The Formidable Nevis LLC

Last month I traveled to St. Kitts/Nevis in the Eastern Caribbean to visit our Registered Agent who regularly works with me establishing Nevis Limited Liability Companies (“ Nevis LLC”). I frequently use the Nevis LLC as a powerful wealth protector and unparalleled asset protection tool for my clients. The Island of Nevis is a small Caribbean British Commonwealth nation in the Leeward Islands. Nevis has gained an international reputation for financial privacy and asset protection because of its progressive and debtor-friendly laws.

How It Works

After you contribute your assets to the LLC, you become the LLC member (or owner). As an LLC member you no longer directly own the contributed assets. These assets are instead owned by the LLC. Your rights then compare to the rights of a member of a domestic LLC, corporate stockholder, or limited partner of a limited partnership. As a member you own, but do not manage, the LLC. Management rests with the Manager.

The Offshore Advantage

The U.S. has limited liability companies, but the Nevis LLC is particularly good for asset protection because it has features you won't find with domestic LLCs. Examples of these features include:

• The Nevis Limited Liability Act provides that the charging order is the exclusive remedy available to a creditor against a member.

• If a Nevis LLC member has an existing creditor, a member may transfer his or her assets to the LLC without it constituting a fraudulent conveyance so long as the debtor-member's interest is proportionate to the capital contributed.

• A Nevis LLC can be managed by a foreign (Nevis) managing director. With a foreign managing director, a U.S. court cannot order you, as the LLC member, to repatriate the LLC assets because the manager, not the member, controls the LLC’s assets - the foreign managing director would be beyond U.S. court jurisdiction. A U.S. court order to transfer or seize the LLC assets would be ignored by the Nevis managing director who, under Nevis law, need only recognize a creditor's charging order obtained through the Nevis courts.
  

• Another benefit of using a foreign managing director is to prevent an indirect attack by the U.S. court on the LLC manager. For example, a creditor of a member of a U.S. LLC with a U.S. manager may be able to obtain a court order forcing the U.S. Manager to make distributions to satisfy the member's judgment debt. However, the creditor of a member of a Nevis LLC with a foreign managing director will not be able to obtain jurisdiction over the non-U.S. manager. So even if an order were issued by a U.S. court, the foreign managing director could not be forced to comply unless and until a successful action was brought against the foreign managing director in manager's jurisdiction.
  

Other Uses of the Formidable Nevis LLC

Estate Planning: Nevis LLCs can be used as an estate planning tool in the same manner as domestic LLCs or domestic limited partnerships. If the Nevis LLC is properly structured, minority membership interests should be discounted for estate and gift tax purposes for lack of marketability and lack of control.

Privacy: Nevis LLC status have strong privacy laws to prevent registration, filing or disclosure of directors, members or managers of a Nevis LLC. All of the affairs of the LLC are private and cannot be disclosed except under truly exceptional circumstances such as links to international terrorism. The only document that needs to be filed with the government is the annual corporate license and this contains minimal information. There is no annual report or annual financial return that needs to be made to the government. There is no public inspection of your LLC’s records. Confidentiality is further enhanced if the LLC appoints a Nevis managing director.

The Nevis LLC has several other benefits:

•    If setup properly, the Nevis LLC has minimal IRS reporting requirements. You are not subject to U.S. foreign trust reporting requirements. The Nevis LLC will either be taxed as a U.S. Disregarded Entity, or as a U.S. Partnership.

•    The Nevis LLC is tax neutral. All Nevis LLCs are free from all forms of Nevisian taxation. There are no Nevisian taxes on dividends, income, capital distributions, or wages whatsoever. Moreover, unlike many onshore jurisdictions, Nevis does not tax an LLC for accumulated (but undistributed) earnings. Notwithstanding the favorable tax treatment of the Nevis LLC, all U.S. Citizens must report all of their worldwide income to the IRS on their annual income tax returns.

•    A Nevis LLC is less costly to organize than an offshore asset protection trust, and the annual maintenance fees may be less than a domestic LLC.

•    You can structure your Nevis LLC so that its profits flow to its members in whatever proportions you specify in its operating agreement. This can differ from the actual ownership interest.

•    In combination with a self-directed IRA, you can structure your Nevis LLC to hold your IRA assets, as IRAs (regardless of their prefix), are not governed by ERISA and do not enjoy ERISA protection. (Click here to read my article on Asset Protection and Alternative Investing for Retirement Assets). IRA protection varies from state to state. They are fully protected in Florida, but are partially protected in California.

•    The managing directors and members of the Nevis LLC are immune from company liabilities.

•    Nevis LLCs do not require minute books, annual director or member meetings, or compliance with other customary corporate formalities.

•    Your Nevis LLC can be owned by an offshore trust or combined with domestic entities - FLPs, LLCs, and irrevocable trusts. These multi-entity arrangements strengthen and coordinate your domestic and offshore estate planning and liability protection.

Click here if you would like to schedule a teleconference with me to discuss the the Formidable Nevis LLC and how it may fit into your asset protection plan.