¶ 2201
Overview
Four vehicles. Belize law offers the planner four vehicles for holding and protecting family wealth: the trust under the Trusts Act, Cap. 202; the foundation under the International Foundations Act, Cap. 24:02; the limited liability company under the Limited Liability Companies Act, Cap. 270:01; and the company under the Belize Companies Act 2022. Parts II, III and IV of this book examine the first three in detail, and chapter 18 examines the company as a holding vehicle (see supra chs. 5–13, 14–18, 19–21). This chapter sets them side by side. It compares them on the matters that decide a client's choice and then examines how each may be moved into or out of Belize and how one may be converted into another.
The comparison is statutory. Each vehicle is a creature of its own statute, and the four statutes were enacted at different times for different markets. The Trusts Act dates from 1992 and was amended in 2007, 2013 and 2023 (see supra ¶¶ 510, 570). The Foundations Act and the LLC Act were enacted in 2010 and 2011 for non-resident clients and were amended in 2013 and 2023 (see supra ¶¶ 1410, 1920). The Belize Companies Act 2022 replaced the International Business Companies Act and the domestic Companies Act (see supra ¶¶ 1810, 1820). The statutes use similar devices in different words, and the differences in wording produce differences in result. A comparison that relies on general descriptions of "trusts" or "foundations" will mislead. This chapter compares the texts.
Three points of difference that recur. Three differences recur throughout the chapter and should be stated at the outset.
First, the four statutes protect against creditors by different techniques. The Trusts Act directs the court not to recognise foreign claims of three kinds, including "the claims of creditors in an insolvency," and overrides the Belize avoidance provisions. Trusts Act, Cap. 202, s. 7(6)–(7) (see supra ch. 11). The LLC Act makes the charging order the creditor's exclusive remedy against a member's interest, bars the court from disregarding the company and confines claims to Belize judgments. LLC Act ss. 34–38 (see supra chs. 16–17). The Foundations Act exempts the endowment from the claims of the founder's and the beneficiaries' creditors, sets a short limitation period and a criminal standard of proof for fraudulent-disposition claims, and excludes the Belize avoidance provisions. Foundations Act ss. 79, 82–83, 98. The Belize Companies Act contains no comparable protection for a shareholder's creditor (see supra ¶ 1880.03).
Second, the statutes treat residents differently. A Belize resident may form an LLC or a company and may settle a domestic trust, but the founder and beneficiaries of a foundation must remain non-resident, because the 2023 amendments to the Foundations Act changed the name of the vehicle and left the residence rule in place (see supra ¶ 1940.03). The LLC Act was opened to residents in 2023. LLC Act s. 14 (as amended by No. 29 of 2023, s. 7) (see supra ¶ 1450.05).
Third, the tax treatment diverges. A registered international trust and a foundation keep statutory exemptions from Belize tax on foreign income. Trusts Act, Cap. 202, s. 65D; Foundations Act s. 107. The LLC has been within the Belize tax system since 2023, as a disregarded entity by default, and the company is taxed as a company. LLC Act s. 94 (as substituted by No. 29 of 2023, s. 13); BCA s. 308 (see supra ¶¶ 1450.07, 1890.05).
The second half of the chapter. The second half of the chapter examines movement. Each statute permits a foreign vehicle of the same kind to become a Belize vehicle without a transfer of its assets, and each permits a Belize vehicle to leave. Foundations Act ss. 85–91; LLC Act ss. 82–93; BCA ss. 176–180; Trusts Act, Cap. 202, s. 4(4)–(5) (see supra ch. 12). None of the four statutes contains a conversion procedure by which a vehicle of one kind becomes a vehicle of another kind while remaining the same legal person. A trust cannot become a foundation by filing, and a company cannot become an LLC by filing. Conversion between kinds is done by transfer of assets, by merger where the statutes allow it, or by interposing one vehicle beneath another, and each method has consequences for the creditor-law clock and for tax that the planner must weigh (see infra ¶ 2270).
Plan of the chapter. Paragraph 2210 compares the legal nature, formation and residence rules of the four vehicles. Paragraph 2220 compares control, fiduciary structure and the rights of those who benefit. Paragraph 2230 compares creditor protection. Paragraph 2240 compares duration, transparency, tax and cost. Paragraph 2250 examines recognition abroad and classification for United States tax purposes. Paragraphs 2260 and 2270 examine continuation and conversion. Paragraph 2280 applies the comparison to typical client profiles, and paragraph 2290 gathers the planning points, the master comparison table and checklists. Chapters 20 and 21 examine the governance of the foundation and the protection of its endowment in full, and this chapter draws on them only for comparison (see supra chs. 20, 21).