11 February 2014. Offshore banking sounds like something only incredibly rich, or incredibly stupid, people do. But, many legit businesses do it because they have to. It's much safer and easier than the average person thinks it is, and there are many benefits to holding an offshore account.

Ease of Business Transactions

More and more home grown companies are expanding, like http://isostainless.com for instance, to the point where their operations become international. Companies like these need the security and ease of conducting business in a variety of countries. Yet, it's not always easy to move money from one country to another - especially when exchange rates change on a daily basis.

That's why many companies opt to keep money in foreign accounts where they typically conduct business. It makes transactions easier, and business can control when they exchange funds, instead of being controlled by transaction requirements in the daily course of doing business.

Privacy

Offshore accounts afford businesses a level of privacy unknown in the U.S. Because of the Patriot Act and the Bank Secrecy Act of 1970, it's impossible for any business to secure its bank accounts. The identity of any business and domestic bank account, as well as its holders, is very easy to find.

That means that any business can be targeted by the IRS or any other government agency. Up until this past year, most businesses didn't worry about it. But, with the recent discovery that the NSA has been spying on Americans, and the IRS has been targeting certain members of political and non-profit groups, the fear of retribution is real for some business owners.

Asset Protection

Some large companies, like Apple, make clever use of offshore accounts to shield their income from the IRS. By funneling money from one offshore account to another, they completely avoid the grasp of the taxing agency until or unless they bring the funds back into the country.

What most businesses don't know is that they can fairly easily do this on a smaller scale. It does require money to get set up, and accountants to keep the books straight, but it's fairly easy to maintain.

The level of asset protection is far beyond anything that could be obtained in the U.S., too. That's because foreign countries are often less inclined to intervene in the banking industry, have less developed regulatory environments, or explicitly promote more freedom in the banking industry.

If your company uses a trustee to manage company assets, even a U.S. judge could not force the business to bring money back into the U.S.

Using Central Banks

Most reputable law firms that suggest using offshore accounts also recommend opening accounts in countries that operate under a central bank. There's less volatility, regulations in place to protect your company, and there's a level of security associated with a large banking system as opposed to a small, disintegrated, system.

In the days of country banks, it was common for bank customers to experience times of illiquidity. Normally, it was not such a big deal if the bank was local and bank customers could withdraw their funds before the bank put a moratorium on withdrawals. But, with overseas banking, you won't be able to just walk into the bank. You'll want an extra layer of protection. This is what a central bank gives you.

Finally, just because a country has a central banking system doesn't mean that it's safe. In foreign countries, it's always important to assess the overall health of the economy, the banking system itself, and the specific bank you decide to do business with. Check credit ratings, but also try to discover the banks creditors, history of payments, and how its customers are treated. This will give you a good idea of whether you should do business with it or find some other company to hold your business's assets.

Matthew Carey is a business finance consultant. His articles mainly focus on businesses that have an export or import focus.