News and Insights
26 September 2022
Limited Liability Companies (LLCs) are as closely associated with the USA as mom's apple pie; some 70% of all legal vehicles set up there are LLCs. And as of September 2022, Jersey has introduced its own version, which begs the questions: what are they and why now?
Jersey already offers a galaxy of options to businesses looking to set up here: limited companies, limited liability partnerships, unit trusts, trusts, partnerships, limited partnerships, incorporated cell companies, protected cell companies, foundations, companies limited by guarantee and so on and so forth. Well, the simplest explanation is probably the right one: the introduction of the LLC is trying to make Jersey an attractive option for US funds and the wealthy client base there. Americans are familiar with LLCs and so being able to offer a Jersey LLC will make them, the reasoning goes, more comfortable setting up here.
LLCs combine a company's limited liability protection with a partnership's flexibility and privacy. The LLC will be organised, broadly speaking, in a manner similar to a Jersey limited company. However, in a move that those who remember the 'Announcers' from Soccer AM's 'Boston Goals' will appreciate, there has been Americanisation of terminology: Directors become Managers and the Articles of Association become the LLC agreement.
While familiarity is one string to Jersey Plc's marketing bow in selling this new product in the USA, confidentiality is the other. The LLC agreement (think the company's rule book) and its register of members do not need to be filed with the JFSC. However, Jersey is not introducing a vehicle that would be more at home in a secrecy pro jurisdiction such as Delaware. The Jersey LLC will be subject to the same strict anti-money laundering, "know your client" and tax information sharing regimes that we are all now familiar with. LLCs' owners will be disclosed to the JFSC, and LLCs will need to comply with initiatives to stop tax avoidance strategies that exploit gaps and mismatches in tax rules.
Will the LLC replace the limited company in the same way that the hamburger replaced the bean crock? If the impact of limited liability partnerships and foundations on the Jersey fund and private client market is our guide, the answer is no. LLCs' adoption may be limited to US fund clients. However, Jersey Finance and Government should be praised for keeping Jersey marketable and innovative with this new product.