Are you ready to start a dropship business using your offshore company? If yes, you are heading in the right direction.
In this blog, we have explained briefly about dropshipping as you might have already got your homework done about "Dropshipping." Further, we have explained in detail on how to start a dropship business using an offshore company.
What do you mean by Dropship Business?
Dropship business is something that doesn't actually require a business to keep the products in stock. Instead, dropshipping is an order fulfillment method in which the store sells the products. The store then passes the sales order to a third-party supplier. The third party-supplier then ships the order to the customer
Dropshipping is a business where the customer orders something from your website or through email. After that, you have to arrange on your own for the manufacturer to post or courier the item.
How to Dropship using an Offshore Company?
Let’s discuss how to start a dropshipping can be done through an offshore company.
- A tax-free offshore company is incorporated. Let us say; the company is called International Business Company Trading Limited.
- International Business Company Trading Limited executes all the businesses. The International Business Company trading limited possesses the web-domain and the website or trademark. The IBC trading limited may also possess sole distributor rights that are held by the IBC or transferred to the IBC.
- You post the terms and conditions on your website or in your order form that productively says that the client is buying from the offshore company setup. The contract must also be concluded in a tax-free offshore environment.
- The client submits his order through the website or by email.
- The offshore company sets up an Offshore bank account in a tax free banking center. As a result of the Offshore company formation with bank account, it receives customer payments, including those payments made through a merchant account as well.
- Normally,the website and server are pinpointed in a country that does not tax business on the basis of server location.
- Customers contract with and pay the offshore company setup. In the first instance, all such money is banked tax-free.
- The offshore company with bank account pays for the goods to the manufacturer. The manufacturer dispatches the goods directly to the customers of the offshore company with bank account.
- You or your local company would be shrunk by the offshore company set up to manage sales or delivery of products or maintenance of websites.
- You would invoice the offshore company periodically, say monthly, for this service. A smart Tax Accountant must be able to help you to claim a series of expenses against this income such as home office, travel, equipment, phone, internet, or other utilities. This will significantly reduce the amount of tax payable on this income. This income would also be the assessable income in your home state.
- Some kind of Intellectual Property is created often or is behind the website based business usually. It might be beneficial to you down the track if two different entities held the ownership of the business and the Intellectual Property.
We will tell you what you can do. You have to set up a second offshore company to possess the Intellectual Property. The first Offshore company, which is the IBC Trading Company pays license fees periodically to the 2nd Offshore Company or the IBC. These fees would be receipted as nil tax. If you desired to bring the ownership of the web-business onshore or sell the business, keeping a passive income stream would be very beneficial for you.
- Once you enhance to grow and add substance, you would be clever enough to establish your MD or a sales team onshore to take up orders and receive income in a nil tax onshore environment.
An essential thing that you must remember is that the IBC should be managed and regulated from offshore in order to reduce the chances of the IBC being taxed onshore.
We hope we have provided you on the details of how to start a dropship business using an offshore company.
Business Setup Worldwide is a platform to guide you through this. If you need any further assistance, then you can contact us! We’d be glad to assist you.