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20 December 2012
Adapted from the Nevis Limited Liability Company Ordinance and the Cook Islands Limited Liability Company Act, the International Limited Liability Companies Act was enacted in January 2012 as a much-anticipated addition to the repertoire of products offered by Belize's offshore sector. The limited liability company (LLC) - a US innovation first established in Wyoming and popularised in Delaware - is essentially a hybrid of two familiar business structures, a partnership and a corporation. The LLC integrates the beneficial elements of a partnership and a corporation without the disadvantages of either. In particular, like a corporation but unlike a partnership, the members or shareholders of an LLC have limited liability. Simultaneously, like a partnership but unlike a corporation, the income of the LLC is deemed to be the income of its members or shareholders. In other words, unlike a corporation, an LLC from a taxation standpoint is a 'flow-through' or 'disregarded' entity and its members or shareholders can accordingly avoid being effectively double taxed on both the LLC's profits and the dividends or distributions declared.
The International LLC Act provides a general framework for the establishment and operation of an international LLC. The act provides for many of the familiar features that an LLC possesses in other jurisdictions, including the limited liability advantage - that is, the Belize international LLC is a legal entity with separate rights and liabilities distinct from those of its members and managers. A member shall have no interest in the property of a Belize LLC, and the property of a Belize LLC shall not be available to satisfy any claim or judgment against a member. No manager, officer, member or employee of a Belize LLC shall be liable for the debts, obligations or liabilities of the Belize LLC unless he or she has assumed such liability by written contract. As an offshore product, while the Belize LLC is restricted from conducting business with residents of Belize or being owned by or owning a resident entity or person, the Belize LLC enjoys extensive tax, duty and exchange control exemptions.
Of particular significance, the International LLC Act introduces numerous asset protection features that make Belize's LLC one of the strongest asset protection tools available. One of the most salient asset protection features of the Belize LLC is the charging order protection. A judgment creditor of a member or shareholder of an LLC may apply for a charging order against a member's interest. This charging order, if granted, gives the judgment creditor certain rights tantamount to an assignee of the member's interest - that is, the right to receive distributions attributable to the member's interest in an LLC, if and to the extent that any are made, along with allocation of profits and losses attributable to the member in accordance with the allocation provisions set out in the act or an operating agreement. However, the charging order does not afford the judgment creditor any voting rights; nor does it grant any right to partake in the management or administration of the LLC, including the right to amend the company's operating agreement or its articles of organisation, or to act as a manager or become a substituted member. The act further provides that the charging order shall be the sole and exclusive remedy available to a judgment creditor or other creditor of a member of an LLC. What this means is that the judgment creditor, even with a charging order, cannot cause a distribution of the funds or assets of the LLC to itself. Those funds or assets are protected from the judgment creditor and shall remain at the disposal, and to be used in the best interests, of the LLC not the judgment creditor.
The charging order protection is further supplemented in the act by the requirement of statutory security for costs to deter frivolous and vexatious litigation. Every creditor, before bringing an action or proceeding against any LLC property, must first deposit with the Supreme Court Registry an amount equal to half of the amount claimed or BZ$50,000, whichever is greater, for securing the payment of all costs as may become payable by the creditor.
Further, in connection with the law against fraudulent conveyances, no action or proceeding shall lie in connection with a fraudulent conveyance to a Belize LLC. A transfer to a Belize LLC shall not be fraudulent as against a particular creditor of a member after the expiry of one year from the date of the LLC's formation, or if such a transfer takes place, two years after the earliest cause of action arose, whichever is earliest.
Regarding jurisdiction, only judgments delivered by a court within Belize shall be enforceable against a Belize LLC or any manager or member thereof in relation to matters governed by the act. This includes decisions of the Supreme Court of Belize, the Court of Appeal of Belize and the Caribbean Court of Justice.
Apart from these extensive asset protection features, and consistent with Belize's key advantage as a low-cost offshore jurisdiction, the Belize LLC is one of the most competitively priced offshore LLCs internationally. The government fee for registration of a Belize LLC is only BZ$150. The annual renewal fee is also only US$150. A foreign LLC may also be re-domiciled in Belize for only US$100. A name may even be reserved for up to 10 days for free.
With its strong asset protection features, flexibility and competitive price, the Belize LLC is sure to make its mark in the increasingly significant field of international asset protection planning.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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