A prospective client recently approached us seeking International Corporate structuring advice in regards to a project that he and some silent partners were looking to pursue outside of his home country including construction of a Private Hospital in country A and construction of a women’s shelter in Company B.
The query got me thinking about the different ways that a JV could be structured tax effectively using an Offshore Company/entity.
If you are in the same position as the querist, you’ll be pleased to know that there are several ways that you could structure such a project from an “Offshore” Perspective:
- You and the financial partner/s could form a JV (Joint Venture) Company in a nil or law tax environment (ie a Company Limited by Shares wherein you all hold shares and receive voting rights in proportion to the amount of shares held). In this scenario the person with the most shares would get to decide who the Director/s of the Company will be; or
- You could form a tax free LLC (eg in certain states in the US or in Nevis or in Belize) with membership units (ie the LLC’s equivalent of shares) distributed in proportion to your respective contributions (LLCs are treated for tax purposes as a Partnership ie the LLC doesn’t have to file a tax return or pay tax; It remits nett profits to the members who are then responsible for declaring the income/paying the tax thereon as/if applicable); or
- You could form a Limited Partnership (in a zero tax jurisdiction) ie where you would be the General partner and the investor/financier would be the Limited Partner (see below for details); or
- You could form an Offshore Company (ideally in a nil or law tax environment) and that Company could enter into a loan agreement with the Funder/s ie whereby your Company would agree to pay back the Loan Principal and or Principal with Interest or just interest only payments at certain agreed junctures (eg monthly or quarterly or yearly or?); or
- You could form an Offshore Company (ideally in a nil or law tax environment) and that Company could enter into an investment agreement with the Funder (ie whereby it is noted that the investor agrees to invest $ in your Company and in return your Company agrees to pay a return to the investor based on a formula as may be agreed); or
- You could set up a (non-licensed) Closed End Fund Company in a nil tax jurisdiction. In this scenario (wherein the Company has the power to issue 2 different classes of shares) the investor would get Class B shares in the Company ie the right to share in the Company’s nett profits but no voting rights. You would get Class A shares (ie shares that have both voting rights and the right to share in the Company’s nett profits).
What is a Limited Partnership?
Limited Partnerships are commonly used in Joint Ventures when one party is happy to contribute capital to the Partnership but doesn’t want to risk being made responsible for any debts (or legal liabilities) that may be incurred by the Partnership.
We can assist you to register a Limited Partnership in Seychelles or Scotland or the UK. The first thing you’ll need to decide is how to structure the Partnership.
To set up a Limited Partnership you’ll need to nominate one or more General partners and a Limited Partner.
In case you’re unsure as regards who is to fulfil what role you might like to note:
- An LP is not a Legal entity and cannot hold property in its own right. The property of the LP is held by the General Partner/s
- The General Partner/s is/are responsible for the administration and management of the LP including signing agreements and resolutions on behalf of the LP
- The General Partner/s is/are liable for the debts of the LP if the debts of the LP exceed assets owned by the LP
- Limited Partners are generally speaking (subject to certain exceptions) not liable for the debts of the LP
- A General Partner may also take an interest as a Limited Partner
- In most jurisdictions as part of the registration process an LP must file a “Statement of Particulars” which must include the name/s of the General Partner/s and a summary of the LP’s proposed business activities
Would you like to know more? Then please Contact Us: