No longer the privilege of the rich, now anyone can set up an offshore tax shelter (the fine print above gives me sufficient legal cover to say so). But before you tell the IRS where it can stick this year’s W2, consider the risks.

It’s not illegal to establish a company abroad to conduct business within the United States, but to do so without giving Uncle Sam his just due is tax evasion of the manner the IRS actively pursues.

There are many legitimate reasons for setting up an offshore entity, and proponents argue that favorable tax treatment is just a perk of conducting business in a more efficient – and often safer -- manner. Despite walking a razor-thin line of legality, removing a 35% expense from an income statement is a strong motivational factor.

The ease with which commerce can take place across borders means an offshore entity can act as a hub for a bourgeoning international business. Many offshore service providers handle regulatory filings, reporting requirements and other administrative functions that make running a business that much easier.

And offshore trusts and shell companies can protect assets from lawsuits, creditors and even the IRS. According to the Equity Development Group, “Utilizing offshore tools to protect privacy could mean the difference between keeping [and] losing what is rightfully yours.”

The Cayman Islands are now said to be the fifth largest banking center in the world, and home to all major accounting firms, including Ernst & Young, KPMG and Deloitte Touche. These firms provide legal, tax and banking advice to the vast banking network on the tiny island. They’re in good company. According to the New York Times, 75% of hedge funds are registered in the Cayman Islands. They establish bifurcated investment vehicles to allow certain investors to bypass American tax law.

But just as the proliferation of electronic banking has helped spawn this niche business, it’s also inspired fraud.

Many of the countries operating as tax havens have few resources to pursue illegal activities within their borders. Operators are often understaffed and provide shoddy services, while others are outright crooks. Hedge Funds typically pay around $35,000 to establish traditional offshore vehicles; if you’re quoted just $2500, your entity may be slightly less than bulletproof.

Back home, the IRS is working on a pilot program to target offshore tax shelters with the hope of recouping some of the estimated $50 – 200 billion in annual lost revenue caused by illegally sheltered income.

Setting up shop in the Caymans would also put you in close proximity to some unsavory types. Enron used 700 secret Cayman-based entities to conduct its financial trickery and several collapsed hedge funds disdainful of transparency, like the Bayou Group and Wood River Capital Management, were registered there.

If you’re giving real weight and consideration to establishing an offshore shelter to protect your financial assets, at the very least use a reputable service. Failing to do so would be a lot like choosing a laser eye surgery clinic on price alone: you might regret being so thrifty.