Ethics angle

Ethics angle

What advantages do U.S companies gain by incorporating in Bermuda?

There are several reasons why business people and companies incorporate in Bermuda. Incorporating in Bermuda has the following advantages:

Ease of registration

The process of applying to form a Limited Liability Company (LLC) is straightforward, just as the process of forming a Bermuda company. Instead of filling a Certificate of Formation with a Memorandum of Association, it is filled with the Registrar of Companies. The essential LLC agreement, which controls the LLC, can be made and implemented at a later date. This gives entrepreneurs a timely chance to incorporate, even as they finalize their business structure.

Affordability

The registration, as well as annual fees for a company incorporated in Bermuda, are based on the given capital interests. The money paid for as legal fees related to form an LLC will be dependent on how complex the LLC agreement is. All these factors make the LLC attractive and accessible to firms of all sizes aiming at majoring in the LLC structure.

Business operation in Bermuda

For all purposes and intents, Bermuda institutions consider LLCs like companies. This includes when getting business licenses, licensing vehicles or equipment, opening bank accounts as well as establishing third-party financing. This aids in separating individual finances from business finances at the initial stages of forming the LLC. Keeping individual and business finances separate is important as it guarantees protection of personal assets of every entrepreneur.

Limited Fiduciary Duty

Through an LLC agreement, an LLC can eliminate and limit its managers’ or members’ fiduciary duties. A codified duty is in place to act in good faith, and it can as well be restricted r expanded through the LLC agreement (Cunningham, 2018).

What disadvantages do U.S companies incur by incorporating in Bermuda?

Incorporation in Bermuda has some disadvantages to very small business owners. For instance, the added record-keeping requirements; being required to pay governmental fees; and there is no guarantee for liability protection in case shareholders or/and companies’ directors are needed to guarantee company loans personally.

In Bermuda, you will need your company to be run by local directors. This might be awkward for any trading company, and it will definitely cost money (Penrose, 2014).

Do you find the practice of incorporating Bermuda unethical? Why, or why not?

Yes. The practice of incorporating Bermuda is unethical because several companies rush there to incorporate so that they can evade paying taxes. Prominent individuals and companies go to Bermuda to protect their assets against taxation. For instance, during the 2016 United States presidential elections, Hilary Clinton blamed Donald Trump for incorporating in Bermuda to evade taxes.  This is because, in 1994, Trump established DJ Aerospace Ltd in Bermuda (Offshore Corporation, 2018). This makes me believe that incorporating is unethical.