The Formidable Foreign LLC
The international trust has been the traditional protective entity. Now
it is only one of several that you can use. For example, we frequently
use a foreign LLC to protect our international clients. However, the international
trust is still useful for clients who need international estate planning,
or want to avoid the tax problems from transferring appreciated assets
to other international entities. We also use it in other special circumstances.
Oftentimes, we use both the international trust and a foreign LLC as its
The Nevis LLC is a powerful wealth protector. It may give you more protection
than the OAPT — and at less cost.
Nevis, a small Caribbean British Commonwealth nation in the Leeward Islands,
gained its international reputation for financial privacy and asset protection
because of its progressive and debtor-friendly laws. The Nevis LLC demonstrates
this tiny jurisdiction's innovation for wealth protection.
The U.S. and other foreign jurisdictions have limited liability companies,
but the Nevis LLC is particularly good for protection because it has features
that you won't find with other LLCs. The Nevis LLC uniquely combines
the most protective features of the international trust, limited partnership,
and Nevada corporation into one remarkably protective entity.
A Nevis LLC can be either member-directed or managed by a foreign director.
For asset protection your LLC should be controlled by a foreign (Nevis)
managing director. You contribute your assets to the LLC and become the
LLC member. 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 director. This transfer of control protects the LLC assets from U.S.
As an LLC member you no longer directly own the contributed assets. These
assets are instead owned by the LLC. A U.S. court cannot order you, as
the LLC member, to repatriate the LLC assets because the manager, not
you, controls the LLC assets. Moreover, a foreign managing director would
be beyond U.S. court jurisdiction. Your creditor would be limited to a
charging order against your LLC interest. This would give your creditor
only the right to claim profits or liquidation distributions due you from
the LLC. Your creditor cannot seize your membership interest. Nor can
your creditor vote or exercise your other membership rights, such as the
right to inspect books and records. Thus, the Nevis LLC compares to a
U.S. limited partnership or LLC. A U.S. court order to transfer or seize
your LLC interest would be ignored by the managing director who, under
Nevis law, need only recognize a creditor's charging order which can
only be obtained through the Nevis courts.
If you are a debtor-member who owns a substantial interest in the Nevis
LLC. Your managing director would withhold profit distribution that could
be seized by your charging order creditor. If you own a minority interest,
and if withholding distributions would conflict with the interests of
the other debtor-members, you can title your LLC interest to another self-owned
Nevis LLC. This would then safely receive your distributed profits. As
you have seen with an American LLC or LP, a debtor-member of a Nevis LLC
can access funds other than distributions of profits. The charging order
would not apply to salaries (e.g. as investment advisor), loans, etc.
made to you from the Nevis LLC.
Under certain circumstances, Nevis law and IRS regulations impose U.S.
income tax liability on a charging order creditor for LLC profits attributable
to the debtor-member. Your charging order creditor can incur a tax liability
even if your creditor recovered no distribution. You have seen this same
poison pill feature with the U.S. limited partnerships and LLCs (but not
other international entities). This is another protective feature of the
Your Nevis LLC would delegate important powers to your managing director
who would ignore U.S. court repatriation orders. If your LLC has multiple
members, (which we recommend), your operating agreement should require
a unanimous vote to change the managing director. This would overcome
a U.S. court order to compel a single debtor-member to replace the manager
with a manager appointed by the court to repatriate the LLC assets. The
Nevis LLC can be structured with similar protective duress provisions
that you would find with the international trust − except that the
debtor-member of an LLC retains a membership interest in the LLC and,
derivatively, its assets.
A Nevis LLC is significantly more protective than the international trust
if you now have creditors because a transfer of assets to your trust would
be a fraudulent conveyance contestable in the trust jurisdiction.
If a Nevis LLC member has an existing creditor, the Nevis LLC ordinances
allow the member to transfer his or her assets to the LLC without it constituting
a fraudulent conveyance − if the debtor-member's interest is
proportionate to the capital contributed. This transfer is then a fair
value exchange and expressly exempt from the Nevis fraudulent transfer
statutes. Interestingly, under Nevis law a mere promise of a future investment
by an existing or future incoming LLC member can be used to measure this
proportionality. A debtor-member can then own a small interest in the
LLC subject to the charging order, although this member contributed all
or most of the LLC's assets. This dilution strategy lets you further
discourage a creditor from obtaining a charging order. This is one of
several features unique to the Nevis LLC.
U.S. limited partnership and LLC laws remain unsettled on the question
of whether your present creditor can recover assets that you transfer
to a limited partnership or LLC, even when you receive in exchange for
your contributed assets, a proportionate share in the limited partnership
or LLC. (Some courts have ruled that impairing a creditor is sufficient
for a transfer to be fraudulent.) However, you have no ambiguity or uncertainty
under Nevis law. Whatever money you invest in your Nevis LLC will not
be a fraudulent transfer, nor challengeable by an existing creditor.
For that reason, we suggest the Nevis LLC is more protective than a foreign
trust or domestic limited partnership or LLC. You can legally and ethically
invest in the Nevis LLC — regardless of your financial situation.
The Nevis LLC is also a more attractive option for the attorney whose clients
have existing creditors and where the attorney or professional advisor
has concerns about their own professional liability from a fraudulent
transfer. And, as mentioned, in more serious cases, we can maximize your
protection by establishing a Nevis LLC as a subsidiary to an international
trust. Layered protection combines the strength of both type entities.
The Nevis LLC has several other benefits:
- The Nevis LLC has minimal IRS reporting requirements. You are not subject
to U.S. foreign trust reporting requirements. If you are a U.S. member
who owns 10% or more of an LLC interest, you must follow the IRS'
foreign corporation ownership reporting requirements.
- The Nevis LLC is tax neutral. You can elect to have it taxed as a partnership
or C corporation.
- Nevis imposes no taxes on their LLC's.
- 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.
- You can appoint a protector to oversee the managing director, as you can
with an OAPT.
- Your LLC agreement can include the same anti-creditor poison pills which
you can adopt with a domestic LLC. For example, a member's interests
can be assessed by the managing director — these same assessment
rights would apply against a charging order creditor.
- Your LLC operating agreement can include a flight or Cuba clause so that
your manager can expatriate threatened LLC assets to another protective
entity in another IFC.
- The managing directors and members of the Nevis LLC are immune from company
- 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 international trust or combined with
domestic entities − FLPs, LLCs, and irrevocable trusts. These multi-entity
arrangements strengthen and coordinate your domestic and international
estate planning and liability protection.
- A Nevis LLC is less costly to organize and maintain than an international
asset protection trust.
While the Nevis LLC is rapidly gaining popularity, the international trust
is still useful for select international wealth protection purposes such
as estate planning, forced heirship avoidance, and other special purposes
that can only be achieved with a trust. Unquestionably, the Nevis LLC
is more protective than a foreign international business corporation (IBC).
The IBC gives you considerably less safety and no corresponding advantages.
The Cook Islands LLC is relatively new and is also one we are now using.
Other IFC's are developing new protective entities. For example, the
Bahamas limited partnership parallels the Nevis LLC. Liechtenstein's
and Panama's private foundations compare to the international trust.
St. Vincent and the Isle of Man hybrid companies are often substituted
for an international trust or Nevis LLC. Asset protection IFC's are
always developing that better mousetrap.
YES, YOU CAN LOSE EVERYTHING!
You may think that your wealth is safe and that you don't need protection.
But don't delude yourself and accept reality —
for every 60 minutes you spend making money, spend 60 seconds thinking
about how to protect it!