The Marshall Islands is a favorite place for individuals seeking to form an offshore corporation. Although the financial secrecy and privacy is not as high as in other tax havens such as the British Virgin Islands or Luxembourg, the Marshall Islands utilizes a hybrid of US and UK law which is very beneficial for individuals seeking to form an offshore corporation or business entity.
The following is a summary of the different types of businesses that can be formed on the Marshall Islands.
IBC – International Business Corporation: The IBC is a very popular business formation tool because it can be used for many different purposes and is considered a distinct or separate legal entity. Because it is a corporation, the investor/owners are limited as to their personal liability in the company. The IBC can be formed relatively quickly, although it generally does require an initial investment of $50,000.
General Partnership: As in the United States, a general partnership allows a modification of allocation of debt and gain so that even if a person invests a certain percentage, they may be able to obtain profits and losses at a different percentage than what they invested – which can be beneficial in a variety of circumstances. One main issue with the general partnership is that the partners are each liable for their own debts/liabilities along with the debts/liabilities of the other partners — which puts the partners at a big risk as to personal liability.
Limited Partnership: In a limited partnership, there is at least one general partner and usually multiple limited partners. The limited partners are not able to actively participate in the business but their liability is limited (most of the time) to the amount of their investment. There are additional registration requirements for limited partnerships as opposed to general partnerships but the LP has become a common offshore business planning entity type.
LLC: a Limited Liability Company is a favorite type of business formation for individuals around the world. This is because in an LLC, the members are only liable for the amount that they invest and the LLC (unlike a partnership) is considered a separate and distinct entity. There is flexibility and management and the LLC members have the right to designate managers oversee the day-to-day activities of the LLC.
*The Marshall Islands authorizes series LLCs so that one LLC can own multiple LLCs which may assist in management and tax reporting.
FME: an FME is beyond the scope of this article but it is essentially for non-Marshall Island entities seeking to own vessels in accordance with RMI law
When it comes to foreign compliance one of the key issues is FATCA (Foreign Account Tax Compliance Act). The following is a brief summary of FATCA:
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)