An IBC is one of the most common business structures in the United States. It’s also one of the easiest to start and provide offshore financial services. Many people think it is just like an LLC, but there are major differences. This article will outline the key differences between an LLC and an IBC that you should know.
A limited liability company (LLC) is a hybrid business entity combining elements of sole proprietorships and an organization. An international business corporation (IBC), on the other hand, is a company that provides offshore financial services. The laws of specific jurisdictions make it a tax-neutral business typically constrained in terms of the activities it may engage in within the jurisdiction it is formed.
Another major difference between offshore financial services is that a group of people can form IBCs. Unfortunately, IBCs are usually harder to obtain and even take some businesses several months and multiple meetings to finalize. An LLC, on the other hand, is typically a small company and requires just one person as a partner. According to the Internal Revenue Service, private operating and non-operating foundations are the two main forms.
An LLC is typically treated as a partnership for federal tax purposes but isn’t taxed as a corporation for state income taxes. That means it doesn’t have to pay out profits to its owners through dividends or other distributions. It also means it doesn’t have to file IRS Form 1120 or a Partnership Return of Income Tax each year. In contrast, an IBC is taxed as a corporation for federal tax purposes and pays out profits through dividends or other distributions. It also has to file IRS Form 1120 annually.
IBCs and LLCs must comply with any upkeep or reporting requirements imposed by the state that incorporated their business. Doing this maintains the company’s good standing and the limited liability protection it received at incorporation. While every state has laws that apply to limited liability companies (LLCs), IBCs often have more annual requirements than LLCs. That said, in an IBC, an annual shareholder meeting must be held yearly. Also, an IBC must often provide an annual report as well. This keeps the Secretary of State informed about the business’s current information. The board of directors must vote on a corporate resolution before taking any actions or making any changes to the company.
If you’re looking for more information get in contact with First Nevis Trust Company today. We are more than happy to help.