An offshore LLC is a form of tax and asset shelter for the wealthy. It is the legal definition for a company that is based outside of an individual's native country, and follows the rules of Limited Liability Companies (LLCs) that allow people to be part owners without putting their personal assets at risk in the event that the company is sued. It is a popular form of investment or tax shelter for individuals in high-risk occupations where the likelihood of litigation is strong over the course of a career, such as with doctors and business owners.
Depending on the legal framework of the nation in which an offshore LLC is established, the company format also offers some anonymity to investors, whose names and personal details are not disclosed in the case of a lawsuit. This protection extends to offshore bank accounts. If an account were set up in an individual's name, foreign lawsuits would gain access to this information in the course of legal proceedings, making personal assets vulnerable to court judgments. An offshore LLC, on the other hand, only has to disclose the company name attached to offshore bank accounts itself in legal proceedings.
Some nations currently offer better legal protection than others in establishing offshore LLC businesses, with the top three as of 2011 considered to be Panama, the Cayman Islands, and Luxembourg. The island nation of Saint Kitts and Nevis is another popular location for the establishment of an offshore LLC. Saint Kitts and Nevis offers additional protection to assets being transferred to the LLC that is established there while an investor is currently under investigation from creditors and financial claims against his or her assets. An additional protection offered by Saint Kitts and Nevis, as of 1984, is that it requires any lawsuit posted against an offshore LLC under its jurisdiction to post a $25,000 US Dollars (USD) bond before it can be filed, and the bond is forfeited if the lawsuit is considered unwarranted. This discourages frivolous lawsuits against individuals who create offshore LLC entities in Saint Kitts and Nevis.
Among the key advantages to establishing an LLC in an offshore location, aside from privacy and legal protections, are that they offer protection from business taxes and allow for a transfer of funds to the offshore LLC at any time that are tax-free once there. This makes them attractive options for businesses or individuals who are taxed at a high rate in their native land. Nations or regions, therefore, that offer tax-free status to foreign investors are often quickly targeted as tax havens for offshore LLCs. This can include regions from Gibraltar in Europe, to the states of Oregon and Delaware in the US, and many Central American nations and island chains in the Caribbean and Indian oceans. Asian and Middle Eastern nations have also become locations for many offshore LLC businesses, including Hong Kong, Dubai, and Singapore.