Offshore Finance Entities may be options for Forex Investors to Consider.
Offshore Finance is in the process of being disrupted, but it should not discourage qualified Forex Investors from forming an entity. There are choices to consider in the industry's present form and positive potential in the future as well. Forex can technically include Cryptocurrency investors as well since it is a part of the currencies market as a whole. What are the options that Forex Investors have? It depends upon their home country jurisdiction, choice of offshore jurisdiction, patience, their own goals, the amount of money that they have to invest, their connections and the legal advice that they receive.
Before forming any offshore entity, seek out a legal and tax professional in your home jurisdiction to ensure that you play by your home country's laws. Your home country is likely to be more draconian.
Offshore Finance Option #1: Offshore International Business Company
This is the standard, basic company. It's not really any sort of a special entity other than the fact that you will trade under this entity and you would be taxed at a corporate rate. You may receive institutional treatment by brokers in the future rather than be subjected to typical retail FX restrictions.
You will have a company and you will have an offshore bank account. Really basic option that suits most thinking of jumping in and going in this direction.
Offshore Finance Option #2: Offshore Captive Insurance Company
This will eventually be the topic of a separate article eventually, but a captive insurance company is a good option for small and medium-sized businesses looking to retain risks, reduce taxes, amass wealth, and even cover for more unconventional sorts of risks. Forget a Lloyd's policy, captive insurance may be a better option.
FX Trading with a small percentage of the funds can take place after a few years of the offshore captive insurance company showing that it is healthy and withstanding claims (or no claims have come up). There is room for alternative investment in a portfolio for a captive insurance company, but most holdings will ultimately be liquid and conservative. The risk element from a small percentage can go a long way though. Small is best described as 5% or less.
Have a mature captive insurance company in an offshore jurisdiction? The more likely you are to have alternative investments and a Forex Portfolio may be a consideration for you.
Offshore Finance Option #3: Offshore Hedge Fund
Here's a weird possibility and it involves Freevestor, sorry to be shameless in the plug. You could form your own Offshore Hedge Fund by putting your own capital into the fund along with attracting high net worth investors to invest in the trading pool. You could choose to put a portion of the funds into a Freevestor Portfolio and collect 20% of the returns that you make on your client earnings.
An Offshore Hedge Fund is also a good option for those with their own proven algorithms. A formalized hedge fund as opposed to a PAMM is able to attract older generations that have more money.
Offshore Finance Option #4: Offshore Bank
An entire series on forming an offshore bank is to come and there are multiple paths to getting there. Some of the options actually involve formalized banks and others may be different Non-Banking Financial Institutions with the same capabilities as a bank.
Why form your own offshore bank?
- Depending upon how you use it, there are tax advantages.
- Make the rules with the bank as opposed to the bank making the rules with you.
- The potential decline of the correspondence bank and the need for vostro and nostro accounts.
- Ability to issue out loans, diversify revenue sources and do more than just trade currencies.
- Depending upon jurisdiction, Universal Banking may be an appropriate option.
- Formalizes the business and with limited competition attracts upper-middle class and the well-heeled.
- Enjoy greater privacy.
- Borrowing at lower interest rates than the public.
- Unattractive target for predatory lawsuits in countries that have high taxes, high regulation and litigation.
- It's an ego stroke.
A Forex Investor becomes much more than just a Forex Investor with an Offshore Bank.
The world of Offshore Finance has much to offer Forex Investors, but it is not right for everyone and it is important to perform due diligence before jumping into any decision of such magnitude.