem.  To the best of my knowledge, there are no accurate statistics made available publicly with regards to just how many Americans alone are expatriating.  However, someone in the US government must have an idea, or why else even address it?  Why would you feel compelled to tell people they must turn over 50% of their money simply because they wish to "expatriate"?  This is a scare tactic enacted by someone, in this case the government, and my guess is they are very afraid.  If no one is leaving, why pass this kind of draconian legislation?  You did not know about this new tax, did you?  Most Americans are not even aware of it.  It was "slipped in" as part of a totally unrelated bill in congress, also it was never publicized.  Yet there it is.  If you want to formally announce that you are leaving, you may go, just pay uncle sam 50% of everything you own.  Kind of like getting a divorce, no? 

The next question is why? Why are people leaving?  Well, let us start off with taxes.  Two people are working, let us say a married couple.  Each earns US $50,000 so combined they are earning $ 100,000.  That sounds like a good income, right?  After they pay US Federal income come, State & Local tax, Social Security tax, FICA, unemployed and social welfare contributions, what are they left with?  Now they still have to pay their mortgage, car payments and utilities.  Now what are they left with?  What is the biggest monthly bill they have? Taxes.

Now, let us say both of these people loose their jobs.  They go down to file for unemployment insurance and other programs, such as food stamps.  But they are told that they are not eligible for food stamps because of their assets and their previous income.  They have no health insurance, and they are not eligible for government insurance, such as medicare, because they are too "wealthy".  Yet, they have paid into all of these programs with their tax dollars.  They are in a precarious situation.  They both find employment again at the same salaries, but they very much remember their ordeal.  So, they figure out that the largest "tax" or government system payments they are making are social security, unemployment and related government entitlement program payments.  They figure why pay into something that gives them no benefit.  They are not eligible for a number of government programs, and they figure social security is bankrupt anyway.  So, they want to "opt out" of the government entitlement and government "insurance" system with the understanding they are not eligible.  Sounds fair, wouldn't you agree?  They can take this same money and invest it on their own, or at least spend it on things like private medical insurance coverage for themselves.  Here is where we come to the interesting part.  The government will not let you do this, yet they say you are not eligible to draw from these programs when you need it either.  So, is this fair?

Let us talk about lifestyle.  Let us say you are 45 years old and have accumulated at least US $ 100,000 in assets or more.  That is to say, between your savings, your 401K plan, your mutual funds and the equity in your home.  If you liquidate everything, you have $ 100,000 or more in cash.  Now, let us say you are just tired and would like to get out of the "rat race".  Let us say you want to "slow down" and stop working 70 hour a week for someone else.  Can you retire or at least live off the interest from $ 100,000 in the US right now?  Maybe, if you get one of those large television cardboard boxes and "homestead" in a public park.  Not something you want to do.  However, using the Dominican Republic as just one example, you can live off the interest with this amount, plus possibly have a better lifestyle in the bargain.  US dollar investments yield up to 12% and are tax-free.  Peso denominated investments yield up to 24%.  So, with a principal of US $ 100,000 to invest, you could earn the equivalent of US $ 2,000 per month.  With this amount of money coming in monthly, you can rent a home or apartment in a residential neighborhood, you can pay your basic living expenses, plus you can hire a full time live-in maid for about US $ 200 per month.  So, you have the opportunity to live better on less outside of the US or even Europe. 

A.  Of course I do not believe that.  Look, taxes are a necessity in any country to support the functioning of government and the services that any government needs to provide.  Things like public roads, school systems, public services such as water & sewer, police, firemen, all of these things.  The money has to come from somewhere.  The problem is, are you getting what you are paying for as a citizen?  There are basic services that any good government is going to provide it's citizens, and then there is "pork".  The US is undoubtedly considered to be one of the wealthiest countries in the world.  So why are there homeless people in America?  Why are the school systems lacking?  Why are American students behind a number of other countries in math or sciences?  Why is the US government giving away millions of tax dollars elsewhere when there are problems at home?  I am sorry, but I do believe charity begins at home. 

As an example, the US government just saved $ 400 Million Dollars in annual rent payments by closing the bases in Panama.  If you do not want to give it back to the American taxpayer, then give a $1 Million grant to 400 school districts.  Puerto Rico was recently complaining about having a US base on their territory.  What does the US government do? They give $70 Million dollars to Puerto Rico to "keep quiet".  Seventy Million Dollars.  I am not a fan of "socialism" or government entitlement programs, but if you have $ 70 million dollars to "give away", then give it to these people running teenage runaway shelters or soup kitchens.  At least do some good with this money at home.  Puerto Rico?  They do not want to become a state because that would mean that Puerto Ricans would have to start paying Federal Income Tax.  They do not want US bases, yet plenty of tax money goes into Puerto Rico each year.  It's very simple.  Cut them loose.  Let them become an independent country.  Take all this money you are sending to Puerto Rico and other countries, and funnel it back into the US. 

If you think the "system" is working the way it should, and you are happy, then stay.  You don't have to agree with me.  It is your right to disagree with my point of view.  However, if you feel that your government is not doing right by you, and that you not obtaining any benefit, then you do have a choice, and you do have other options.

A.  No country or place is perfect.  Countries and governments are run by people, and people are not perfect.  However, there are governments that seem to have more common sense than the US government or at least a better system with regards to taxation and the legal system.  There are other countries that have even higher tax rates than the US, but the citizens do feel that they are getting their money's worth.  Let us take Sweden as an example.  No one likes to pay income taxes.  This is common around the world.  But, in the case of Sweden, the majority of the middle class at least get something in return for their tax money.  Swedes are all covered by national health insurance, university education is subsidized so every child has the opportunity to attend college at no or minimal expense.  The government has a maternity leave program, whereby a new mother can take off one year from work at 70% pay or whatever the exact figure is.  The Swedes pay a lot of income taxes, but the people paying the taxes get a benefit.  They also complain about the taxes that they pay, but try living in the US.  Find out what a university education costs, and what happens to you when you loose your job and have no health insurance.  The US government will not help you.  They will gladly take your tax money, but you will not get too much help when you really need it.  So, what are you paying taxes for?  To support Puerto Rico?  To support NATO, so the American air force can bomb poor Yugolslavia?  I read somewhere that each one of these bombing raids cost more than $10 Million Dollars.  A 90 minute flight, and $10 Million Dollars goes up in smoke.  You want to drop money from the sky?  Drop $10 Million in cash over Chicago or Philadelphia. 

A.  No, but I do think people should have a right to live where they want and do what is best for them.  The US government is always first in line to point out human rights violations or problems in other countries, yet they do not practice what they preach with regards to their own citizens.  This is what many people in other countries do not see or understand.  They ask me, "Why are all these Americans or other foreigners coming to our country"? "Everyone wants to go to America".  You go right ahead.  I'll see you off at the airport, and stay right here.

You want to know what the real problem is?  No one complains or says a word when the poor people or the unemployed leave.  When the middle class or "well to do" start to leave, then it becomes an issue.  But instead of trying to fix the problem or at least address some of the reason why they want to leave, the government insteads attempts to tax or control them even more.  This is the hypocrisy and "double standard" that exists.  In fact, this is what makes people even angrier because often enough the government takes away another "liberty" or "freedom" in the process.  What I do with my money is my business.  If I do not break any laws and am a peaceful citizen, why do I have to report everything I do to the government?  Why does a bank have to report the fact that I purchased $ 3,000 worth of travelers checks when planning a vacation?  Why?  To catch money laudering?  The majority of money laundering is done through real estate, always has been.  Why don't they shake down "Century 21" or "Remax"?

Most people do not mind paying their fair share of taxes.  Most people also understand that certain controls are needed for some things, such as the customs department reviewing incoming shipments of products to look for drugs.  But there is a limit.  Not everyone is stupid.  Some US judges have gone so far to publicly state that "personal property" and money is not covered under the constitution.  In other words, you as a natural person have rights that are guaranteed under the constitution, but your money does not.  Let me tell you something.  When any government controls the money or personal property of it's citizens, it in effect controls it's citizens.  If they claim the right to put your money "in jail" without a fair trial or through due process of law, they might as well violate your rights and do the same to you anyway.  There is not much you can do without money. 

Q.  Moving on to Banking and the Offshore Industry in General, Many people feel uncomfortable with the idea of moving their money abroad or investing in another country.  How would you answer this question?

A.  Well, these are two different points.  Let me answer the "offshore" question first with regards to an offshore services firm or setting up an offshore structure.  It is certainly true that there are both crooks and reputable firms out there.  The common concern, or the area most people run into trouble with includes:  Nominee Directors & Those firms that want your investment money.
That is to say, some firms masquerade as "offshore services" firms when in reality they want your money.  There are some very good banking institutions and mutual fund companies operting offshore, and there are some bad ones.  Common sense applies.  If someone offers you an inexpensive incorporation fee, but then wants to talk to you about placing your money into their own managed or "in-house" investments, watch out.  A little bell should go off in your head.

There is nothing wrong with using nominee directors for an offshore structure, providing the nominees know nothing about or have no control of your money.  Many of these firms will tell you that you should use nominees in order to protect your confidentiality and perhaps keep your name off of documents for tax reporting or other reasons.  That is all well and good, providing those same people are not also handling your investments as well.  This is the danger and this is where most people have run into trouble.  Our firm does not manage client investment money because we think this is a conflict of interest for a client.  We assist our clients with bank accounts or investments, but we have nothing to do with their accounts.  They control the accounts, they sign the signature cards and they maintain the banking or investment relationship themselves.  If I get run over by a bus in the morning, clients never have to feel "exposed" or not in control, because of the fact is they are in control from the start.  This is the way we think it should be done, because it is the right thing to do for the client.  A client should be able to take their incorporation or other documents and walk into any bank or investment firm on their own, without my knowledge or permission, or that of the nominees as well.  What a client has with regards to money is really none of my business, and that is the way I would want it if I were the client.  Don't even ask me about the net worth of my clients or what they have in their bank account, because I honestly do not know. 

The banking question is another matter because now we are talking about the safety of the financial institution itself.  This is where many Americans get "hung up" on FDIC insurance and to some extent, the premise that it is better to bank in an English speaking jurisdiction.  With anything, make sure you are comparing "apples to apples".  Also, just because a jurisdiction speaks English does not mean that the banking regulations are better or sounder.  Case in point is Montserrat, Nevis, Antigua and a number of other places that support "brass plate" banks.  These are the places where people find difficulties.  You see this bank or investment frm advertised somewhere, but what you don't know is, that the office is a shack somewhere in downtown St. Johns.  Ever been to Antigua?  Take a walk around, off from the main streets.  I found one building, which was basically a barn, with five name plates on it.  "First National something or other Bank & Trust".  The building looked like a shed with rusted farm tools in it.

The majority of problems that investors have had were with so-called "Class B" banks.  These are banking licenses that can be purchased for $ 50,000 or something in that neighborhood.  A class B bank is one that is very restricted with regards to the type of business it can do.  Also, it may not solicit deposits from the general public.  However, many of these "fly by night" offshore banks have been class B banks, whereby the management had solicited public accounts even though they were not permitted to do so.  After a while, they close up and shop and disappear.  So, since these "cheapo" banking licenses are usually available from many of these English speaking Caribbean islands, and places like Vunuatu, just make sure you know what you are getting involved with.

The ironic twist to all of this is, many investors prefer to do business in an English speaking jurisdiction rather than one using another language, because they think the laws are better or the banking system safer.  The fact is, in Spanish speaking jurisdictions such as Panama or the Dominican Republic, it is not so easy to get a banking license.  There is none of this "rubber stamp" banking licenses handed out for $ 50,000.  You need to go through a extensive review process, you need to have a substantial amount of operating capital before you open your doors, plus there are reserve requirements with the central bank.

With respect to FDIC insurance, it is not what you think it is.  Remember the "Savings & Loan" nonsense a few years back in the US.  Remember FSLIC, the "sister" US government insurance program which was meant to protect depositors?  What happened?  How many banks actually failed? Less than 20% of all the savings & loans in the country?  Yet FSLIC could not handle it.  The government had to issue special zero-coupon bonds called "REFCO" bonds, and merge the FSLIC into the FDIC.  Who is paying for that? The American tax-payer, along with the other 5 Trillion Dollars worth of US government debt.  The same people you trusted to run the government FSLIC insurance program are responsible for FDIC.  As a financially sound insurance company, it is a joke.  As a phychological security blanket to prevent people from making a "run" on the bank, it is a huge success.

Q.  What advice can you offer someone interested in setting up their affairs as you suggest or even taking it a step further to expatriate?