Non-U.S. LLC Statutes and Cross-Border Use

Scope of the chapter. The limited liability company is no longer an American form. Jurisdictions on every continent have enacted LLC statutes, and several small jurisdictions in the Caribbean and the Pacific have enacted statutes designed for owners who live elsewhere. This chapter examines four of those statutes in detail: the Nevis Limited Liability Company Ordinance, the Belize Limited Liability Companies Act, the Cook Islands Limited Liability Companies Act 2008 and the Marshall Islands Limited Liability Company Act of 1996. It then compares them with one another and with the American statutes, examines whether an LLC may pay a member's income taxes while the member's interest is subject to a charging order, and explains how a non-U.S. LLC is classified and reported for federal tax purposes and how American courts treat it.

Why these four. Each of the four statutes is used by American owners, and each has features that no American statute shares. Nevis, Belize and the Cook Islands combine a charging-order provision stronger than any American counterpart with a fraudulent-transfer rule of their own or, in the Cook Islands, with a trust statute that supplies one. The Marshall Islands statute follows the Delaware act closely and adopts Delaware's non-statutory law as its own, so that an owner obtains a Delaware-style entity formed outside the United States. Together they illustrate the range of choices available to a planner who considers an LLC formed outside the United States.

Relation to other chapters. The comparison of American formation states is in chapter 5, and the internal affairs doctrine as it applies to foreign LLCs is in chapter 12. Chapter 4 compares the LLC with other forms, including non-U.S. vehicles. Charging orders under American statutes are examined in chapter 27, which treats the tax-payment question at greater length, and the DAO LLC of the Marshall Islands is examined in chapter 53. The federal tax and reporting rules for foreign entities are treated in chapters 39, 42 and 46, and beneficial-ownership reporting in chapter 48.

Organization. The chapter proceeds as follows:

1. the features common to the non-U.S. statutes examined (¶ 5410);
2. Nevis (¶ 5420);
3. Belize (¶ 5430);
4. the Cook Islands (¶ 5440);
5. the Marshall Islands (¶ 5450);
6. other jurisdictions and a comparison of the four (¶ 5460);
7. payment of members' taxes while a charging order is in force (¶ 5470);
8. federal tax classification and reporting of non-U.S. LLCs (¶ 5480); and
9. cross-border use and the treatment of non-U.S. LLCs by American courts (¶ 5490).