Saint Lucia: St. Lucia's IBC - LLC Flexible

With many centres having implemented LLC or limited liability company legislation, the question has often been posed why not St. Lucia or simply when? The LLC's attractiveness to the US market is based, amongst other things, on the ability of a US person to be able to elect to have the entity treated as a disregarded entity, partnership or an association taxable as a corporation. This election is binding for a period of 60 months and is usually made to provide flexibility in managing the US person's business needs.

LLCs generally have the same legal characteristics as companies save the terminology. For instance, shareholders are referred to as members and directors as managers ¹. There often is no reference to a unanimous shareholder's agreement but typically to an operational agreement that has the same effect.

A St. Lucian IBC can make the election at the time of incorporation. If no election is made the IBC will be considered a corporation. In order to be a disregarded entity there must be only one member, whereas at least two are required for the partnership election ².

The most significant factor in the suitability of the IBC to provide the LLC-type flexibility is Reg.301.7701-b(8)(i) of the US Internal Revenue Code, 1986, as amended, which lists various countries and the types of entities in those countries as being corporations. Where an entity is listed, absolutely no election can be made under the entity classification rules (commonly referred to as "check-the-box") to treat these entities as anything but corporations. St. Lucia is not listed in this Reg. and as such corporations formed in this jurisdiction can make an election ³.

Under the St. Lucia IBC Act, an IBC has the flexibility to be classified as an exempt IBC or one that is taxable on its worldwide income at a maximum rate of 1%. Furthermore, in all cases, it is exempt from exchange controls or withholding taxes. The IBC has the built in flexibility of the most accepted regional models and can be set up at a very competitive cost with the fastest incorporation times in the industry.

While it is acknowledged that this lacuna may have a limited life, draft dedicated LLC legislation is being considered to ensure that this new entrant into the financial services industry remains a jurisdiction of choice for all reputable investors.

1 Nevis Limited Liability Company Ordinance 1995,
Barbados Societies with Restricted Liability Act 1995

2 Section 89 St. Lucia International Business Companies Act 1999

3 Paul Tadros US International Tax Partner PWC Barbados