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Advantages and Disadvantages of Conducting Business Offshore - Essay Example

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Advantages and Disadvantages of Conducting Business Offshore.
Offshore company relates to the incorporation of a company overseas, and it is utilized in a way that investors are able to avoid tax laws imposed to business in their home countries…
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Advantages and Disadvantages of Conducting Business Offshore

Download file to see previous pages... Therefore, the tax reasons for offshore business are the principal factors in deciding to start the business offshore, though there are other advantages and disadvantage. Making a decision of conducting business offshore entails the motives of establishing a business for a given purpose in a country having different corporate and commercial laws. In fact, there are alternatives allowing solutions like organization of relationships, which are created between the stakeholders of the business contrary to the commercial laws. Consequently, this is a significant way of reducing the level of administrative duties regarding financial statements and tax return, which are not submitted or entries made in the commercial register. Nevertheless, the main objective of the paper is to explore the advantages and disadvantages of conducting business offshore (Gitman and McDaniel 44). Advantages One of the advantages of conducting business offshore relates to the investor or owner protection due to anonymity that is considered a vital factor of investing. Therefore, there is an advantage associated with anonymity in the beginning phase of a business regarding the utilization of anonymous business with unknown owners. In fact, this is mainly for the purpose of protection against interference from the government bureaucracy and crime. Moreover, this reduces the regulations imposed on a certain business activity in situations such as transacting in business environments in less developed countries. An exemplary example is options regarding a trade of the foreign securities in a country with rules concerning the foreign exchange. Therefore, this makes the business to avoid being subjected to these regulations, given that these kinds of regulations are not common (Bertho 100). The other advantage relates to the taxes, where the international businesses seek ways of maximizing their profit through reduction of cost, which include the tax burden. Therefore, this has been a source of inspiration for many counties in the world, whereby they reduce taxation imposed on international business in order to attract investors, since the business started through their ventures contributes significantly to the economy due to creation of employment. In this case, this is used as a way of utilizing the advantages provided by governments in this countries and the fiscal system in order to optimize profit or reduce the tax burden through the international tax planning (Committee on the Offshoring of Engineering 143). However, international tax planning has gained popularity due to inappropriateness associated with the taxation in the developed counties. In fact, there is cost incurred by the companies seeking to earn income from which tax is deducted, for example there are cost incurred due to assignment of variables or the sale securities. In situations when a company suffers losses associated with these activities, the subsidiaries that are established become helpful due to the suitability of the tax environment. Therefore, the businesses conducted offshore benefit substantially through minimization of the rate of income tax, where by the business environment can offer a chance for increasing number of tax deductions from revenue gathered from the transaction (Ramanathan 18). Disadvantages There are disadvantages associated with the offshore business, which makes its business model to be unsuitable for some investors. One of the reason is that is poses the threat of destroying the economy of a country, since there are numerous permanent jobs that are lost, while the increasing number ...Download file to see next pagesRead More
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