There are many benefits of a Nevis LLC. An offshore LLC puts a solid layer of protection between you and your creditors. Operating your business through a Nevis LLC will keep those creditors from reaching company assets and retained earnings. Holding your savings and foreign investments in a Nevis LLC will protect them from prying eyes and secure them in a lockbox no creditor can reach.
To be clear, a US person can operate a business in the United States through an offshore LLC. All you need to do is file forms with your state to do business there, a Foreign Bank Account Report, and a tax return with the US IRS reporting the income of the Nevis LLC.
If you are operating the offshore LLC from the United States, the structure will not increase or decrease your US taxes. It should be tax neutral, meaning all income earned in the LLC will flow through to your personal return. The benefits of a Nevis LLC are privacy and protection – not tax savings – when you are living in the United States.
If you’re living and working outside of the United States, and qualify for the Foreign Earned Income Exclusion, then a Nevis LLC can help reduce your US taxes. For more information, see Foreign Earned Income Exclusion 2016.
We also use offshore LLCs incorporated in Puerto Rico to hold businesses. This gets you a 4% tax rate on Puerto Rico sourced income and allows you to live in the US. The catch is that you must have 5 employees in Puerto Rico. For more on this, see Blood in the Streets Offshore Tax Planning.
Now back to the point, the benefits of a Nevis LLC…
The island of Nevis, in the Eastern Caribbean across from St. Barts and just beyond Puerto Rico, has been a leader in offshore LLCs for business and asset protection since 1995. Where Cook Islands has focused on offshore trusts, Nevis has worked hard to build its reputation in offshore LLCs.
In 2015, the Nevis legislature updated the Offshore LLC Ordinance and significantly increased the asset protection benefits of a Nevis LLC. These changes made the Nevis LLC the strongest and most efficient structure possible to operate a business or hold personal assets.
First, Nevis allows for single member LLCs. This means that you can move your IRA into a Nevis LLC. It also means that you don’t need nominee shareholders or partners to use a Nevis LLC for asset protection.
In the case of an IRA or other US retirement accounts, only statutes that permit single member LLCs are compatible with US laws. This is because the owner of the Nevis LLC is your retirement account and not you and your spouse. You are the manager of the LLC and in control but not the owner.
For more on taking your IRA offshore, see my page on Offshore Self Directed IRAs.
The primary benefit of a Nevis LLC over the competition is the fact that the only option open to a creditor who has attacked the LLC in Nevis is a charging order lien. That is to say, that a charging order lien is the exclusive remedy and method to collect a debt against a Nevis LLC.
This means that someone with a charging order in Nevis is only entitled to distributions made from the LLC and not to the LLC membership interest or the underlying assets. As they can’t reach the membership interest, a creditor is unable to force the distribution of any assets.
This gets even better when the creditor is a US person. If the Nevis LLC refuses to make distributions, the creditor gets nothing. However, the person holding a charging order is required to pay US taxes on their portion of the LLC profits as if they were distributed or net (US IRS Revenue Ruling 77-137). This is because all income earned in the LLC flows through to the “owners,” which now includes the creditor, for tax purposes. Whether you receive cash or not from the LLC, you must pay US tax on your share of the net profits.
Think about that… the person who sued you is responsible for paying US taxes on the earnings in the Nevis LLC even though they have no right or ability to get to those earnings. Once the creditor who spent all the time and money to get a charging order finds out they are standing in a minefield, they will quickly settle for pennies on the dollar.
And a creditor would have had to spend a great deal of money to get that charging order. First, they need to put up a $100,000 bond in Nevis before filing a claim against a Nevis LLC. Second, attorneys in Nevis are prohibited from working on contingency. The litigant must pay for all legal services up front and in full.
Finally, charging order liens against Nevis LLCs expire after 3 years and are not renewable. This means that the person who attacked you gets to pay taxes on the profits within the Nevis LLC for three years and then loses any leverage he had to negotiate.
For these reasons, I believe the Nevis LLC is the best offshore limited liability company available.
I hope you have found this article on the benefits of a Nevis LLC to be helpful. If you would like to form an LLC in Nevis to operate a business, protect your assets, or hold your retirement account, please contact me at info@premieroffshore.com or call (619) 550-2743 for more information.
