Offshore or Domestic: Which Type of Bank is Best for Your Business?

By Luigi Wewege, the Senior Vice President, and Head of Private Banking, Caye International Bank in Belize.

You’ve opened a small business and want to establish bank accounts that you can use for the operation. While it’s a given that you will have domestic accounts, should you rely on them solely, or would it be wise to have offshore corporate accounts as well?

The decision rests in factors like the nature of your business, where you will seek clients, and what sort of protections and resources you want at the company’s disposal. Compare domestic accounts with offshore accounts in the following key areas, and you will soon have your answer.

Interest Bearing Accounts

It makes sense to have corporate accounts that allow you to generate some amount of interest on the balances. The question has to do with the types of accounts you can open, deposit to regularly, and then not touch unless an emergency comes along. With that in mind, would a domestic savings account be best, or would something like an offshore time deposit account be better?

Offshore accounts are likely to be your best bet if you want to stockpile funds and earn the best interest rate possible. Interest rates tend to be competitive with what you would find at domestic banks. Depending on the minimum deposit policies of your local bank, you could begin earning interest on an offshore account balance even though there’s less money in the account.

The Strength and Stability of the Banking Institution

While some remain convinced that banking institutions in their own countries are stronger than in other parts of the world, that’s not always the case. This sometimes comes from the perception that banking laws and regulations in other countries are less stringent than at home. While that may be true in some nations, it does not apply in others.

It always pays to determine what an offshore bank provides in protections for their customers, individual and corporate. One factor to consider closely is the liquidity rate that the bank requires. You may be surprised to find out that offshore banks require a minimum liquidity rate that’s higher than you will find in your country of origin. In that case, it does make sense to keep some of your financial assets with an offshore institution.

Governmental Rules and Regulations

Governmental rules and regulations vary from country to country. While those at home may work well for you, could it be that establishing bank accounts in another country would be helpful? If you find out more about the banking laws in that particular country, you will have the answer.

In some cases, owning property as an investment will mean having a bank account in that same country. Whether you plan to use that property as a revenue stream or maybe construct a facility there in the future, it pays to know the banking laws that will apply. Doing so makes it easier to manage transactions and increases the odds of achieving the type of return you want.

Policies and Procedures Related to Bank Accounts

Banks in offshore locations will have some differences in policies and procedures. That’s because they must operate under the laws in those nations. The good news is that compliance could create a situation where you and your business benefit.

For example, there may be certain privacy protections that the bank extends to every depositor. All the protections you enjoy at home are likely to be included, but there may be a few more associated with those offshore accounts. In terms of ensuring you know who has access to your business account data, those offshore accounts could offer more benefits you can put to good use.

Ease of Managing Bank Accounts

Online banking is so common today that most people take it for granted. Even so, some believe that online access to corporate bank accounts is always superior at home. That’s not necessarily the case.

Offshore banking institutions provide protections for online banking that easily match whatever you will enjoy with those domestic accounts. There may even be additional protections that make hacking those international accounts more difficult. You’re likely to find that managing the account balances in your offshore checking and investment accounts will be just as simple as using your domestic ones.

Acquiring Offshore Assets Like Real Estate

While you want to keep liquid assets that can be called upon if necessary, the plan should also call for investing some of the funds to build additional resources. There are plenty of investments at home, but what about international investments?

You may find that having offshore banking and investment accounts allow you to tap into opportunities not always found at home. By all means, acquire assets like real estate, bonds, stocks, and other holdings in your country of residence.

At the same time, it pays to look at similar options found in different nations. You may find that basing offshore accounts in one country allows you to get in on investments in several countries with greater ease.

The Impact of Economic and Political Shifts on Your Business Accounts

Mentioning the idea of offshore business accounts is likely to trigger someone declaring that your money is safer in domestic accounts. The reasoning is that political upheavals and economic reversals elsewhere could mean you lose your assets.

However, some nations have provisions for protecting deposited funds no matter what happens with the economy or the political environment. Doubters may be surprised to learn that some of those countries have more stringent protections against political and economic shifts than those found with domestic accounts.

Tax Considerations

Taxation is another point to ponder when it comes to selecting an offshore banking location. It may be that choosing to house a portion of your assets offshore would lower overall taxes. While still paying what’s required by law, you legally reduce that amount and have more to keep for future needs.

Some corporate accounts may not even be subject to taxation when you don’t operate a physical business within the country’s borders. Even if there is some tax obligation, it’s likely to pale compared to what small business owners pay domestically.

Keeping Assets Safe from Legal Issues

You hope that the company never has to deal with any legal suit. Even so, it never hurts to be prepared. Along with carrying business liability insurance at home, it makes sense to house some of your assets in offshore accounts.

Why place funds in those offshore accounts? No domestic judgment can include an order to tap into those account balances. Even if it takes all or most of the domestic assets that the company has to settle the judgment, there are still offshore assets to keep the operation going.

Find the Perfect Offshore Location for Your Business

One final point to ponder is where you will seek to expand the client base. If your company plans to limit goods and services to your country of residence, there may be no need for offshore accounts to provide payment methods at the most competitive exchange rate.

When you plan on offering products to offshore customers, having accounts in the best international setting can make things much more manageable. A strategically chosen location can serve as a hub for receiving payments and ensuring they clear much faster.

If offshore accounts would be an asset to your small business, our team at Caye International Bank in Belize is ready to talk with you today. Contact us to discuss your account options. It won’t take long to have those accounts open and ready for use.

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