The Nevis LLC: A Versatile Offshore Wealth Protector

Hollander and Company, LLC
www.hollanderco.com
Tel: (212) 576-1061
Fax: (212) 576-1078
editor@hollanderco.com

Corporate &
Commercial
Law Article

Jay Hollander, Esq. is the principal of Hollander and Company LLC, www.hollanderco.com, a New York City law firm concentrating its efforts in the protection and development of property interests relating to real property, intellectual property and commercial interests, as well as related litigation.

The content of this article is intended to provide general information relating to its subject matter. Providing it does not establish any attorney-client relationship and does not constitute legal advice. Personal advice in the context of a mutually agreed attorney-client relationship should be sought about your specific circumstances.

Article

Nevis, a small Caribbean Island, who only in recent years gained a reputation for financial privacy and asset protection, has added a new weapon to its wealth preservation arsenal: the Nevis limited liability company.

While most states and many foreign jurisdictions recognize limited liability companies, the Nevis LLC promises to be particularly popular because of its many unique features.

The Nevis LLC can be either member directed or managed by an outside foreign director. For asset protection purposes, the LLC should be controlled by an outside director, particularly if a debtor member owns a significant interest and can be compelled to change management to one who would obey a U.S. court order.

If you have a judgment creditor, the creditor can only obtain a charging order against your LLC interest. This entitles the creditor only to your share of any distributions from the LLC. The LLC interest cannot be seized nor can the creditor vote your interest or exercise other member rights, such as the inspection of books and records. Interestingly, Nevis law imposes U.S. income tax liability for the debtormember's share of the apportionable profits, notwithstanding whether the creditor received a distribution. These same protective features are found with U.S. limited partnerships and LLC's but usually not with offshore entities designed to shelter wealth.

Properly structured, a Nevis LLC can delegate virrually all powers to the managing director, who like a Trustee of an offshore trust can ignore U.S. court orders to repatriate assets. If the LLC has two or more members, an operating agreement provision requiring unanimous member vote to change the managing director will stifle a court order compelling one debtor member to replace the director. Conceptually, the Nevis LLC then assumes the same protective characteristics of the offshore trust, except that the debtor member may retain an interest in the LLC and, derivatively, its assets.

Unlike the situation with an offshore trust, if you are in litigation or have an existing creditor, under Nevis LLC ordinances, you can place assets into the LLC and avoid a claim of fraudulent conveyance if your membership interest is proportionate to the contributed capital. However, a promise of a future contribution by other LLC members can be used to achieve proportionality, thus leaving the debtor member with a minority interest, although he contributed all or most of the present assets. Unfortunately, U.S. limited partnership law is unsettled on whether a present creditor can successfully attack a transfer to a limited partnership as a fraudulent conveyance when the debtor received, in exchange a proportionate interest in the limited partnership. In this respect, the Nevis LLC can be more protective than both a foreign trust or limited partnership and can be legally and ethically used regardless of your financial situation.

In addition to its strong asset protection capabilities, the Nevis LLC boasts several other significant features:

- The Nevis LLC has minimal reporting requirements, and it is not subject to the foreign trusts new reporting requirements.

- While it is tax neutral, like an offshore trust or FLP, it can elect to be treated either as a partnership or "C" Corporation under IRS regulations.

- If the LLC conducts business in the U.S. and has U.S. source income, it can be structured for profits to flow to the owners or mangers as specified in the operating agreement

- Ownership can be in registered or bearer form for anonymity of ownership or affiliation.

- Officers and directors are immune from company liability, and creditors cannot pierce the corporate veil.

- There are no requirements to keep minute books, hold annual director or member meetings or observe other customary corporate formalities.

- As with its domestic FLP and LLC counterparts, the Nevis LLC can similarly save estate taxes through discounted valuations. You can also easily gift interests in the LLC and maintain all income rights and management control of the company. Or you may, for privacy purposes, maintain control while titling ownership elsewhere.

- The Nevis LLC can also be owned by an offshore trust in lieu of an 'BC and can also be used in combination with domestic entities, such as FLP's and domestic irrevocable trusts.

- The Nevis LLC can be set up quickly and is usually less costly to form and maintain than an offshore asset protection trust.

- Nevis is an outstanding privacy haven and is politically and economically stable.

While many more Americans are using Nevis LLC's in place of offshore trusts, there are still instances where the trust may be preferable, particularly when estate planning is an objective. The Nevis LLC should however, replace many IBC's because it does offer so many advantages. Clearly, for achieving a wide variety of financial or legal objectives, it is an alternative structure for offshore financial planning that should always be considered.

EDITOR'S NOTE: This article was contributed to this site by Dr. Arnold S. Goldstein in the public interest. Dr. Arnold S. Goldstein is President of Arnold S. Goldstein & Associates, with offices at 384 South Military Trail, Deerfield Beach, FL 33442 (Telephone: 954-420-4990). His firm concentrates on asset protection and estate planning.