Synopsis

Colorado is a state situated in the western region of the United States of America and is internationally renowned for its winter and summer playgrounds, such as Vail and Aspen, and the Rocky Mountains. Colorado provides a competitive business tax structure that rewards investment and innovation. Colorado has no franchise tax and with low income taxes at the state level and a wide range of local tax structures, offers almost unlimited choices to meet the needs of all types of businesses.

The Colorado legislature, leading the United States of America, on June 1, 2001, signed into law the Colorado Foreign Capital Depository Act that is perhaps the most helpful investment tool for non-resident and non-citizens of the United States ever drafted by an single state or federal legislature in North America. The Colorado Act, outlining unheralded protective legal powers, provides a Colorado Foreign Capital Depository the opportunity to offer its substantial large depositors, who are non-resident, non-citizens of the United States, the most powerful asset protection and financial anonymity in the USA and, perhaps, the world.

Colorado was one of the first states to authorize the use of LLCs and was only the third state to have such a statute. Now, LLCs are the most prevalent form of organization for new business entities in Colorado because of the liability protection they provide and because of the flexibility they afford in defining the business relationship between the parties.

The concept of the Limited Liability Company ("LLC") is relatively new and is potentially one of the most interesting developments in international corporate and trust work in recent years. An LLC has corporate form and personality but is categorised as a partnership under the Internal Revenue Code of the USA. As such, the LLC is not separately taxable but rather its income is taken to flow through to its members who are taxed according to US principles as though they had received the income directly. Non US persons are only taxed on US source income or income connected with the conduct of a US trade or business. If the LLC earns only income which falls outside this definition and the members of the LLC are non US persons with no US presence then no tax would be payable either by the LLC or by its members.

Thus, a non taxable structure can be created by having non US individuals or companies as the members of the LLC. If the LLC had individual members, those members would most probably suffer taxation on profits received from the LLC in their country of residence so the recommended structure is to have two offshore companies (we recommend Turks and Caicos Island companies) as the members of the LLC.

The US has signed taxation treaties with most developed countries. The effect of these taxation treaties is to considerably reduce the level of tax which must be withheld on the payment of royalties, dividends and interest to an US individual or corporation. Opinion is split as to whether an LLC falls within the terms of these taxation treaties. The LLC is a relatively new product so there is little precedent available which gives assistance in determining the exact treatment of an LLC by non US countries in relation to the taxation treaties. Thus, although it would appear as though an LLC may be extremely useful in any tax planning exercise, we recommend that care be exercised and that a suitable legal opinion is sought. We can arrange such legal opinion from an expert US tax lawyer upon request.

What is clear is that the US LLC is a low profile zero tax company which enjoys the protection and privileges afforded by the US legal system.

THE COLORADO LLC

It is possible to incorporate an LLC in most US States but for the reasons described above Colorado is a preferred domicile. A Colorado LLC has the following characteristics:

 

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Last reviewed: Saturday, July 01, 2006

Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission.