Offshore companies are incorporated outside the jurisdiction of its primary operations regardless of the fact that the jurisdiction is an offshore financial center. The offshore financial sector is larger and more pervasive than any individual national economy. It is used by business to optimize tax structures. Currently, more than half of the world's money is offshore. Also internet has opened possibilities for companies to go offshore.

The days when offshore legal entities were for super rich people and large enterprises are over. Offshore legal entities and bank accounts are affordable and easier now. It has created a very strong demand from two new groups of customers. First group includes middle class individuals, who would like to preserve their hard earned wealth by moving their assets offshore. Doctors, engineers, corporate managers, nurses, buy properties and move to low tax jurisdictions upon retirement. Second group consist of middle- and small-size businesses, which conduct business internationally. Import/export companies, companies offering their goods and services online, consulting companies with international clientele are the most frequent buyers of offshore legal entities.

Main reasons why clients set up offshore companies are

• Asset Protection

• Income tax reduction

• Escaping burdensome government regulations

• Estate tax reduction or elimination

• Increased level of privacy

• And Investment opportunities not available at home

Offshore companies have benefits like taxation, simplicity and reporting, legal asset protection, fees, anonymity, thin capitalization, financial assistance and cost of operation.

For legal incorporation of offshore companies, important documents required are Memorandum and articles of association which are fundamental requirement. These articles detail the objectives and internal processes of the company. Another important article is the Certificate of Incorporation, which is issued by the Registrar of Companies and serves as proof that the company has been brought into existence. A registered and licensed agent, who deals with official communications with the registrar, is also employed. There is also a requirement of a registered office of the company, to which official documents are sent and legal notices are received. Shareholders, Directors and Managers -- the legal owners of the company should also be made in order to get the incorporation done. In some cases, even shadow directors are appointed who blindly follow their instructions. In these cases, the courts have considered those instructing the named directors really control the company, and that the named directors merely rubberstamp decisions. Companies managed in this way will be tax resident in the jurisdiction where the shadow director is resident.