The Belize International Business Companies Act (IBC Act) allows for the formation of an LLC-like entity called a “limited duration company (LDC).” The Belize LDC is a pass-through company. That is, there is no tax at the company-level. These entities are very similar to the limited liability companies (LLCs) in the U.S. They are also similar to the GmbH in Germany and the “Limitada” in Latin America. Like an LLC, they are governed by their internal “operating agreements” rather than by-laws that are used by corporations.
Thus, the entity is essentially an LLC with a slightly different name. Whereas an LLC in some jurisdictions has a 30 year life, an LDC has a 50 year life. Therefore, the company will include in its memorandum of association a provision which limits the duration of the company to any period up to a maximum of fifty years from the date of its first registration as a limited duration company. The life of the company is renewable or can be re-filed at the end of this period. The name of the company needs to include at its end “Limited Duration Company” or the corresponding three-letter abbreviation.
Map of Belize
An existing company can also be converted to an LDC. This is often done for favorable tax treatment because there is no tax at the company level.
In either case, US people will typically file the IRS for 8832 and elect foreign disregarded entity status to ensure no US tax at the company level. Tax responsibility is, therefore, passed on to the members of the company, thus, typically lowering overall taxes.
Belize LDC Asset Protection
The articles of association of a may prohibit the transfer of any share or other interest of a member of the company absolutely, or may provide that the transfer of any share or other interest of a member requires either the unanimous resolution of all the members or a resolution passed by such proportion of the members as the articles of association may specify. What this means is that is someone sues a member of a properly structured entity and wins, the judgment holder is prohibited seizing a member’s share or any assets within the company. This is a significant benefit that is not available to a Belize corporation.
Like a US LLC, the act provides that the articles may designate that the affairs of the company can either be managed by its members, or by some person designated as manager with such rights, powers and duties as may be specified in the articles of association. In that case, the company shall be exempted from the requirement to have a Board of Directors. So, you can have centralized power, such as owning 1% and, as the manager, have 100% of the control. This may be ideal when taking on investors, allowing you to pull all of the stings. It is also very beneficial when involving family members. Mom and Dad can own 1%, for example, and have all of the control while the children own the remaining 99%. The kids cannot touch the money and parents can spend all of the money on themselves if they wish. However, when the parents die, the kids don’t get stuck with a big wealth transfer because the wealth grew when 99% of it was in the kids laps.
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The act also allows the articles to provide that a person ceases to be a member of the company upon the happening of any one or more of the events specified in the articles of association. They may further provide that the rights of such former members shall be limited to an entitlement to receive such value for their shares in the company, as may be determined by the articles of association. This means that if you are the manager of an LDC, you may elect to pay off one of the members and remove him from the company if he is hindering your business.
The articles of association can provide for the authorized share capital of the company to be divided into various classes of shares carrying either limited or unlimited liability. Naturally, most members would want their liability to be limited so that litigation against the company would not affect them personally.
There are numerous benefits offered by the Belize LDC. These benefits include financial privacy, asset protection, lawsuit protection and favorable tax treatment.
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