Offshore Company vs Foundation vs an Offshore Trust in Panama - What do I need?

When customers call, more often than not, the conversation turns to "Do I need an offshore corporation, foundation or trust, or some combination thereof?"  At which point, we usually review the customer's situation and needs.  It is impossible to capture all of the possibilities here, but this article will attempt to help you decide what type of asset protection structure you need.

Offshore Company vs a Foundation :: Are you running a business or protecting money you already have?

The offshore company is really geared to someone who is running a business, although it is also often used as an outer layer in an asset protection structure.  If you are just trying to protect assets you already have, your main vehicle (inner-most layer) should be a Foundation.  A Panama foundation is much harder to break than a corporation.  This is in part due to the fact that the foundation is legally not owned by anyone.  This makes legal attacks difficult to impossible.  This author is only aware of 2 cases where a foundation was pierced and in both cases drug money was involved.

In fact, most banks in Panama now require their compliance department to review all bank account applications by foundations.  For this reason a foundation account can take a few days longer to open.  Having said that, we have a special relationship with several of the top banks in Panama, to streamline this process, thus reducing and in some cases eliminating the delay.  For example, the largest bank we offer, with over 40 billion in assets, will open foundation accounts for us the same day!  In fact, the bank manager will personally come to our law offices and interview you and often approve you the same day!  No other law firm can get you this kind of service.  In fact, if you buy a shelf company (only $200 extra), we can have the bank account open the very same day!

Operating a business using a Panama Company and Foundation 

If you are operating a business, you need both a foundation and a corporation.  Why?  Because money will be received by and sent from the the offshore corporation, thus making it your "interface" with the outside world.  So why do you need a foundation as well?  The answer is simple, "Your pot of gold should NOT be at the end of the rainbow!"  This is very important.  If you follow the money trail it should NOT lead to your stockpile of money.  This money is your nest egg and needs to be protected in a separate vehicle.  In fact, we go to great pains, to make sure your foundation and corporation are NOT associated in any way that is visible to the outside world.  THIS IS CRITICAL.  Many offshore law firms use the same resident agent and directors, and council members to form both the corporation and foundation.  (oh - and they register the company and foundation the same day as well)  This is a big mistake.  If there is any association between the company and foundation, then an attacker will easily determine that the foundation owns the corporation, and then attack both entities.  Since the foundation is where you are storing your stockpile of money, your first layer of asset protection has already failed.  Any attack on your company should NOT put your assets at risk.  Instead an attack should only serve as notification that you need to move your money, which has been safely stored in your foundation.  (Money is transferred from the corporation to the foundation by an internal bank transfer so there are no external transfer records.  Internal bank transfers are covered under Panama bank secrecy laws.)

Internet Based Businesses should NOT be domiciled in a high tax jurisdiction.  Duh! 

80% of the worlds internet based businesses are located in the USA, Canada or the UK!  Shocking!  If you are running an internet based business, why in the world would you domicile it in one of the highest tax jurisdictions in the world?  Why not make an offshore country like Panama the home of your internet business?  After all, most internet businesses have little or no need for a physical presence in a high tax jurisdiction.  At most, an internet based business needs order fulfillment services, which can be purchased from an number of order fulfillment companies. 

Protecting money you already have or are about to get like an inheritance

Although you are not running a business, "Your pot of gold should not be at the end of the rainbow!" concept still applies.  In other words, the corporation bank account where you send and receive wires should NOT be the place you store the bulk of your money.  You need an outer layer that will shield your nest egg from the outside world.

Nobody should know where your money is, even if they follow the wire records, except you, your bank, and your law firm.  It is critically important for you use a law firm.  Do not use "offshore company mills" because you will NOT be protected by attorney client privilege.  If an attacker wants to get your information, including where your bank account is, the attacker only needs to convince the "offshore company mill" to hand over your information.  Since this "company mill" already has your money, they have little reason to not release your information.  Certain agencies and good lawyers are adept at applying pressure, making it much easier for the "offshore company mill" to give you up, than protect you.  (... and don't forget about the good old bribe - don't count on a offshore company mill having integrity)  If a law firm was to give out your information, without a court order, they would lose their law license and be out of business.

The bank should be located in a jurisdiction like Panama where bank secrecy is strictly enforced and backed by jail time for violators.   Bank secrecy laws are only as good as they are enforced!

Trusts - Registered vs Unregistered

Trusts can be registered or unregistered.  A registered trust can have a bank account, although in Panama, a foundation is used instead.  A foundation is a much stronger vehicle in Panama because it is basically a trust and corporation combined into one.  The only restriction on a foundation, is that it is not allowed to conduct "for profit" business.  It can, however, earn passive income, like interest income and stocks, bonds, etc.  It can also own a company that conducts business.  Together a corporation and a foundation makes a strong asset protection vehicle because it gives you the impenetrability of a foundation and the flexibility of a corporation.

Unregistered Trusts and Multiple Jurisdictions

What most offshore law firms do not tell you is that many countries (perhaps the country you live in) consider the owner of a foundation to be the beneficiary.  Most of these same counties also require you to report over 10% foreign ownership of companies.  These law firms set the customer as the beneficiary, thus cause them to violate their local laws.  Since they are only obligated to advise the customer on laws in Panama, they do not bother to tell the customer, even though they know that their asset protection products will cause them to break the law in their home country.  We operate with integrity.  We will set you up with a trust structure in 3 jurisdictions, that will act as the beneficiary of your foundation.  The trusts are setup as a a legally "self-owned" structure, taking the ownership burden off of you, while still leaving you in complete control of your assets.  The trusts are located in jurisdictions where it legal challenges are difficult, if not impossible to win.  An attacker, would have to go to 3 different jurisdictions, win 3 court cases, just to learn that the entity is actually self owned.  In fact, after winning 3 court cases, in 3 jurisdictions, the attacker would be left without jurisdiction.  Call for details.