Panama Company vs Foundation

Panama Company vs Foundation


The formation and activities of a Panama Private Interest Foundation and Panama Corporation are...


Panama Foundations

Panama Foundations


The Panama Foundation Law was established in Panama in 1995. Panama Foundations are unique because...


Panama Company vs Foundation


The formation and activities of a Panama Private Interest Foundation and Panama corporation are geared towards ripping the practically the same benefits of international assets protection through the tax privileges that they are granted as Panama offshore entities. As offshore entities, both Panama Foundations and Corporations are able to engage in business transactions internationally and any of the income that they earn should not originate from within Panama, although both entities are able to engage in banking or have professional relations with business persons in Panama since this is not considered as conducting business for income earning purposes.

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The basic differences between a Panama Foundation and a Panama Corporation lie in the purpose of these entities and their structure, which ultimately makes the way in which they reap their offshore benefits different. First of all, Foundations are used solely for holding assets for a specific period of time. Although Panama Foundations may from time to time engage in commercial activity in which the foundation’s assets will be implicated, this constitutes a basic feature that encourages increased growth for the foundation’s assets. Secondly, structurally, a Panama Foundation has no members or owners. The Protector, Beneficiaries and Foundation Council are the elements that form the foundation, none of which have any claim of ownership over the foundation. The Panama Foundation in itself is separate and independent of each one of these persons, each of whom has specific functions in regards to the administration of the Foundation but do not own it. The Beneficiary
“inherits” the assets kept in the Foundation, the Protector dictates his or her wishes which are the purpose and objectives of the foundation through the Charter which the foundation regulates the administration and management of the foundation’s assets and the Council plays the role of a board of directors and is responsible for the administration and carrying out of the foundation’s business.

On the other hand, the Panama Corporation is an offshore company that has the fundamental objective of conducting business offshore. Panama offshore corporations can engage in the regular activities of any regular business such as trade, marketing, consultancy, copyright and may even be a holding or investment company. Panama offshore corporations, however, cannot function as international trusts, exempt insurances or offshore banks since there are specific entities formed for conducting such activities as well as specific offshore legislation that regulate how they operate. Panama Offshore Corporations are made up of two essential members, namely, the Directors and Shareholders and unlike the Panama Foundation, have ownership, which may be based on the number and type or class of shares that each member, or any other factor that may be stipulated in the constitution of the company, which is established by the Memorandum and Articles of Association of the Panama Corporation, which has a function that is similar to the Foundation Charter with respect to regulating various aspects of the entity. Additionally, a Panama Corporation does not have a specific duration and is able to continue to carry out its business for as long as it remains in good legal standing with the Panamanian Government by paying the necessary annual maintenance fees and is not dissolved. Like Panama Foundations, Panamanian offshore corporations are flexible and are able to make amendments to the Memorandum and Articles of Association.

In conclusion, one must always keep in mind that the purpose of the foundation is specific and the profits made from any activity that is undertaken must go towards the organisation, whereas the corporation may engage in several activities which may or may not be reinvested in the company. The profits of the corporation are distributed accordingly among the shareholders who are free to dispose such funds as they wish. However, in regards to asset protection, although both the Panama Foundation and Corporation enjoy the same tax benefits, may be used for holding assets such as property, funds or valuable possessions that are meant to be transferred at a later date and are regulated by similar offshore laws in terms of being unable to conduct business within Panama, a Panama Foundation provides a superior means of asset protection. This is based on the fact that unlike the Panama offshore corporation or company, the Foundation has absolutely no owner which means that no one can make any sort of claim on the assets held in the foundation. The transfer of assets is dictated by the Foundation Charter to the person (s) or corporation that has been designated the Beneficiary of the Foundation at a given time. The Foundation also offers a higher degree of privacy in that business is conducted by the foundation itself and has no need to implicate the persons involved since it is respected and recognised as an independent legal corporate entity. As a result, the Panama Foundation is effective for owning corporations, boats, real estate and conducting holding activities and opening and operating bank accounts

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