If you’ve been in any business for any length of time, you’ve probably heard these words: “You ever consider getting an offshore account?”
When we see offshore accounts mentioned in movies, it’s always part of the badguy’s scheme to skirt FBI and IRS snooping. The reality isn’t quite so seedy. An offshore account simply falls under the jurisdiction of international regulation, which can simplify a lot of things for a high-risk merchant. You never know what’s going to happen from day to day with local banks.
Sure, today there might not be any problems, but you never know when your governor is going to decide that it’s time to crack down on alcohol sales or adult entertainment.
You never know when Paypal is going to suddenly switch their regulations up on your industry, leaving you scrambling to find someone else to do business with. A big part of the appeal of an offshore merchant account is simply that international regulations tend to be a little more stable. How a local bank does business might change overnight. How the entire world does business, on the other hand, those are some gears that move a little more slowly.
Of course, before you go shopping around for an offshore account, you need to consider the question of…
Offshore Merchant Account Providers: Do You Need One?
Not every high-risk merchant is going to be in need of an offshore merchant account. If you are only classified as high risk because of your high chargeback rate, then you probably don’t have as many legal quandaries to contend with in your line of work as someone in another field might. It might be a good idea to see what offshore account providers can offer you, but it might not be a necessity.
The people who will benefit most from offshore accounts through their merchant account provider will be those who work in industries that are frequently faced with rampant over-regulation and scrutiny. People who work in controversial fields, industries that are frequently targeted by politicians and regulatory committees to be made an example of.
For these high risk merchants, an offshore merchant account provider might be a necessity. Again, this is not to say that someone working outside of these industries might benefit from an offshore account, but the field tends to be built around serving the needs of people working in industries that face legal and regulatory resistance in their home country, and would just like to cut through some of the red tape.
It may also be a good idea to work with an offshore account provider if you frequently do business in very high volume. This is probably not a major concern for most small businesses, but for any medium sized business that is quickly growing, it might be a good idea to do some research on offshore accounts so that you’ll be ready to make the switch should you need to at any point in the future. High volume sales can be a problem for local account providers, but should not be an issue for most offshore account providers.
The Benefits Of An Offshore Account
The most obvious benefit is the one that we addressed: Offshore account providers don’t really care what it is you’re selling. As long as you’re not breaking any international laws or anything, they’re probably not going to close your account down or put any limitations on it. This is vitally important to many who work in high-risk industries.
Basically, they leave you alone and let you do your thing. If you have to relocate your place of business following some new local laws, you can keep your merchant account without any real hassle.
But there are other benefits to having an offshore merchant account, as well. One of the big ones is discretion.
You can transfer funds wherever and whenever you like, to anyone you’re doing business with. Offshore account providers are known for protecting their clients in order to keep their information safe. This can be very important for those who work in high risk industries or in any field that attracts controversy.
Many who use offshore accounts may not be doing anything illegal, but perhaps they have political opponents who are snooping around trying to find dirt on them, or their field is a hotbed for hackers, and the more information their merchant account provider is making available to anyone who asks, the more at risk they are, and the more at risk their customers and partners are.
Finally, discretion is important simply because what business is it of anyone else’s what you’re doing?
Maybe you just plain don’t want your business out there. You don’t want the FBI asking questions about you without due process, you don’t want the IRS pushing you around. There’s something to be said for maintaining privacy for its own sake, and the discretion provided by offshore merchant account providers can offer that.
Beyond economic complications, offshore accounts can also be helpful in avoiding issues pertaining to copyright and patent. When selling any sort of imitation product, for instance, but it lookalike fashion clothing and accessories or just anything where the intellectual property rights might be contested, copyright law tends to be bound to a certain part of the world for a number of reasons.
For instance, Hong Kong films used to feature music from mainstream American films on a regular basis, simply because it would have been too expensive to send a legal team all the way to Hong Kong in order to press charges.
This is one of the benefits that offshore merchant accounts can provide: Anyone who would want to go out of their way to make it hard for you to run your business would likely find that it’s not worth the effort. To fly all the way to Europe or Asia in order to get hold of your data, anyone targeting you would first need tremendous resources to do so, and secondly, you would have to be a very high priority.
This is why offshore accounts aren’t necessarily the haven for criminals that they are portrayed to be on television and in film. If someone is selling illegal drugs and sending millions of dollars to an offshore account, the FBI has the resources and the motive to track that person down. But a local sheriff who thinks he owns the town is not going to be able to fly to Europe and intimidate an offshore account provider like he might a local bank or business.
Not to paint all lawmen as petty fascists using their office to settle personal grudges, it’s just that local law can be a fidgety, where international law tends to be fairly rigid and secure. What is legal for an offshore merchant account provider today is likely to be legal in ten, twenty years, and it is very difficult to intimidate these providers through extralegal tactics.
Another benefit to offshore merchant accounts: Fewer tax liabilities.
Offshore accounts are generally going to be found in countries with no direct tax liabilities just for storing your money there. You will have income tax and other taxes associated with your industry, of course, but when you add taxation just for storing your money on top of this, well, it can be frustrating to see such a large percentage of your earnings eaten up by these charges.
Are You Still Growing?
This is an important question to consider if you are considering an offshore merchant account: Is your business still growing, or are you happy with where you’re at right now?
A local diner whose owner has no interest in opening additional locations doesn’t really need an offshore account. But if they’re considering opening up a chain, then it might be a good idea to open up an offshore account in order to effectively handle the high volume of business before it becomes an issue.
Advice you may have heard before: Buy beyond your means. Buy yourself a larger home so that you can be inspired to work harder to pay it off. Buy a better car. Expand before you think you’re completely ready.
This advice is to be taken with discretion. A larger house probably isn’t going to help you run a better business, but if you’re thinking of starting a family, it makes perfect sense. This is the principle you may want to follow if you’re considering growing your business. Don’t think about where you’re at right now, think about where you want to be, and how you’re going to get there.
If you just wait for your business to blow up, then it probably won’t, or worse, it will, but you won’t be ready for it. You wouldn’t open a second location to that diner and then try to staff it by splitting your current work staff up among the two locations. Rather, you’d put one of your managers in charge of the new place and instruct them to hire more cooks and servers. The same goes for selecting a merchant account. When you suddenly start making deposits twice your usual size every night, your bank might even freeze your account until they can get to the bottom of this. This isn’t a concern when you already have your offshore merchant account at the ready.
If you’re happy running a small, local business, something in a low-risk industry, then there’s nothing wrong with that. But when you start growing your business, or branching out into high-risk areas, then you’re probably going to need a merchant account that stores your money offshore, and it’s best to prepare for that as soon as you consider that it might become necessary.
You don’t want to get caught unprepared and ill-equipped for the changes that come with your business growing. A growing business can quickly become too much to handle if you’re trying to operate it on the same principles and with the same tools that you were using when it was just a local oddity attracting maybe a dozen regular customers.
Ultimately an offshore merchant account is one of those things that not every business needs. But the businesses that do need it can accept no less. There are simply no substitutes for the flexibility, security and discretion of an offshore account if you work in a high-risk industry or if you work in high volume.
Local banks and merchant account providers may do their best, but they’re subject to local law, taxation and they may be run by people who do not fully understand what rights and privileges they have to put towards the protection of their client base. An offshore merchant account provider will give you the best protection possible, cutting through the red tape, slashing your taxes and helping you to grow your business with far fewer hiccups along the way.