Nevis LLCs: State-of-the-Art Asset Protection

Nevis LLCs: State-of-the-Art Asset Protection

By Mark Nestmann • June 10, 2013

Do you have business or investment assets you're looking to protect from frivolous litigation? If you do, a Nevis limited liability company (NLLC) could be one if the most effective and least expensive ways to protect it.

By way of background, Nevis is an island located 225 miles southeast of Puerto Rico.  It's part of the Federation of Saint Kitts & Nevis that achieved independence from Great Britain in 1983.

The Nevis LLC ordinance came into existence in 1995. Today, it is undoubtedly the most popular non-U.S. LLC in the world for reasons I'll describe in a moment.

In common with an LLC formed in a U.S. state, a Nevis LLC comes into existence upon the filing by a local agent. (One of The Nestmann Group's affiliate companies is a local agent in Nevis.)  The owners of a Nevis LLC are called "members." If the Nevis LLC carries out its business outside the Federation of St. Kitts & Nevis, its income isn't subject to local tax, although it may be taxed in the residence country of its members.

Any LLC—including a Nevis LLC—protects its assets and operations from creditor claims against a member by limiting the remedy available to creditors to a legal concept called the "charging order." Under the charging order concept, creditors of members of the LLC don't generally have the right to force the business to liquidate, or to seize the interests of the liable member or members. Creditors only have the right to receive future distributions made from the business to the liable member.

In theory, even with a charging order in place, an LLC can carry on its business and even enter into new ven­tures and business activities without being hindered by a creditor.  Non-liable members can receive monies from the LLC as advances, loans, or other benefits not classified as a distri­bution.  Liable members can receive these benefits as well, although a creditor may be able to attach them.

The problem is that with LLCs formed in a U.S. state, results-oriented judges have found ways to bypass charging order protection and attach the membership interest of LLCs. This problem is particularly acute in single-member LLCs, or when the liable member declares bankruptcy.

Nevis LLCs don't suffer from these problems. Under the laws of Nevis:

  • Judgments outside Nevis against Nevis LLCs or their members or managers aren't automatically enforced.  To enforce the judgment in Nevis, the creditor must first retain a Nevis attorney, who under local rules may not work on a contingency basis. That means the creditor is paying legal fees from day 1. The creditor must also post a cash bond with the local court to cover any damages or court costs incurred as the result of any counter claim the debtor may be awarded. Nevis is also a “loser-pays” jurisdiction; the prevailing party in litigation is generally entitled to have its legal fees reimbursed by the loser.
  • The "charging order" is the exclusive creditor action permitted against a Nevis LLC or its members. Creditors only have the right to receive future distributions made from the business to the liable member. They have no right to interfere in the business or to foreclose on the ownership interest of the liable member. Indeed, Nevis has no winding-up mechanism for LLCs, making the charging order truly the only way creditor can recover assets from a Nevis LLC.
  • Only the LLC may be named as a defendant in any suit.  A lawsuit against a Nevis LLC that also names its members or managers as defendants may be dismissed.  This procedural requirement makes the process required to attach the interest of a member significantly more difficult.
  • Proof of receipt of membership interest defeats a fraudulent conveyance claim.  Under Nevis law, the transfer of assets to an LLC is not considered a fraudulent conveyance as long as the transferor receives a corresponding equivalent membership interest in the LLC.  This doctrine holds true to defeat all creditors even if the creditor's attack is based upon the LLC's status as a single-member LLC.
  • An enhanced burden of proof is required to prevail in a fraudulent conveyance action against a Nevis LLC. Local law requires proof "beyond a reasonable doubt" that a transfer was fraudulent for a creditor to prevail in a fraudulent conveyance claim.
  • Procedural rules discourage frivolous litigation. In the unlikely event that a Nevis court finds your transfer of money or property to a Nevis LLC fraudulent, it will be set aside only to the extent necessary to satisfy actual damages (not punitive damages) suffered by a particular creditor. Moreover, each creditor must bring a separate action in the local court.

I could go on, but hopefully you get the idea. The Nevis LLC truly is a state-of-the-art asset protection entity.

What about taxation? A Nevis LLC is what is known in the tax world as an eligible entity for U.S. entity classification purposes. Eligible entities are able to choose how they will be treated by the U.S. for tax purposes. This gives U.S. members in a Nevis LLC an enormous degree of flexibility on how they choose to have its income taxed.

For instance, if you're looking to protect a portfolio of passive assets within a Nevis LLC, you'll probably want to choose to have it taxed as what the IRS calls a "disregarded entity" (if the LLC has only one member) or a "partnership" (if it has more than one member). On the other hand, if you're a business owner operating a business outside the United States, you may choose to have your Nevis LLC taxed as a "foreign corporation." This allows you to defer paying tax on your non-U.S. business profits.

The Nestmann Group, Ltd. charges $2,500 to create a Nevis LLC, complete with articles of organization, a customized operating agreement, and a 30-minute consultation with a one of our partners to select the appropriate choice for how the entity will be taxed. This payment covers all government fees for one year along with the right to consult our partners to answer questions relating to the proper use and operation of the entity.

A Nevis LLC is an outstanding opportunity for anyone whose personal or business activities could benefit through the use of a state-of-the-art offshore business entity. To get started, please contact us at service (at) nestmann.com.

Copyright © 2013 by Mark Nestmann

Protecting your assets (and yourself) against any threat - from the government, the IRS or a frivolous lawsuit - is something The Nestmann Group has helped more than 15,000 Americans do over the last 30 years.

Feel free to get in touch at service@nestmann.com or call +1 (602) 688-7552 to learn how we can help you.

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About The Author

Since 1990, Mark Nestmann has helped thousands of clients seeking wealth preservation and international tax planning solutions. He is the author of highly acclaimed Lifeboat Strategy and other books & reports dealing with these subjects.

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