Delaware, Wyoming or Singapore Compared as Offshore Financial Centres
Offshore financial centres offer key advantages for owners, including ease of doing business, tax benefits and even simple corporate compliance. Delaware, Wyoming and Singapore are three key areas of offshore incorporation.
Setting Up a Company
Setting up a company is the first step to creating an offshore financial centre. The process is often simple, and each local has its own benefits.
Delaware is where many businesses in the United States choose to incorporate, and the reason for this isn’t just low incorporation or tax benefits. The state has one of the best business courts with a very strong corporate law structure, and this is advantageous to corporations.
Forming a business in the state is easy, and there are numerous online services that will walk you through the process.
When you incorporate, you’ll need to:
- Choose a business entity type:
- Limited Liability Company
- Limited Partnership
- General Partnership
- Statutory Trusts
- Obtain a registered agent. The agent must have a physical presence in Delaware, and a business that is physically located in the state can act as their own registered agent if they wish.
- Certificate of incorporation. Entity forms that must be filed with the state.
Incorporation can cost as little as $90, but you’ll find that there are yearly corporate compliance measures that also must be taken. This will be listed in the next section.
Wyoming has one of the lowest income tax rates and lowest corporate tax rates in the United States. A lot of businesses choose to incorporate in the state, and there are numerous advantages over incorporating in Delaware.
The process of incorporation is very similar to Delaware, you’ll need to:
- Choose a business type:
- Limited Liability Company
- Profit Corporation
- Obtain a registered agent. A registered agent is required in the state.
- Certificate of incorporation. All entity forms must be filed with the state.
Setting up a business in Wyoming can be done for as little as $125.
Now, which state is better for incorporation? Each state has its own benefits. The key difference between the states is that Wyoming doesn’t have:
- Corporate income tax
- State personal income tax
- Franchise tax
One-person corporations are allowed, and annual and filing fees are low. Wyoming also allows businesses to adopt a corporation formed in another state.
Whether choosing Delaware or Wyoming, the initial setup process is simple and easy.
Singapore’s business legislation is friendly, offering anyone that wants to create a business in the country to have an easy, quick method of incorporation. Foreigners can freely incorporate in the country as long as they are over 18 years of age.
Foreign companies can also incorporate in the country.
Often considered the “Delaware of Asia,” Singapore does require a few additional steps to incorporate in the country. You'll need to have the name of the business approved before incorporation, and then the following requirements must be met:
- One or more resident directors need to be added. Non-resident directors can also be added. Both need to be 18+ years of age, free of malpractice charges and must not be bankrupt.
- Shareholders must be assigned, and this can be between 1 and 50.
- A minimum of S$1 in paid-up capital must be present to incorporate.
- A registered address must be provided that is a local, physical address within Singapore.
Foreigners registering their business in Singapore must use the services of a professional firm to register the business. Anyone that plans to move to Singapore will be required to obtain their Entrepreneur Pass or Employment Pass.
Registering is otherwise easy, requiring:
- Name reservation
- Registration of the company
If the incorporation has been approved, you’ll receive an official email notification from the ACRA.
One or more business licenses may need to be obtained to remain in local compliance.
Yearly Corporate Compliance
Corporate compliance is a must-understand, and this is where an accountant can make sure that your business remains in compliance at all times. The corporate compliance for each area is as follows:
Delaware’s corporate compliance is straight-forward. The state requires that you maintain a registered agent, so you must maintain a registered agent’s service throughout the lifetime of your business.
You'll need to also maintain any licenses or certifications based on your business type.
But the state doesn’t require that you file an annual report. You will be required to pay an annual tax of $300 before June 1 of each year.
The only two statutory requirements are:
- Pay franchise taxes
- Maintain a registered agent
You'll also need to:
- Hold meetings
- Keep meeting minutes
- Create resolutions to authorize corporate actions
These requirements may not be present when choosing another entity type aside from a corporation.
Wyoming’s corporate compliance is also simple and easy. A registered agent must be kept throughout the lifetime of the corporation’s existence.
Licenses and certifications will need to be obtained on a local level, so this will vary depending on the business’ location.
Corporations will be required to:
- Keep permanent records of minutes for meetings of the board of directors and shareholders.
- Record all actions taken outside of a meeting.
- Record all actions by a committee in place of the board of directors.
Wyoming requires an annual report to be filed on behalf of the business. Major business taxes don’t exist in the state, but there is an annual license tax which many consider a franchise tax.
Wyoming may be one of the country’s most tax-friendly states thanks to its lack of personal and corporate income tax. The “license tax” is minimal:
- $50, or
- $0.0002 per dollar of assets
The method chosen is dependent on which value is higher.
Singapore’s friendly business practices do require that a company secretary be assigned within six months of incorporation. A registered address must also be maintained. Licenses must be maintained from year-to-year.
Singapore’s annual filings include:
- Annual financial statements
- Filing of chargeable income
- Financial statement audit (depending on annual income and assets or employee count)
- Annual general meeting
- Annual tax return filed with the IRAs
- Annual return with the ACRA
Singapore’s professional firms will be able to help keep a corporation in compliance annually.
Tax Benefits of Delaware, Wyoming and Singapore
Every jurisdiction has their own tax benefits:
- Delaware. Delaware doesn’t require corporate tax unless the income is derived from Delaware. In this case, the tax rate is 8.7%. Businesses can incorporate their businesses in the state, but if business is not transacted in the state, the only tax paid is the franchise tax.
- Wyoming. Wyoming does not have corporate income tax. Sales tax will need to be collected in the state, but it remains at just 4%.
- Singapore. Singapore does have a friendly tax structure, and exemptions and incentives also exist. Companies pay less than 9% taxes on the first S$300,000 in annual profits. A flat rate of 17% is assessed for profits over this amount.
Double taxation agreements exist between Singapore and the United States, and these laws apply to corporations. This will help corporations save money, and a key requirement is that 50% of the corporation’s stock be held by citizens of the respective country.
That is, a company with 50% or more stockholders being citizens of the United States would pay income tax in the United States.
Availability of Trained Workforce
If a business is planning to incorporate and run their operations in either state or Singapore, there is ample availability of a trained workforce.
Delaware’s population, as of July 1, 2017 stood at 961,939 residents. The state has a very high dropout rate for high schoolers at 11.2%. And between 2012 and 2016, the number of people age 25 or older that had a Bachelor’s degree or higher was just 30.5%.
Wyoming may be a large state in terms of land area, but the state has the lowest population in the United States. The small population leads to less availability of a trained workforce, and only 26% of the population has a Bachelor’s degree or higher.
High-school dropout rates are 8% in the state.
Singapore has a robust education system which ranked the highest in math, reading and science in 2016, according to Pisa rankings. The country has the top global education ranking, and the education system is geared towards high achievement.
Singapore’s population dwarfs Delaware and Wyoming, with 5.79 million people in 2018.
Singapore, in terms of numbers and education, is often the better choice for businesses that want to hire a trained workforce. That is not to say that Wyoming and Delaware do not have a great workforce, but in terms of education, both states lag behind Singapore. The smaller size of these states also results in fewer people in the workforce.
Choosing the right jurisdiction to incorporate a business is essential to your company’s success. All three of these locations are considered tax havens, and while each has its own benefits, it’s often best to discuss your business’ needs with a professional. Singapore, which has great double taxation policies with the United States, also has a robust, well-educated workforce.