Marshall Islands Companies and Trusts

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General Introductory and Offshore Tax Information

The Marshall Islands has produced an appealing legislative framework for offshore companies and entities incorporated and registered in the Islands. This framework is embedded in the Marshall Islands Associations Law which contains Acts governing all Marshall Islands offshore companies. These Acts are: the Business Corporations Act, Limited Partnership Act, Revised Partnership Act and the Limited Liability Company Act. The Associations Law contains general rules for all Marshall Islands business companies, whilst specific clauses are given in the respective Acts for each type of Marshall Island Entity.

Marshall Islands has a fiscal regime under which taxes are applied based on residency in terms of source of income. Hence, unlike some offshore jurisdictions where company tax residency is assessed based on where a company is controlled and managed, in the Marshall Islands source of income is the determining factor. Consequently, what is found is a situation where offshore companies are referred to as non-resident domestic corporations, and a comprehensive legislation to support this framework. In the same vein, foreign companies (incorporated in a foreign jurisdiction) can also be resident or non-resident for tax purposes depending on whether they trade or offer services in or outside the Marshall Islands.

Marshall Islands corporate structures (e.g. offshore partnership versus domestic partnership) whether offshore or onshore are thus very much the same in terms of structure and powers, with the exception that offshore companies are tax exempt and restricted from trading within the Marshall Islands. Offshore company incorporation must also be done through the Trust Company (designated registered agent for Marshall Islands offshore companies and entities). Marshall Islands offshore companies and entities are subject to annual fees, but enjoy exemption from exchange controls, stamp duty, royalties, corporate tax, income tax, dividends, interests, estate and inheritance tax.

Marshall Islands Offshore Business Entities:

  • Marshall Islands Limited Liability Company (LLC)
  • Marshall Islands Offshore Business Corporation
  • Marshall Islands Offshore Banks
  • Marshall Islands Offshore Trust
  • Marshall Islands Offshore Partnership
  • Marshall Islands Offshore Limited Partnership

Marshall Islands Limited Liability Company (LLC)

Main Features:

  • Law- Marshall Islands Association Law 1995 (amended in 2005) (Limited Liability Company Act)
  • Marshall Islands Non-resident or offshore Limited Liability Companies can be either domestic or foreign LLC’s; based on whether incorporated in the Islands or incorporated outside the Islands but registered to transact in the Islands
  • Either domestic or foreign Marshall Island LLC becomes a non-resident or offshore entity if business is done exclusively outside the jurisdiction of the Marshall Islands
  • The main formation documents of a Marshall Islands LLC are the Certificate of Formation and the Limited Liability Company Agreement
  • The internal affairs of a Marshall Island LLC are governed by the Company Agreement which may written or oral
  • The Company Agreement may make provisions for the admission of members and assignees to whom certain rights, powers or share of profits and losses may be given
  • Assignees may eventually become members in the manner provided for in the Company Agreement and upon the written consent of all members
  • Marshall Islands LLC’s have no shareholders, all principals are referred to as members
  • Potential companies are allowed to reserve a name and adopt an appropriate name before being incorporated. Names can be altered after incorporation
  • The registered agent (The Trust Company) for service of process must be appointed by both foreign and domestic LLC’s whether onshore or offshore companies
  • An LLC may change or revoke its registered agent, but agents are not responsible for any of the obligations and liabilities incurred by an LLC
  • The Attorney General serves as registered agent for Marshall Islands LLC’s which do not appoint a registered agent
  • Marshall Islands offshore LLC’s are not allowed to enter into insurance, trust or banking business
  • One or more LLC’s may merge or consolidate with other LLC’s registered in the Islands
  • Managerial powers are proportionate to the percentage of each member’s interest unless otherwise stated in the Company Agreement
  • Members not required to take part in managing company
  • Favorably used for conducting business activities such as research and development, venture capital, technology, oil or real estate investments
  • Liability of each member subject only to contribution made
  • Names of members not disclosed in principle formation documents
  • Company name required to contain “Limited Liability Company or “L.L.C.” at the end Foreign Limited Liability Company
  • Refers to an LLC which is registered to operate in the Marshall Islands but was an LLC incorporated under the laws of a foreign jurisdiction Domestic Limited Liability Company
  • Simply refers to a Marshall Island Limited Liability Company which is resident and operates only in the Islands, contrary to an LLC used for international business (offshore trade)

Marshall Islands Offshore Business Corporation

Main Features:

  • Law-Marshall Islands Association Law (amended in 2005) (Marshall Islands Business Corporations Act)
  • The Act regulates both Marshall Islands onshore and offshore companies (corporations)
  • Marshall Islands business corporations constitute IBC’s or offshore companies if operating exclusively offshore as non-resident entities
  • May be acquired as a Shelf Company
  • Offshore business corporations are prohibited from carrying on insurance, trust and banking business. On the other hand, domestic corporations to which provisions of the banking and insurance laws apply are subject to the Business Corporations Act which is given priority if any conflicting clause needs to be clarified
  • Two or more corporations engaged in any joint venture as partners are subject to the provisions of the Revised Partnership Act
  • All instruments to be filed are to be signed at least one director or officer and written in English; Articles of Association must be filed with the Registrar
  • Minimum of one director to incorporate
  • Perpetual duration
  • Marshall Islands offshore corporations can continue or transfer out of the Marshall Islands, while offshore companies from other jurisdictions may transfer or redomicile into the Marshall Islands
  • Corporations transferring into the Marshall Islands are required to file Articles of Domestication, in which all relevant particulars of the corporation to be redomiciled are contained
  • Bearer shares may only be issued in the manner stipulated in the company’s constitution
  • Shares can be issued in any currency
  • Independent juridical personality with limited liability
  • The Trust Company is the only approved registered agent for all Marshall Islands offshore companies
  • May redomicile (domestication) from a foreign jurisdiction into the Marshall Islands

Foreign Maritime Entities

Features:

  • Regulated under the Business Corporations Act
  • Includes any partnership, trust foreign entity or other corporate structure whose constitution permits the ownership of vessels
  • Upon application to register in Marshall Islands must provide name, name of incorporating jurisdiction, date of incorporation, details on capacity to own and operate vessels, address of head office, names and addresses of managers, legal capacities to sue etc., name and address of Marshall Islands registered agent
  • Required to meet annual fee obligations
  • Should undergo the necessary filing procedures if merging or consolidating in the Marshall Islands with other entities
  • If being dissolved in jurisdiction of incorporation will be prohibited from transacting in the Marshall Islands until the necessary actions are taken for incorporation and reregistration in the Marshall Islands

Foreign Entity

Main Features:

  • Regulated under the Business Corporations Act
  • Refers to a foreign company, partnership, unincorporated association or trust which was incorporated in a foreign jurisdiction but has registered to do business in the Marshall Islands
  • All foreign companies must be registered in order to undertake any business activity in the Marshall Islands
  • Upon registration may operate domestically or as a Marshall Island offshore company
  • Issued a Certificate of Existence before commencing operations locally or as a Marshal Island offshore company
  • Operating as a Marshall Islands offshore company, keeping general meetings, opening bank accounts and setting up a local agency to facilitate securities exchanges, registration and transfer outside of Marshall Islands

Marshall Islands Offshore Banks

Main Features:

  • Law — Banking Act, 1987
  • Governs issuance of three types of Marshall Islands banking licenses: Offshore banking Licence, Domestic banking License, Savings and Loan Association License
  • Marshall Islands offshore banks must appoint a resident agent
  • A Marshall Island offshore bank may be required to maintain accounts, records, minutes and other documents
  • May offer trust services and act as a fiduciary
  • Unimpaired issued capital stock of $250,000 originally paid-up in cash
  • May only do banking business
  • May not do offshore banking business with local residents of Marshall Islands
  • Subject to annual licence fees
  • Subject to other fees and obligations as may be prescribed Branch
  • A bank office which does its own banking business and keeps its own records Domestic Bank
  • Minimum unimpaired issued capital stock of $1,000,000 originally paid up in cash
  • May offer trust services and act as a fiduciary
  • Required to present proof of insurance by the federal Deposit Insurance Corporation of the United States of America upon granting of license Foreign Bank
  • Established in a foreign jurisdiction
  • Carries domestic banking
  • May offer trust services and act as a fiduciary

Marshall Islands Offshore Trust

Main Features:

  • Law — Trusts Act 1994
  • May be created by will or codicil, conduct or oral declaration
  • The beneficiaries a Marshall Island offshore trust must be non-resident
  • Required to have at least one trustee who is licensed within the Marshall Islands
  • Local trustee may be a foreign trust that registered locally, a trustee company or a Marshall Island Corporation
  • Duration of 100 years
  • Minimum of two (2) trustees except if only one (1) was appointed
  • The Trust Company must be appointed as registered agent Employer Trust
  • Established by an employer for the benefit of employees
  • May involve pension funds, distribution of profits, stock bonuses or disability benefits
  • Perpetual duration
  • Certificate of registration to be renewed annually
  • Minimum of two (2) trustees except if only one (1) was appointed Foreign Trust
  • Provides services domestically but established in a foreign jurisdiction

Marshall Islands Offshore Partnership

Main Features:

  • Law — Marshall Islands Associations Law (Revised Partnership Act)
  • This Act regulates General Partnerships
  • Main formation documents include the Certificate of Partnership Existence and the Partnership Agreement
  • The Certificate of Partnership Existence contains the partnership’s name, particulars of the registered agent (The Trust Company), and may include the names of the partners and specifications authorizing signing on behalf of the partnership, powers and limitations of partners. However, under the Act each partner has the power to be an agent of the partnership
  • The terms and conditions for the internal administration and pursuit of the partnership’s aims and interests are contained in the Partnership Agreement
  • Whether an agreement is reached in writing or orally, all partners are bound to the terms laid out and consented to in the Agreement
  • A Marshall Island Partnership is referred to as a Partnership at Will if the partnership is not considered as such when undertaking a specific business activity or for a certain period of time. A Marshall Island partnership may however continue to operate such time has passed by filing the necessary documents with the authorities
  • A Partnership for a Definite Term or Particular Undertaking exists whenever the members agree to terminate the business after a certain duration of time or on completion of a specific undertaking
  • All partners are severally and jointly responsible for the partnership’s liabilities for the time during which they were partners.
  • Marshall Island offshore partnerships are required to designate a registered agent for service of process
  • Minimum of two (2) partners
  • Other Marshall Islands business entities may be converted into partnerships by filing the necessary documents; both a Certificate of Conversion and a Certificate of Partnership Existence are required for this procedure
  • To reinstate a partnership whose Certificate of Partnership Existence has been cancelled, a Certificate of reinstatement must be filed with the Registrar of Corporations along with the applicable fees
  • Marshall Island partnerships may also merge with other Marshall Island companies and entities or transfer to a foreign jurisdiction. Foreign entities may redomicile or transfer to the Marshall Islands as well

Marshall Islands Offshore Limited Partnership

Main Features:

  • Law- Marshall Islands Associations Law (Limited Partnership Act)
  • Marshall Islands Limited partnerships are regulated along the same guidelines as general partnerships
  • Limited partnerships may be foreign partnerships registered in the Marshall Islands as Limited Partnerships or local Limited Partnerships
  • Both foreign and local Limited Partnerships can acquire non-resident or offshore status by conducting trade and offering their services strictly outside the Marshall Islands
  • Marshall Islands Limited Partnerships differ mainly from ordinary (general) partnerships due to the way in which the liability for members is structured
  • Marshall Islands Limited Partnerships have both general partners and partners with limited liability
  • Limited partners have limited liability
  • A limited partner is responsible for liabilities and obligations ONLY if he assumed responsibilities as a general partner (such as managing and controlling the business) in addition to being a limited partner
  • Provision is made in the Act to admit persons as general partners and to pay/give interest (split of profits or otherwise) without the general having made or being bound to make any contribution to the business
  • Admission as a general partner is also possible under the condition that the person does not acquire any interest in the business; or as a sole general partner without contributing or acquiring interest in the business
  • Specifications for the duties and powers of limited and general partners can be detailed in the Limited Partnership Agreement Marshall Islands Limited Domestic Partnership
  • Operates locally within the Marshall Islands Marshall Islands Limited Foreign Partnership
  • Incorporated outside the Marshall Islands but is registered to do business in the Marshall Islands Marshall Islands Offshore Foreign/Offshore domestic partnership
  • Any of the two partnerships mentioned above used as a non-resident/offshore business entity
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