From this early legislation the concept of the limited liability company grew. These companies had two important features, firstly the director's and stockholder's liabilities became limited to the amount of the share capitalization of the company, and secondly the companies were viewed as a separate legal entity, distinct from its owners.

The concept of limited liability companies can be traced back to the early part of the 19th century and the insatiable demand for cash which the industrial revolution and its thousands of manufacturing and trading organizations spawned. Whilst many of these early businesses were government backed, the demand for funding was so great that entrepreneurs started looking to the public for investment money.

Many of these early enterprises were highly successful of course, leaving only happy investors, but many others failed, either through misjudgments, bad luck, incompetence or downright fraud. Sometimes, when these businesses failed, the investors were not only left nursing the loss of their original investment, but frequently faced demands for all the company's losses. Not unreasonably, faced with such mounting losses and ensuing bankruptcies, demands were made for legislation to protect stockholders and other investors.

Offshore legislation ensures that should a limited company fail, for whatever reason, the directors and stockholders of the company were limited in their financial liability to the failed company and its investors and creditors to the amount of the share capital they owned. In practice the directors and stockholders of a failed limited company simply lost their original investment.

The legal framework of limited liability companies constantly changes to keep pace with more modern business practice; however the basic concept still remains to this day. Ensuing legislation now gives more protection to investors and the general public, especially from companies run with intent to defraud, and tries, with some success, to ensure that those convicted or suspected of fraudulent dealings are barred from holding directorships.

It is the separate legal identity aspect that makes the limited company an ideal tax planning vehicle.

Because tax rates have always varied, not only from individual to business but from country to country, there has always been an incentive to live or work in or from a lower tax area. As the wealth of both companies and individuals has increased over the years, this incentive has become the foundation for a business in its own right.

The principle motivations behind the demand for offshore services from both individuals and corporations are tax minimization, risk management, cost reduction.
With global instability, currency fluctuations and political uncertainties set to continue, offshore industry clients' needs will be not only to minimize their global tax exposure, but also to protect and preserve their assets and investments in safe havens.

Thus, risk management has become as important a motivation for using International Financial Service Centers as international tax planning.

The political and economic catalysts that influenced the growth of the offshore industry in the eighties and nineties will continue to influence growth in the next two decades.

These catalysts are political and economic instability, market globalization and deregulation, the internationalization of business, the lifting of trade barriers, a trend towards steady global economic growth and a global relaxation of foreign exchange controls. In addition to political and economic catalysts there are also global tax related catalysts that continue to influence the growth of the offshore industry. These include high tax regimes, more effective tax recovery as well as the opportunities of utilizing double taxation treaties.

An increasing number of countries, often but not exclusively 'third world', have seized upon this to offer companies based in high tax areas, a 'tax haven' if they move their legal identity to their own low tax shores. Not only does this save the organization tax, it ensures that the 'haven' country gets both a revenue from registration fees (to its government) and employment and income for its citizens by way of formation agents and their own businesses. There are now some 40/50 different offshore jurisdictions worldwide, each offering slightly different companies but all sharing a common aim - to attract international business by way of offering a low or zero tax base from which to trade.