The Sequoia Group

Limited Liability Companies & Offshore Corporations

The formation of an offshore corporation or limited liability company (LLC) can be an extremely attractive and effective means of conducting business. An offshore entity may obtain authorization to conduct business in the specific U.S. states where it intends to offer products or services for sale; however, all income generated by the sale of goods or services in the U.S. is subject to U.S. federal and state income tax. Additionally, should the majority of the shares of the offshore company be held by U.S. persons, then the specific provisions of the “controlled foreign corporation” (CFC) rules of the Internal Revenue Code will apply to attribute such income directly to those U.S. persons as if they actually earned the income.

Benefits of Offshore Business Entities

Both offshore corporations and LLCs can be formed in a variety of jurisdictions, including the Bahamas, Cayman Islands, St. Kitts and Nevis and the British Virgin Islands. One of the primary benefits of an offshore business entity is that there will be no income tax imposed by the local jurisdiction where the entity is located. In addition, an offshore entity is the preferred vehicle for the holding of U.S. real property by foreign nationals as it allows for highly favorable U.S. income and estate tax treatment.

An Old Formula with a New Twist

The formation of an offshore limited liability company (LLC) is a relatively new twist on an old formula. As with the formation and operation of a domestic LLC, this unique entity allows both the benefits of corporate limited liability and free transferability of shares, while at the same time allowing for the highly beneficial tax treatment associated with a partnership or "S corporation," i.e. the flow-through of income, deductions and credits directly to the individual shareholders. In addition, all of the shares of the company may be held by an offshore asset protection trust, thus providing even greater security for the assets of the company itself.

In short, the formation of either an offshore corporation or limited liability company, which require minimal yearly administration and registered agent fees, provide a highly favorable means of conducting business, particularly where a significant portion of the income of the business will be derived from non-U.S. sources. The initial fees for formation of an offshore corporation or LLC range from $2,000 to $5,000, depending on the specific jurisdiction, with annual reporting and management fees being somewhat less.

For additional information on formation of an offshore corporation or LLC, please contact The Sequoia Group at 561-988-6009 to arrange a confidential consultation.

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