Flag 1: Citizenship and Residency

The flags you place for citizenship or permanent residency can have a dramatic effect on all the other flags. A second passport is widely recognized as a critical step you can take to reduce your sovereign risk. A passport facilitates worldwide movement and travel.

However, citizenship is much more than a passport and travel document – it’s a social contract maintained with a government. With this contract comes benefits and sometimes drawbacks. Its up to you to determine whether you want to continue to be a citizen of your country of birth – or if another option is more beneficial to your current situation.

The whole idea of a second passport was previously only available to those with direct lineage or the ultra-rich who could afford to bribe immigration. Passport programs can be confusing and government guidelines are not always clear. However, the ability for anyone to receive a passport has changed dramatically in the past few decades.

A second passport or citizenship was previously expensive or tedious to acquire. However, changing laws, increased low-cost mobility and other factors have created passport opportunities. Now a person can achieve a legitimate citizenship by naturalization for about $5,000 and 3 years with a re-domiciliation process. For a quicker timeline, an investment of $100,000 and a background check can get you a new citizenship in just 6 months.

There are many different passport options depending on your unique circumstances. Citizenship is sometimes a sensitive issue, but us permanent travelers have a saying:

“ubi bene ibi patria” – Where one is well off, there is his country.

Flag 2: Residency Taxation

Citizens are taxed in a number of different ways. We are taxed when we earn. We are taxed when we spend. We are taxed when we die.

Its been said that only two thing in life are certain: death, and taxes.

Tax has become an increasingly complicated and intricate affair as individuals and businesses seek to avoid taxes, which is completely legal.

Courts have repeatedly ruled that tax evasion is a crime, but that tax avoidance isn’t. It’s well within your rights to pay only the amounts required by law, and nothing more.

Many individuals and companies currently legally minimize their taxes by intelligently making use of international corporations offshore. In fact the largest companies in the United States use offshore companies to legally defer taxes, sometimes indefinitely.

The growing number of entrepreneurs with a worldwide focus, or location independent operations, are looking for answers. The day of the micro-multinational is upon us. If you ever have a question regarding taxes, you should direct it to a qualified tax professional or tax attorney.

“The Founding Fathers never intended a nation where citizens would pay nearly half of everything they earn to the government.” – Ron Paul

Flag 3: Offshore Company

Legal Entities are the primary method of asset protection. Legal entities (most commonly trusts or companies) are able to protect your wealth and your business and save dramatically on taxes.

A business entity is paramount to conducting business, and for a few hundred, or a couple thousand dollars, you can create a business entity – something outside yourself that can be used for literally thousands of objectives. A company or corporation is capable of carrying debts and liabilities, buying property or assets and transacting business outside your own name. This new entity can also be used to open bank accounts, gain citizenship, establish privacy, gift assets, set up a tax base, extend beyond your lifetime, protect and grow wealth and accomplish many other goals.

Business Entities are one of the most important flags to plant internationally.

If you own a business of any size, a business entity is absolutely critical, but something some people sometimes ignore for other issues such as marketing. However, for personal financial management and planning, legal entities have numerous advantages. I’m a firm believer that anyone can gain from the benefits of a legal entity. For many people, a legal entity in their home country may be enough – however many people can benefit from an offshore incorporation as well.

With almost all incorporations you can get a bank account anywhere worldwide. You can, for instance, set up a Singapore bank account with the proper company documents from the United States or Nevis or Hong Kong.

Asset Protection flags are where your business maintains a registered office – the place where your company’s articles of incorporation are filed. It is usually not in the same jurisdiction as where your office is, for reasons of liability and taxes. Many people use offshore companies in places like the Cayman Islands, Belize, Guernsey or other no-tax or low-tax jurisdictions.

Asset protection flags are interesting because you can sometimes objectively state that setting up a company in Nevis as an LLC might be better than Hong Kong because there are less reporting requirements and you don’t face a yearly audit. Alternatively, you could state that Hong Kong is more reputable and won’t send up a ‘red flag’ to the authorities.

It’s quite easy to find a jurisdiction for a business entity which has no tax, or territorial tax rules. Planned properly with the guidance of a professional, tax can be deferred indefinitely, or eliminated completely.

“Each person enjoys, over himself and his powers, full and exclusive rights of control and use, and therefore owes no service or product to anyone else that he has not contracted to supply.” – G. Cohen

Trusts Can Also Be A Flag

A trust is comprised of 2 essential, basic parts; (1) a trustee, and (2) a beneficiary. The trustee is the person who you trust to keep assets held in the trust safe for the benefit of the beneficiaries. The founder is the person who creates the trust and a protector is a person who can veto or remove the trustee. A trust can be the owner of a business entity and create an additional level of protection. This is because a court order cannot compel a person located outside their jurisdiction to take action. A trust is an efficient way to place assets outside your ownership, but somewhat within your control – as the trustee has a fiduciary duty to protect the assets for your benefit.

Learning more about asset protection can dramatically improve your business, and can help with your wealth management.

Flag 4: Offshore Banking

The countries where you hold your assets and wealth should be in another jurisdiction from where your money is actually earned or spent. Ideally, these jurisdictions have a reputation for privacy, professionalism and stability.

Once you have protected your assets within a legal entity, its important to invest your liquid assets in an intelligent fashion. This is highly contingent upon your individual circumstances and risk profile. One thing should be clear, your financial planning should not be restricted to just plopping cash in a bank account and watching it dissolve slowly over time due to inflation. We need to be personally responsible for the growth of our wealth, and how we protect and manage our assets.

Flag: Bank Accounts

What country you bank in is almost as relevant as the bank itself. A systemic collapse could wipe away your liquid assets. Obviously this is a long shot, but we should prepare for the worst, and hope for the best. I don’t like to keep all of my money in one bank, or all of the banks within one country.

Bank accounts can be opened under a personal name, or through a corporate account and controlled and owned by a legal entity.

Other relevant flags within this sector include: brokerage accounts, investment advisors, private funds, opportunities for business, and essentially anything that makes you money. While legal entities provide the vehicle for investment and business, business markets are the highway upon which we drive.

“Freedom can run a monetary system as superbly as it runs the rest of the economy. Contrary to many writers, there is nothing special about money that requires extensive governmental dictation.” – Murray Rothbard

Flag 5: Physical Assets

This was “playgrounds” in the original 5 flag theory but physical assets such as land and gold are much more strategic. We routinely discuss investment opportunities in physical asset tax advantageous jurisdictions. No matter what country you are from – holding physical assets outside the shores of your home presents unique advantages.

The playgrounds “flag” has been eliminated. Lifestyle is not a flag, lifestyle is fluid experience, a journey. Flag Theory assumes that the lifestyle is a given, but won’t dedicate significant forethought to the subjectivity inherent in lifestyle choices.

This system assumes you live co-currently where you play and work. After all, what good is all the wealth and money in the world if you don’t have the time to enjoy it? Most people drift through life with a deferred life plan, or only spend part of their year on vacation. Permanent travelers spend their lives building a business from a location that resonates with them on a deep level. Rather than eliminate the ‘playground flag’, I center lifestyle is intrinsic for the type of person who implements flag theory.

The elimination of the playgrounds flag does not mean that you can’t build a recording studio at your buddy’s resort, or a house on a secretive island in South East Asia. I merely posit that it shouldn’t be considered a flag that’s used for a strategic advancement of solving your privacy and freedom issues. Further, your playgrounds as a PT are highly mobile, and can effectively be anywhere you enjoy spending time. No flag needs to be planted.

Whereas once you established a legal entity flag, it’s “planted”. It makes little sense to alter it indiscriminately. However, our playgrounds can be constantly changing, and this is WHY we established the other flags, so that we can enjoy privacy, wealth and freedom.

The whole premise of flag theory rests on your ability to be a free individual, location independent, so that each country we visit views us as a tourist, temporary, just “passing through”. Furthermore, It makes little sense to stay in one place for one time, unless you want to qualify as a tax citizen.

Flag 6: Digital Security

The internet has changed the face of business and commerce forever. Now that businesses can operate without an established base, from the internet – the locations where our infrastructure flags are planted becomes important.

Further, our intellectual property and intangible assets are more at risk than ever before. You need to be hyper vigilant about the security of your financial information, passwords, national identification number and even digital currency.

Three questions you might ask yourself about your data security and infrastructure…

• Where are the servers which host your website physically located?
• Where, and with whom is your domain registered?
• Where do you drop ship from?

It’s like anything else – you often don’t appreciate it until its gone. Your security, your identity, and your website need to be protected at all times. Not knowing is no longer an excuse. Sensitive information should be sent via encrypted email. Firewalls, VPN access and virus software are a must. It’s not about being paranoid, it’s about being prepared.

Your merchant account is the point of sale for your business if you operate an internet business. Merchant accounts have altered the landscape of business and commerce forever. For the very first time, a teenager in Wisconsin can pay a programmer in Russia to build a website and start accepting payments from a buyer in Brazil. With a website and a merchant account, you have instant access to the world’s largest marketplace – the world wide web. Overnight, your business can be a micro-multinational.

Other Infrastructure and Intangible Assets flags: Important documents, servers, merchant accounts, processes, server farms, domain registration, encrypted communication, patents, passwords, industrial design.

Flag 7: Digital Assets

In the same way the internet changed communication, blockchain is changing the world of finance and banking. Everything from currency used to pay for goods and services, holding these in a digital wallet fully under your own control, or even utilizing blockchain for payment systems and smart contracts. We believe a digital asset strategy makes sense to any modern Flag Theory strategy.

Whether you choose Bitcoin, or one of the multitude of other alternative coins, the autonomous nature of many of these systems can allow you to fully control your wealth and transfer it across borders without restriction or need to gain permission. These systems aren’t for everyone yet, but worth building into your strategy for future utilization, much like the Internet in the mid 90s.