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Belize LDC Formation
A Belize LDC, or Belize Limited Duration Company, is the local equivalent of a Belize LLC. The term “limited duration” refers to its 50-year lifespan. The company be continuously renewed for additional 50 year increments. A Belize LDC is formed under the Belize International Business Companies Act. Like an LLC, there is no tax at the company level. Belize LDC is also comparable to LLCs in the United States. Like an LLC, the is managed according the terms of its operating agreement, rather than by-laws that are used by corporations.
Belize LDC Company Benefits
Many feel that the LLC and LDC are comparable, and they are, but there are some differences one should review. In contrast to an LLC, the life span of which had traditionally been thirty years in many jurisdictions, an LDC offers a fifty-year life span. The company must add something to the memorandum to limit the company’s lifespan to fifty years or less, starting from the company’s official registration date as an LDC. As stated, once this time passes, someone is able to file to continue to the company’s existence. Additionally, Belize requires such companies to include “Limited Duration Company” or LDC at the end of its name.
Other benefits of Belize LDC include the following:
- Your Belize LDC is exempt from tax in Belize
- Forming an LDC in Belize is a fast and easy (and must be formed through an agent)
- Belize LDC laws allow for a great deal of flexibility.
- A Belize LDC is capable of being restricted (to a special purpose) for any object not prohibited by the laws of Belize.
- The Belize LDC may have only one member and manager. Members and managers do not need to be resident in the country.
- A Belize LDC may be formed in any language (provided a properly translated English version is also submitted)
- The Certificate of Formation is also granted in that foreign script.
You do not need to simply start a new company to form a Belize LDC. You can also transfer an existing company and turn it into a Belize LDC. So a company that is already formed in the US or UK, for example can be converted into a Belize LDC and retain its age. Many people choose to convert their existing entities because Belize does not tax LDCs at the company level.
If the Belize LDC has a US owner, most tax advisors suggest that an IRS form 8832 should be filed. The most common election made on this form is for foreign disregarded entity status for one-owner companies and foreign partnership status for companies with two or more owners. This helps to protect you from excess United States taxation at the company level. Instead, the tax responsibility simply flows through to the member(s). This saves money in taxes that would normally need to be paid at the company level and then again at the personal level. With a Nevis LDC there is only one level of taxation: personal.
How to Form a Belize LDC
- Similar to forming an LLC in Belize, when forming an LDC, the company needs to be formed through an agent. You will make the payment of your fees to this agent (such as this one) in order to form a company in Belize. Belize does not allow a company to be formed without using an agent.
- Most of the information needed to register your company can be completed over the phone, online, faxed, or mailed. On the initial phone call, you will select a name.
- Each owner/director must provide a copy of a notarized passport and proof of address to the agent. The agent is legally required by the Belize government then utilize this information to do a due diligence background check on the company’s listed owners.
- After your registration documents are complete, your agent will submit the Memorandum and Articles of Association for the company. The agent must then submit it to the Belize government as well as the required fees.
- After Belize files your documents, you then receive a certificate of formation, making it official.
- Remember to submit your yearly annual fees to your agent each year to meet the requirements of the Belize government.
How a Belize LDC Protects Your Assets
With a Belize LDC, owners have more statutes in place to protect assets and personal property through the articles of association, something that is not offered by a standard Belize corporation. When forming the articles of association, LDC members may decide not to allow transfers of shares or other assets owned by the company unless all members agree to such a change. That helps prevent someone who has sued a member from taking his or her interest in the company. In addition to the members agreeing to this restriction, if members agree to sell a portion of the company, the members must make a written resolution. The resolution will specify the decision that a transfer should be made and how much of an interest in the company to transfer.
By including this provision in the Belize LDC’s articles of association, the liabilities of one company member does not affect all of the members as a whole. Therefore, if one company member winds up with a lawsuit and your LDC has been formed correctly, even if the lawsuit is lost, the individual pursuing litigation cannot wind up taking member’s ownership interest in the company. This asset protection benefit is an additional provision not available to standard Belize corporations unless they file to convert to a Belize LDC.
Similar to a US LLC, the LDC’s articles can allow for a manager to manage the company or for the company to opt to have members run the organization. This is referred to as “manager managed” or “member managed.” In the first arrangement, a manger, who may or may not be a member, runs the company. In the second arrangement, the power to operate the company is left up to the members. By selecting designated managers, the company then no longer needs to list a Board of Directors. Allowing for this type of control can be very beneficial when a company is dealing with investors because the company’s selected managers still retain control of the company’s decisions.
Members can be bought out of their shares, as long as this option is specified in the operating agreement and/or articles. Furthermore, events that can terminate a member’s connection to the company also must be located in the articles of association and/or operating agreement. The rights of former company members are should be included. Thus, if allowed, former members must be bought out, and the rules for this process should be dictated clearly in the articles and/or operating agreement.
Specified in the articles of association, the company can both divide and classify shares as either limited or unlimited liability. Most likely, most of the members will want as little liability as possible, so this format allows for such liability against the company itself to remain within the company and the members are protected from personal liability.
Therefore, one can see after reviewing some of the additional company benefits offered by a Belize LDC, why many business owners choose to form a limited duration company in Belize. Typically, the LDC offers substantially more room for business owners to protect themselves from lawsuits, as well as favorable tax benefits, and these are some of the reasons is why many company owners choose the Belize LDC.