In some cases, a foreign corporation, recognized as a citizen or national of the place of incorporation, may confer a trade advantage or may help avoid a disadvantage. It may also be used as an integral part of a trust structure. Certain countries, moreover, seek to make it attractive to incorporate in their jurisdiction, even when activities are to be conducted elsewhere. Generally, a desirable jurisdiction should be politically neutral, follows a policy of free trade, does not interfere with the commercial activities of corporations established there, and is politically acceptable to other countries and places in which the corporation may be trading. Formal diplomatic recognition as well as commercial recognition and acceptability are important.
Commercial recognition is a feature of an offshore jurisdiction that is earned.
Use of a jurisdiction in financial transactions allows banks to become familiar and more comfortable with its legal system and forms of corporate documentation. Most popular jurisdictions have a legal system derived from a major western country and greatly favor corporations which are non-resident in nature. Most professionals prefer their western style legislation since it provides a familiar basis for legal interpretation and facilitates understanding of their laws in international practice, particularly in developed countries. In addition, there is inherent in the western tradition the protection of private property and the promotion of international trade. In order to be successful, a corporate law must provide those entities under which it is formed with the legal capacity to conduct all forms of commercial activity anywhere in the world, allow for a simple management structure and provide the corporation with broad financial powers.