Marshall Islands Limited Liability Companies
The Limited Liability Company (LLC) is a new type of business entity that is becoming increasingly popular with attorneys around the world. The Republic of the Marshall Islands has enacted a LLC Act facilitating the formation of these attractive business entities in a tax free environment.
Regardless of the circumstances surrounding the creation of a business entity, generally the goal is to maximize its profitability while minimizing the risk of exposing its beneficial owners to personal liability. The LLC provides this by combining the best traits of corporations and partnerships, while eliminating many of the drawbacks.
The main documents forming and governing a LLC are the:
- Certificate of Formation, and
- Operating Agreement.
The Certificate of Formation establishes the LLC and the Operating Agreement defines the economic organization, management responsibilities and other arrangements for members (or owners) of the LLC.
Formation of Limited Liability Company
LLC's formed pursuant to the Marshall Islands LLC Act must file a certificate of formation setting forth:
- the name of the LLC;
- the name and address of the Registered Agent;
- if the company is to have a specific date of dissolution, the latest date on which the limited liability company may dissolve; and
- any other matters the members determine to include therein.
Management of a Limited Liability Company
Members in a LLC are not required to participate in the management of the entity; instead, they may designate "managers" (who may or may not be members) to manage the affairs of the LLC. Members may also actively participate in management without losing their limited liability. Flexible management makes a LLC an excellent vehicle for transactions requiring a considerable degree of passive investment such as venture capital projects, investment in real estate, oil or technology, as well as research and development of business.
Members of a Limited Liability Company
The LLC may be conveniently employed in the types of parent-subsidiary arrangements inherent to large corporations because any type of entity may be a LLC member. In addition, the names of members are not disclosed in the certificate of formation, thereby preserving confidentiality.
The attributes of the members vary according to the management structure utilized by the LLC, and thus members in one LLC may be similar to partners, while in another, be more like shareholders. For example, if the management is vested equally in the members, then they take on the characteristics of partners. If management is vested in select members, most of the members have attributes of limited partners. If the management is vested in outside managers, however, members possess shareholder-like qualities.
Liability of Members of Limited Liability Company
Like shareholders in a corporation, the members of a LLC are protected from personal liability in excess of their capital investment. Like the partners in a partnership, members of a LLC can flexibly allocate management responsibilities and gains and losses. The LLC also allows members to contribute passively as in the limited partnership. Unlike the limited partnership, however, where the general partner remains personally liable in the event of a business loss, the LLC allows all members to contribute without risking personal liability.
Marshall Islands Limited Liability Company Act
The Marshall Islands LLC Act offers all of the above mentioned benefits in a tax free, confidential environment. The Marshall Islands law was modeled after the Delaware Limited Liability Company (LLC) law in the United States. LLCs formed under the Marshall Islands Act provide a cost efficient way to maximize your clients' profits while minimizing their liability.