An Isle of Man Limited Liability Company (LLC) is very popular with foreigners because they can own 100% of the company.
The Limited Liability Companies Act of 1996 (Act) governs the formation, business activities, and termination of an Isle of Man LLC.
Background
The Isle of Man is a British Crown Dependency and an island in the Irish Sea.
Its political system is a unitary parliamentary republic with a President and a Legislature.
Benefits
An Isle of Man Limited Liability Company (LLC) obtains these benefits:
• 100% Foreign Ownership: Foreigners can own all the shares of an Isle of Man LLC.
• Limited Liability: The members are liable only up to the amount of share capital they contributed.
• No Taxes: Non-resident owned LLC’s who do not engage in business in the Isle of Man pay no taxes. However, U.S. taxpayers along with everyone subject to global income taxation must report all income to their tax authorities.
• Fast Registration: Standard registration takes 48 hours with the option to pay higher fees for faster registration.
• Two Members: A minimum of two members (who can be foreigners) is required to form a LLC.
• No Minimum Share Capital: There is no required minimum authorized share capital.
• English: Since the Isle of Man is part of the United Kingdom, English is its official language.
Company Name
The LLC must select a company name not used by any other Isle of Man legal entity. The company’s name must end with either the words “Limited Liability Company” or the abbreviations “L.L.C” or “LLC”.
Prior approval of a proposed company name is available from the Registry Department which has the power to reject a proposed company name, make conditions as to how a name is used, require that a LLC change its company name, and change the name if the LLC fails to comply with the Department’s order to change it.
Registering the LLC
The following three items must be filed with the Companies Registry in order to register a new LLC:
• The Articles of Organization for the LLC;
• A complete application form (L6); and
• The registration fee.
Articles of Organization
The law does not provide a specific format for the Articles of Organization. However, the Limited Liability Companies Act 1996 (Act) requires this information:
• The company name;
• Members names and addresses;
• The Isle of Man Registered Agent’s name and address;
• Total amount of contributions in cash and value of like kind;
• The right to add additional members and admission terms and conditions;
• Effect on the company due to members’ resignation, retirement, death, bankruptcy, expulsion, or dissolution;
• If the LLC will elect a manager; and
• Any other provisions regulating the LLC’s internal affairs.
Powers set forth in the Act are not required to be repeated in the Articles of Organization.
The person forming the LLC along with named initial members named in the Articles of Organization all must sign the Articles.
The Companies Registry will issue a Certificate of Organization which is proof of registration.
Registration Fees
The registration fees depend upon how quickly the applicant seeks to have the LLC approved:
• £100 for a standard registration occurring within 48 hours upon receipt of all required documents
• £250 for registration to be completed in 2 hours; and
• £500 for a faster service while the applicant waits
Limited Liability
Liability is limited for its members up to their capital contribution which must be set forth in the Articles of Organization.
Members
At least two members are required to form a LLC. The members of the LLC govern the company much like partners govern a partnership. Membership is not assignable or transferable.
Beneficial Ownership
If the LLC is formed on behalf of a specific owner’s benefit, his/her identity as the ultimate beneficial owner must be disclosed on a confidential basis to the Companies Registry.
Operating Agreement
A private document called the “Operating Agreement” contains the internal regulations and how the LLC is controlled. This document must include:
• Company name approved by the Companies Registry;
• Names and addresses of the members;
• Registered agent’s name and address who must be qualified under the Registered Agent’s Qualifications Regulations of 2003;
• Total amount of the members’ capital contributions;
• Members’ rights to admit more members;
• Members’ rights to receive repayment from the LLC of any or part of their capital contributions; and
• If members are permitted to appoint a manager.
Every LLC must maintain a register of details regarding its members. The register must be kept at the LLC’s registered office or at any other location in the Isle of Man.
Directors
There is no requirement for directors in a LLC.
Management
While there are no directors and the membership can manage the LLC on its own, the LLC can choose to appoint one or more managers as specified in the Operating Agreement.
Minimum Authorized Share Capital
No minimum authorized and issued share capital is required.
Registered Office and Agent
Every LLC must have a registered office address in the Isle of Man along with a local registered agent.
Taxes
LLC’s are taxed as a partnership. Therefore if a LLC has no Isle of Man residents and does not engage in any type of business in the Isle of Man, it pays no taxes. In addition, distributions made to non-residents pay no taxes and there are no withholding taxes.
However, U.S. taxpayers along with everyone subject to global income taxation must report all income to their tax authorities.
VAT and EU Trading
The Isle of Man is not a member of the European Union (EU). However, it is part of the EU customs territory pursuant to Protocol 3. An Isle of Man LLC can open for business in the Isle of Man and register for a VAT. This gives the LLC an advantage in utilizing the Isle of Man Corporate Tax Rate of 0% while trading in the EU.
Accounting and Auditing
The law does not require annual financial statements. However, the Act does require that accounting records be sufficient to prove and explain the LLC’s business activities.
As with any company, records must be kept regarding income, payments, loans, fees paid, and profits.
An annual return must be filed with the Companies Registry detailing the LLC’s capital and membership. Failure to file the annual return by its deadline will result in the LLC being removed from the Companies Registry.
Annual General Meeting
The law does not require formal meetings of members.
Public Records
The Companies Registry records are available to the public.
Time for Registration
It is estimated that registration and approval of the LLC may take 48 hours or less if the applicant wishes to pay higher registration fees.
Shelf Companies
Shelf Companies are not available.
Conclusion
An Isle of Man Limited Liability Company (LLC) obtains these benefits: 100% foreign ownership, limited liability, minimum of two members (who can be foreigners) is required, no minimum share capital, and English is the official language.
