Updated
GL-L-06
Glossary · Structures and trusts
LLC - a company that keeps your personal assets apart from its debts
01 / In 30 seconds
The short answer
- What it is
- A company with limited liability of its members — the equivalent of a familiar limited company
- The main point
- The owner’s personal property is separated from the company’s debts
- Where you encounter it
- The US and a number of other countries; in Europe equivalents have other names
- Taxes
- Depend on the country of registration and the owner’s tax residence
- An important nuance
- A foreign company may fall under CFC rules in your country of residence
02 / In plain words
What LLC means
An LLC (limited liability company) is a company whose members have limited liability. Put simply: it is the closest equivalent of a familiar limited company. The key idea is the separation of property: the company itself is liable for its debts, not the owner’s personal assets, provided the owner has given no personal guarantees and has not abused the form.
The form is widespread in the United States, where the terms depend heavily on the particular state, and it is also found in other countries under the same or a similar name. In Europe forms with the same meaning have other names: Ltd, GmbH, Kft and so on. What they have in common is limited liability and the company’s separate legal personality.
For a client changing their country of residence, the main question is not the form but taxes at two levels: how the company is taxed in its country of registration and what happens in the country where the owner lives. After a move, a foreign company may fall under CFC rules: its income will have to be declared where you are tax resident. That is why the structure is always checked against the immigration plans.
A case from practice
A client registered a company abroad and six months later moved to Europe. After the change of tax residence, the company’s income fell under CFC rules, and a declaration was required. Had the structure been checked before the move, some of the questions could have been settled beforehand.
Why an LLC is set up
- Running an international business
- Limiting personal liability
- Working with foreign clients
- Holding assets through a company
- Proof of source of income
- Structuring a partnership
03 / What it covers
What to check
Company
- Country and jurisdiction
- Constitutional documents
- Reporting requirements
Taxes
- Tax in the country of registration
- CFC rules for the owner
- Dividends and their taxation
Ownership
- Members and shares
- The beneficial owner
- Registers and disclosure
Work
- Opening an account
- Substance where required
- Bank compliance
04 / How it works
How a company is usually set up
Define the task and jurisdiction
What the company is for: business, assets, proof of income.
Check the tax consequences
We calculate taxes in the country of registration and of the owner, including CFC.
Company registration
Constitutional documents, members, beneficial owner.
Opening a bank account
The bank checks the company and the owner under KYC rules.
Reporting and maintenance
Annual reports, fees and renewal of registration.
05 / Key facts
What you need to know
01Liability
Limited to the investment
The company answers for its debts. Personal guarantees by the owner or abuse of the form remove that protection.
02Taxes
At two levels
Taxation in the country of registration and in the owner's country of residence. Both are calculated before registering.
03CFC rules
May apply after a move
After a change of tax residency, the foreign company's income may have to be declared in the new country.
04Bank account
Harder than registration
A company is set up in days, its account only after the bank's checks. Choose the jurisdiction with banking in mind.
Common mistakes
Registering before calculating taxes
First calculate taxes in the company's country and the owner's, then register.
Mixing personal and company money
Keep a separate account and books: mixing weakens limited liability and raises bank questions.
Setting up where no bank will open an account
Before registering, check which banks work with companies from that jurisdiction.
Forgetting annual reporting
Plan renewals, reports and fees in advance: without them the company loses good standing.
06 / Expert advice
How to prepare in advance
First the taxes are calculated, then the company is registered — not the other way round. Two levels are checked: taxation in the country of registration and the consequences in the country of your tax residence, including CFC rules. Separately it is confirmed whether such a company will get a bank account: jurisdictions where registration is cheap but banking unavailable are common.
What we do for you. We look at your company as part of the immigration picture: it evidences your source of income in due diligence and at the same time creates tax obligations after the move. Reconciling these two things before applying is cheaper than putting them right afterwards.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
A company with limited liability of its members, the closest equivalent of a familiar limited company: the company is liable for its debts, not the owner’s personal property.
Mainly in the country and the details of regulation. The meaning — limited liability — is the same. The specifics depend on the jurisdiction.
Not by itself. But in a number of countries business immigration is built around a company: there, genuine activity, employees and presence matter.
Rules on controlled foreign companies. Under them an owner may be obliged to declare a foreign company’s income in the country of their tax residence.
Usually harder than registering the company itself. The bank checks the beneficial owners, the activity and the link with the jurisdiction.
No. Personal guarantees, abuse of the form and bad-faith conduct can lead to the owner’s personal liability.
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