Nevis LLCs: Are they worth it?
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Contents
- Why Nevis is a Top Choice for LLCs
- #1: It's expensive (and risky) to launch a lawsuit against a Nevis LLC.
- #2: Even if you lose, a Nevis court can’t force you to turn over LLC assets.
- #3: Anonymity and Privacy
- How to Use a Nevis LLC for Tax Savings and Asset Protection
- #1: Holding an Offshore Investment Portfolio
- #2: Estate Planning
- #3: Operating an Offshore Business
- #4: Enhancing Asset Protection
- How to Set Up a Nevis LLC
- Disadvantages of a Nevis LLC
- Mistakes People Make with a Nevis LLC
- Who Needs a Nevis LLC?
- Frequently Asked Questions
- Need Help?
LLCs are almost perfect. They’re easy to form and administer, making them a great way to hold a business or investments. But they’re also an amazing asset protection tool. Why?
Because if you (personally) get sued and lose, a legal concept called the “charging order” makes it difficult for creditors to grab your ownership (“membership”) interest in the LLC.
Difficult, but not impossible. In the United States, a creditor with deep pockets may eventually convince a court to let it seize your LLC or its assets. For stronger protection, you need to look internationally to places like Nevis, a small island in the Caribbean that has some of the strongest asset protection laws in the world.
In this article, we explain exactly how Nevis LLCs provide asset protection, who is the right fit for this structure, and whether you might consider this entity the next time you update your wealth protection plan.
What is a Nevis LLC?
A Nevis LLC (Limited Liability Company) is a type of business entity established under the laws of the Federation of St. Kitts and Nevis, a two-island nation in the Caribbean. The official name of St. Kitts is St. Christopher, but it’s better-known as St. Kitts.
Because of their legal flexibility, tax planning opportunities, and strong protections, Nevis LLCs have become a popular tool for US clients.
Why Nevis is a Top Choice for LLCs
Depending on the state you live in and the state in which you form an LLC, a domestic LLC can offer decent to very good asset protection. But a domestic LLC can never escape the jurisdiction of US courts.
Nevis, on the other hand, doesn’t automatically enforce foreign judgments in its own courts. And Nevis LLCs are shielded by some of the strongest asset protection laws in the world. An LLC properly drafted and registered there is extremely difficult to attack.
Here’s a closer look at why Nevis is such a great place to establish an LLC.
#1: It's expensive (and risky) to launch a lawsuit against a Nevis LLC.
Nevis doesn’t automatically enforce foreign judgments against Nevis LLCs. A creditor must start the whole legal process over again in Nevis.
Not only that, but in Nevis:
- A creditor can only sue your Nevis LLC – not you personally. Unlike the US, a Nevis court has no personal jurisdiction over you unless you are physically present in St. Kitts or Nevis.
- A case against a Nevis LLC must be proven “beyond a reasonable doubt.” This is the standard to be found guilty of a crime in the US. In most states, a civil case must be proven “on the balance of probabilities;” a much weaker legal standard.
- Creditors have to post a bond as collateral before they can even access the Nevis legal system.
- If the creditor loses, they will forfeit part or all of the bond under Nevis’ “loser pays” system.
#2: Even if you lose, a Nevis court can’t force you to turn over LLC assets.
The odds are stacked against a creditor coming after you in Nevis. But even if a Nevis court issues a charging order against a Nevis LLC, your creditors have no right to take its assets or your membership interest.
The most they can claim are future distributions from the LLC to you. This gives you a tremendous amount of power to force the other party into a settlement.
#3: Anonymity and Privacy
Nevis LLCs also offer a high degree of privacy. There is no public record of the LLC’s existence, making it nearly invisible to potential creditors.
This does not include Uncle Sam. You will need to file various forms with the IRS and Treasury Department letting them know about any foreign companies and foreign accounts you have an interest in.
How to Use a Nevis LLC for Tax Savings and Asset Protection
A Nevis LLC can be a powerful tool for a variety of wealth preservation purposes, from holding offshore investments to estate planning to operating an international business. Let’s take a closer look at some of the key ways you can use a Nevis LLC.
#1: Holding an Offshore Investment Portfolio
A Nevis LLC is an ideal vehicle for holding a portfolio of passive assets, like stocks or bonds, in an offshore account. By forming the Nevis LLC and opening the investment account in the LLC’s name, you create a tax-compliant and asset-protected structure.
#2: Estate Planning
Nevis LLCs can also be useful for estate planning strategies. For high-net-worth individuals, gifting minority ownership interests in a Nevis LLC to family members can allow you to take advantage of valuation discounts.
In estate tax planning, a valuation discount reduces the market value of assets gifted from a high-net-worth person or married couple to one or more beneficiaries. A typical valuation discount is 25%, but in certain cases, discounts as large as 70% are achievable.
This method can cut estate taxes by lowering the taxable value of assets like business interests or real estate when transferring them to heirs.
In practice, valuation discounts allow high-net-worth individuals and families to pass a lot more to the next generation before estate taxes come into play.
This is a sophisticated strategy you shouldn’t try without help from an estate planning expert.
#3: Operating an Offshore Business
If you create a domestic corporation to operate an international business, it can pay as little as 10.5% tax on its profits by having the corporation operate the business through a Nevis LLC it owns.
However, this has to be done properly. A lot can go wrong if you don’t set up and operate such a business properly and in full compliance with IRS requirements.
#4: Enhancing Asset Protection
As you’ve seen, a Nevis LLC offers outstanding asset protection out of the box. But you can improve that even further with an LLC “Operating Agreement”.
You can also place assets outside the country and beyond the jurisdiction of US courts and creditors. This places both the structure and the assets beyond the reach of US courts.
Overall, a Nevis LLC can be a versatile and powerful tool for safeguarding your wealth, reducing your tax burden, and achieving your financial goals. But — at the risk of repetition — it’s important to work with experienced professionals to ensure you set it up correctly.
How to Set Up a Nevis LLC
The process of setting up a Nevis LLC is pretty straightforward.
Hire someone to set one up for you. You have two options: work with a professional who will help you figure out how to fit a Nevis LLC into your planning and then register it, or work with a wholesale company based in Nevis who will give you one. The latter is cheaper but you’re more likely to end up with a structure that’s legal but doesn’t work for your needs.
Pass due diligence and draft the Articles of Organization. That will need to be filed with the Registrar of Companies by a Nevis agent.
Stay compliant. In practice, that means paying an annual renewal fee to stay in good standing and filing the applicable reporting forms with the IRS and Treasury.
Once the due diligence process is complete, your agent can file the Articles of Organization. When we help set up Nevis LLCs for clients, we suggest planning for at least a month from start to finish.
Disadvantages of a Nevis LLC
We’ve already talked about the advantages of a Nevis LLC. But for a balanced picture, it’s worth looking at the main disadvantages from a US client’s perspective.
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Compliance and reporting needs: US clients must meet various reporting duties when owning a foreign entity like a Nevis LLC. The US owners of the foreign entity must file an annual reporting form for the LLC. If the foreign entity holds non-US accounts in its name, its US owners may have to make additional disclosures. This includes filings such as the Report of Foreign Bank and Financial Accounts (FBAR) and possibly the Foreign Account Tax Compliance Act (FATCA) forms. These requirements can be complex. Failing to meet them can result in severe fines and penalties.
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Costs: Both the setup and operating costs of a Nevis LLC are higher than comparable costs for domestic LLCs in most states. Compliance costs are higher as well due to ongoing foreign reporting obligations.
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They are hard to bank: Over the last few years, it’s become harder to get banking services for Nevis LLCs. We have a lot of experience helping clients get it done. You might struggle to do it on your own.
FBAR Penalties & Other Dangers of Hiding Offshore Assets
Mistakes People Make with a Nevis LLC
Like most things, mistakes are just the process of learning. But when it comes to international planning, mistakes can be expensive. Here are the most common ones we see when it comes to a Nevis LLC.
Holding the Wrong Kinds of Assets: A Nevis LLC is a great way to hold many types of assets… from an asset protection point of view. But certain assets held in a Nevis LLC can create a tax nightmare back in the US. For instance, we generally suggest US clients avoid owning US investments in a foreign entity like a Nevis LLC. In our planning, that’s why we always recommend knowing what assets you plan to move into the LLC before you establish the structure.
Failing to Comply with U.S. Reporting Rules: One big mistake is not doing the required reporting back home. US owners (aka members) of Nevis LLCs must file certain forms with the IRS and possibly the Treasury every year. Missing these can lead to big fines and penalties.
Misunderstanding Tax Rules: If you don’t live in St. Kitts or Nevis and your Nevis LLC isn’t managed there, you won’t owe any tax in Nevis on any income or gain it generates. But US citizens and residents must pay tax on all global income to the IRS no matter the source. (Yes, there are ways around this, but they can be complex, and expensive to set up and maintain. Feel free to book a consultation with a Nestmann Associate to discuss your case.)
Overlooking Operational Issues: Some clients don’t consider the operational challenges and costs linked to managing a Nevis LLC. The challenge of getting an offshore bank account is an example.
Assuming Total Privacy and Protection: Thinking that a Nevis LLC provides complete anonymity and asset protection is wrong. While Nevis has very strong privacy laws, US clients must still reveal their ownership when legally required. In practice, that means telling Uncle Sam about it.
Poor LLC Structure and Maintenance: Not structuring the LLC right or not keeping it in good order can ruin asset protection. It’s crucial to make the right decisions when you first form the LLC.
Using LLCs to dodge US taxes or for other illegal acts. This isn’t just unethical, it’s ill-advised. The legal consequences of evading tax and violating money laundering laws are severe. You could be subject to serious fines and penalties, or even go to prison. And no amount of structuring will protect you.
Skipping Expert Advice: Arguably the biggest mistake we see is not getting the right advice before setting up a Nevis LLC. The fact is, there are plenty of companies out there who will register a Nevis LLC for a few hundred dollars. But if the planning around it isn’t done properly, it’s a waste of money. We can’t tell you how many times we’ve had to deal with “orphan structures” that were set up with no clear purpose and just sit there empty.
St Kitts and Nevis Bank Accounts
Should you open a St. Kitts and Nevis bank account? Here’s why you might want to, the banks that will do it, and what services are available.
Who Needs a Nevis LLC?
A Nevis LLC is a flexible structure that can fit into many different types of plans. But, like all planning, it’s better for some clients than for others. Here are a few likely scenarios:
The client is a 48-year-old architect based in Minnesota who regularly accepts commissions overseas. He has a net worth of approximately $10 million. Half of his net worth is held in a domestic living trust. The remainder is in his own name. His income in 2023 was roughly $500,000.
Main Client Concerns:
- He wants to move a portion of his assets outside the US.
- He wants his assets kept as private as possible.
- Because he’s in a high-risk profession, strong asset protection is important.
- He’s starting to give some thought to estate planning and providing for the next generation.
How the Nevis LLC Could Help:
- Provides robust asset protection from lawsuits and creditors.
- Could be used to hold accounts in Switzerland and other asset havens.
- Maintains ownership confidentiality and privacy.
- Potential for valuation discounts in an estate planning scenario.
NOTE: We have changed the case details to preserve client privacy.
The clients are a retired married couple in their early 70s with a net worth of roughly $6 million. They are exploring their first wealth protection plan. The husband, who owns a chain of furniture stores, and his wife, the CFO of a restaurant franchise, seek to safeguard their assets. About $2 million of their net worth is in a Roth IRA. They also own a significant portion of precious metals at an offshore private vault.
What the Client is Looking For:
- They are concerned about political risk in the US and want to get some of their assets out of harm’s way.
- They want to access international investment options.
- They are looking to keep records of their assets private.
How a Nevis LLC Could Help:
- Structuring through a Nevis LLC makes it very hard to enforce a claim.
- The offshore bullion position can probably be retitled in the name of the Nevis LLC.
- Assets held in a foreign structure can’t be instantly frozen as they can be if held in the US.
- It can serve as a springboard to further international investments.
NOTE: We have changed the case details to preserve client privacy.
Frequently Asked Questions
Do you have to go to Nevis in order to set up a Nevis LLC?
No, you do not have to physically go to Nevis in order to set up a Nevis LLC.
What are the key advantages of a Nevis LLC?
Easy to form and administer. This makes them ideal to hold a business or an investment portfolio.
For large estates, LLCs are an important estate planning tool. Sophisticated gifting strategies involving a Nevis LLC can save millions of dollars in gift and estate taxes.
Strong Asset Protection Laws: Nevis has some of the strongest asset protection laws globally, making LLCs established there virtually immune to lawsuits:
- A creditor can only sue your Nevis LLC – not you personally.
- A case against a Nevis LLC must be proven “beyond a reasonable doubt.”
- Creditors have to post a bond as collateral before they can even access the Nevis legal system.
- If the creditor loses, they will forfeit part or all of the bond under Nevis’ “loser pays” system.
- Creditors have no right to foreclose on the assets or membership interests of a Nevis LLC.
Anonymity and Privacy: Nevis LLCs provide a high degree of privacy with no public records of the LLC’s existence, keeping it hidden from potential creditors. (Although not from the US government.)
What are the requirements to form a Nevis LLC?
- You must have a registered agent located in Nevis.
- You must maintain a registered office address in Nevis. This is usually provided by the firm that registers the company for you.
- The company needs at least one member (i.e. owner) and one manager. Members and managers can be individuals or legal entities from almost any country.
- (Optional but highly recommended) It’s a good idea to have an expert review your case first before you set up a Nevis LLC. They will be able to tell you if you’re going to enjoy the benefits you hope.
How is a Nevis LLC formed?
Hire someone to set one up for you. You have two options: work with a professional who will help you figure out how to fit a Nevis LLC into your planning and then register it, or work with a wholesale company who will sell you one. The latter is cheaper but you’re more likely to end up with an “orphan” structure — something that’s legal but doesn’t work for your needs.
Pass due diligence and draft the Articles of Organization. That will need to be filed with the Registrar of Companies by your agent.
Stay compliant. In practice, that means paying an annual renewal fee to stay in good corporate standing.
(Optional but highly recommended). You’ll also want an Operating Agreement drafted to take full advantage of Nevis LLC laws; e.g. for asset protection.
What are the ongoing compliance requirements for a Nevis LLC?
Compliance is generally pretty straightforward. Your agent will need to file some paperwork with the Nevis authorities every year and pay an annual renewal fee. You also need to keep detailed business records for at least six years after a company is dissolved. And you’ll need to file reporting forms with the IRS and possibly the Treasury each year.
Can a foreign LLC transfer its domicile to Nevis?
Yes, there is a process for a foreign LLC to transfer its domicile to Nevis. Although in most situations, it’s better to create a fresh LLC in Nevis.
How much does it cost to set up a Nevis LLC?
Costs can vary widely. Setting up a Nevis LLC from a wholesale registrar without any planning can cost just a few hundred dollars. But we don’t recommend this unless you have a lot of experience in international planning. There are just too many ways for it to go wrong.
It’s better to work with a professional who can make sure that anything you do overseas fits into a proper wealth protection plan. For such services, you can expect to pay anywhere from $2,500-$10,000 depending on the complexity of your case.
How much does it cost to maintain a Nevis LLC?
Maintaining a Nevis LLC will generally cost anywhere from $1,000-$2,500 per year.
Need Help?
Over the past 40+ years, we’ve helped thousands of clients build better wealth protection plans. Structures that “de-risk” your assets and make you virtually immune to lawsuits is a big part of that.
If you’re wondering if a Nevis LLC is right for you, or you realize your plan needs some work, please get in touch to see if our services are right for you. It starts with a consultation with one of our Associates to discuss your case. You can do that here.
The Ultimate Guide to Nevis Trusts: Asset Protection, Privacy and Tax Benefits All in One
A few themes come up over and over with our clients — asset protection, privacy concerns, and a desire for lower taxes. A Nevis trust is one of the few planning tools that offers all of them in one package.
But that’s not to say it’s right for everyone. They can be expensive to set up. And compliance can be a bit of a hassle.
So is it right for you? This guide will help you figure that out: Nevis Trust.
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We have 40+ years experience helping Americans move, live and invest internationally…
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We have 40+ years experience helping Americans move, live and invest internationally…
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