OFFSHORE COMPANIES
OFFSHORE LLC AS AN ASSET PROTECTION TOOL
OFFSHORE
COMPANIES
Often times there is a great deal of mystique surrounding offshore corporations
and foreign trusts and there is also often a lack of practical information
on how to actually use an offshore corporation or foreign trust. Clients
will form an offshore corporation with various purposes in mind but
once the corporation is formed, they are not sure how it can be used
for their benefit. We will outline various uses of offshore corporations,
but it is important that you take this information as a starting point
and guide and seek out competent legal counsel for further analysis
of your particular circumstances and situation. We would always remind
clients that the tax and other benefits, which can be obtained by use
of offshore entities usually, depend upon the country of residency of
the beneficial owner and its anti-avoidance legislation.
From small beginnings
early in the 20th century, the offshore sector has grown ever faster
in response to high tax rates in developed countries. It is estimated
now that more than half of the world's money is offshore.
'Offshore' has no
precise dictionary meaning, the word simply reflects the fact that most
low tax jurisdictions are islands.
Desirable Corporate Characteristics
Many offshore and
tax planning jurisdictions have made efforts to ensure that their company
law provides the following features:
- Limited Liability.
- Minimization
of directors liability.
- Minimal or optional
statutory filing obligations.
- Nominee shareholders
allowed.
- Disclosure of
beneficial ownership either not required or limited to special bodies,
such as offshore authorities or central banks.
- Broad range or
permitted company names and suffixes to denote limited liability.
- Low capital requirements
The ability to hold directors and/or shareholders meetings anywhere
in the world.
- The absence of
or the optional requirement for the audit of accounting records.
- Confidentiality,
in most common law tax jurisdictions beneficial ownership, director
and shareholder etails are not a matter of public record.
Motivations
for Offshore Services
The principal motivation
behind the demand for offshore services from both individuals and corporations
are:
- Tax Minimization
- Asset Protection
- Risk Management
- Cost Reduction
- Confidentiality
Avoid Bureaucracy
With global instability,
currency fluctuations and political uncertainties set to continue, our
clients' needs will not only be to minimize their global tax exposure,
but also to protect their assets and investments in safe havens. Nearly
95% of all the world's lawsuits are filed in the United States, primarily
due to expanding theories of liability coupled with contingency fee
compensated lawyers. One in five suits involve employment issues. Even
if you win, defense costs and the diversion away from your business
can cost hundreds of thousands of dollars. Properly crafted entities
and insulation techniques can make assets difficult to attach to, making
your family an unattractive target of potential lawsuits.
Additionally, risk
assessment specialists may be useful to surface practices that often
give rise to legal actions. Many of the strategies are not intuitive
and require professional adviser's guidance along with family awareness
and cooperation.
OFFSHORE LLC AS AN ASSET PROTECTION TOOL
The Offshore Limited
Liability Company (“LLC”) has become a very popular entity
used in the offshore industry because of its flexibility, because it
is tax neutral and because it offers a high degree of asset protection.
There are only a
few offshore jurisdictions that have enacted LLC legislation. Among
them, Nevis is by far the most advanced jurisdiction because it explicitly
provides for charging order protection and it also provides that the
charging order is the exclusive remedy of a debtor of a member.
The U.S. Internal
Revenue Service has indicated that LLCs generally may be taxed either
as corporations, or as partnerships, with income and losses flowing
through to the members without any incidence of tax effects at the entity
level. If the LLC elects to be taxed as a disregarded entity then, there
are no foreign information-reporting requirements.
ADVANTAGES OVER DOMESTIC LLCs
Offshore LLCs offer
far superior protection than domestic LLCs, especially if the assets
are held outside the US in a jurisdiction that does not recognize US
judgments because the creditor will have to bring a second lawsuit in
the offshore jurisdiction. If properly structured:
- A creditor of
a member of an offshore LLC with a non-U.S. manager may not be able
to obtain jurisdiction in the U.S. over the non-U.S. manager.
- Judicial dissolution
and liquidation by U.S. courts is not possible.
Please contact us
to discuss your asset protection planning.
