Offshore llc ( limited liability company) versus ibc
foreign llc advantages vs. international business company
Tax minimization and simplification of operation just about sum up the use of the foreign offshore limited liability company ( llc ) for U.S. residents especially with the latter benefit being true for people of any nationality. Furthermore, when used with an offshore grantor trust this combo assures excellent asset protection also and satisfies the taxing authorities.
If you want a legal structure so that tax free benefits are provided, then you need to be approached by the council of an already established charitable foundation who asks you to open up the foreign llc on behalf of the charitable foundation that you previously gave a "donation" to. Ask us about participating in that opportunity if you are interested. But first of all, what is a foreign LLC, who is it good for, and how does it differ from the more popular international business Company ( IBC ) ?
A foreign offshore LLC ( limited liability company or limited life company in some jurisidictions ) is an unincorporated business entity which is a cross between a partnership and a corporation. Like a corporation, it protects its members from personal liability for the obligations and debts of the entity they are conducting business through. But like a partnership, the expenses and income flow directly through to the individual members. Offshore LLCs typically enter into an operating agreement, which states how the members relate to each other and how the company is managed. While the company is liable for its operating debts, the members are NOT liable for any of the llc's obligations.
The main benefit of this kind of company structure is that it provides a layer of legal seperation between the owners of the company, the company itself, and the business it conducts. The foreign llc can be a sort of "poor mans grantor trust" in that it provides fair asset protection to the person with modest assets to protect but not enough money to justify purchasing an offshore grantor trust which typically costs about $2,000 and $1500 per year after that to maintain. Like the offshore grantor trust, the offshore limited liability company when filed as a disregarded entity using form 8832, will allow profits from the assets it holds to flow onto the 1040 tax return of the U.S. owner. This allows the company to function as a tax minimizer since the tax rate can be lower than that of an ibc.
Another benefit of the offshore foreign llc over the more well known ibc is that a person or entity can get a court order that allows it to seize the stock certificates of the IBC and thereby the creditor gains control over the assets of the IBC. But with the offshore foreign llc if a creditor claims a judgement against a member, they are only entitled to a charging order. The charging order gives the creditor the right to receive distributions from the offshore LLC that the member would have received. But these profits become available only if the other members elect to make the distribution. The charging order does not give the creditor the right to obtain the voting or management rights. So the members can decide not to make a distribution and the charging order remains ineffectual and the member's assets are protected.
For the U.S. person the primary difference between an ibc and a foreign llc is the way each is treated by the I.R.S. and its subsequent tax exposure for either the shareholder or member. At the end of 1996 the U.S. elected that both domestic and foreign corporations were to be taxed at the rate of 35% and could not elect to be taxed otherwise. In contrast, the sole member of the llc can elect to have the the taxes flow onto their personal tax return when the LLC elects to be a disregarded entity using IRS form 8832. So, if the personal tax rate of the foreign offshore llc owner is 20% for that year then the owner benefits in comparison to the ibc tax rate which is 35%.
Although the foreign offshore LLC as a stand alone disregarded entity for tax minimization purposes is adequate for the lower capitalized individual who wants to protect their assets and can not justify spending money on an offshore grantor trust, it is not recommended as an entity by itself for those with a sizeable amount of assets. The use of an offshore grantor trust as the majority owner of the llc will give the added asset protection it needs for those who have a sizeable amount of assets in their LLC. This addition of the offshore grantor trust will also allow taxation minimization to be a feature of the structure since laws concerning an offshore grantor trust allows the settlor of the trust to have taxes flow onto their 1040 tax return at a lower rate than an international business company (ibc) is afforded by the laws.
The foreign offshore llc is also much better than a U.S. llc since there is so much red tape to deal with when opening accounts in the U.S. or abroad using the U.S. LLC. So given the choice between a foreign offshore one or an onshore one, it is much better to choose the offshore foreign llc since the freedom and asset protection gained is much better than could be gained from a Nevada or a New Mexico llc which are the most popular ones in the U.S. These should be avoided for those who want investment and business freedom offshore.
With a foreign offshore llc you have a lot less hassle and paperwork but with equal or better asset protection than an international business company (Ibc) if it is set up correctly. There are no director, treasurer, or secretary positions to have to try and figure out and keep track of. You have only managers with an offshore foreign LLC and you can have as many as you want or you can have one sole manager which is the Sovereign YOU.
You do not have to mess around with annual meetings or even do any extra time consuming paperwork. With a foreign offshore LLC you do not have the hassle of dealing with having or not having annual meetings. Since most people choose to be the only manager they sovereignly decide what to do WITHOUT the paperwork involved with meetings. There is also an easy "operating agreement" you can change yourself as the manager of the foreign offshore llc. But with an ibc you need to monkey around with changing the bylaws through the hassle of a meeting etc.
The use of an already established charitable foundation as the only owner and only member of the offshore foreign limited life or liability company provides interesting possibilites for those with a lot of assets to protect and grow. Also, the use of an insurance wrap is aimed at accomplishing tax deferred investing. But this kind of structure is very very expensive to set up and it is not the recommended way to go in our opinion unless you are very wealthy. So ask us about our low cost solution for tax free or tax deferred investing.To learn more about obtaining your own foreign offshore llc package for not only asset protection but also for offshore investing and business freedom please click here.
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