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Marshall Islands: Types of Company

Limited Liability Companies

In 1996, the Marshall Islands enacted a Limited Liability Company (LLC) Act. The Marshall Islands law was modeled after the Delaware LLC law in the United States . The LLC is a hybrid business entity which combines the favorable elements of a corporation and a partnership. Members are governed by an operating agreement but have limited liability in the same way as the shareholders of a corporation. Unlike the limited partnership, however, where the general partner remains personally liable in the event of a business loss, the LLC allows all members to contribute without risking personal liability.

The main documents forming and governing a LLC are the Certificate of Formation, which establishes the LLC, and the Operating Agreement which defines the economic organization, management responsibilities and other arrangements for members (or owners) of the LLC.

LLC's formed pursuant to the Marshall Islands LLC Act must file a certificate of formation setting forth:

  • The name of the LLC;
  • The name and address of the Registered Agent;
  • If the company is to have a specific date of dissolution, the latest date on which the limited liability company may dissolve; and
  • Any other matters the members determine to include therein.

Members in a LLC are not required to participate in the management of the entity; instead, they may designate "managers" (who may or may not be members) to manage the affairs of the LLC. Members may also actively participate in management without losing their limited liability. Flexible management makes a LLC an excellent vehicle for transactions requiring a considerable degree of passive investment such as venture capital projects, investment in real estate, oil or technology, as well as research and development of business.

The LLC may be conveniently employed in the types of parent-subsidiary arrangements inherent to large corporations because any type of entity may be a LLC member. In addition, the names of members are not disclosed in the certificate of formation, thereby preserving confidentiality.



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