Benefits of yacht ownership through offshore corporate structures

Benefits of offshore ownership

Some would say an offshore company is simply one that is incorporated in a country where there is little government control and/or low tax rates, but this is too simplistic. Offshore companies do have other hallmarks and benefits such as protecting privacy.

Properly set up and maintained corporate yacht structures, whether onshore or offshore, limit the liability of the beneficial owner to the value of the assets in the structure. They also work well to insulate the owner’s other assets from creditors.

Offshore entities often do a better job of maintaining the anonymity of the beneficial owner and defeating efforts to pierce the corporate veil.

Offshore structures may be more important for what you don’t get with the selection of a given flag state. With the selection of the nationality of the corporation comes a regime of law. In the context of yachting, we often hear this referred to as ‘flag’ selection, which is to say country selection.

Stated differently, if you select the Cayman Islands flag, you have selected to run your yacht according to Cayman Islands’ laws.

While application of law can sometimes be a complicated analysis of multiple factors, the flag is almost always among the most important factors when it comes to application of law.

Flag selection

The flag, with certain limited exceptions, establishes the law under which the yacht conducts its business.

For example, if you fly a true French flag, you have just bought the French farm, so to speak, including the entire regime of French civil law. You can’t just pick and choose the laws you like and disregard the ones you don’t. You get, and are subject to all of them.

Flag selection is serious business. Don’t get too creative and don’t buy into the sales pitch of an obscure country looking to create some cash flow with an offshore registry. For example, certain flags require that all crew have the same nationality as the flag state. If the laws seem uninviting or harmful, don’t fly that flag.