When would someone use an international entity - such as a Nevis LLC - rather than a domestic or U.S. entity?
You would go international whenever you question whether your domestic
plan will adequately protect you. An instance would be when a
present creditor might ignore the charging order remedy and attempt to set aside
an asset transfer to a domestic limited partnership, LLC or domestic trust.
It’s poor planning if your creditor can argue that your transfer
was fraudulent. You are then safer with transfers to a Nevis LLC because
Nevis expressly deems these transfers
not fraudulent. In this respect, a properly structured Nevis LLC is more protective
than the international trust – particularly when you already have
creditors. Transfers to the trust could be a fraudulent conveyance and
contestable in the trust’s jurisdiction, although practical obstacles
may still prevent creditor recovery. This deserves repeating. If a Nevis
LLC member has an
existing creditor, Nevis LLC laws allow the member to transfer his or her assets
to the LLC without it beinga fraudulent conveyance if the debtor-member’s interest is proportionate to his share of
the contributed capital. This transfer is considered a fair value exchange
and not fraudulent. Interestingly, a promise of a future investment in
the Nevis LLC by a present or incoming LLC member can be used to measure
this proportionality. A debtor-member can then own a minority interest,
subject to the charging order, though the debtor-member contributed all
or most of the LLC’s present assets – provided the majority
member contractually promised to pay its larger proportional share later.
This dilution strategy can effectively discourage creditors whose charging
order recourse is then only against only a small minority interest in
the LLC. This feature is unique to the Nevis LLC. It’s only one
example of how we can achieve safer results internationally.