Each vehicle has its own distinct characteristics that may make it preferable to another in a given situation.

For example, while the owners of a company or an LLC and the limited partners of an LP each enjoy limited liability, limited partners of an LP may lose their limited liability status if they actively participate in the management of the LP, thereby incurring unlimited liability. In contrast, owners of a company or an LLC are permitted to participate in the management of the business of the company or the LLC, as applicable, without fear of losing their respective limited liability protection as investors in these entities.

As another example, a company may be preferable to both an LP and an LLC structure, given certain of its attributes such as unlimited duration, less cumbersome ownership transfer mechanics and simpler procedures for raising capital investment.

When making the decision to form a new vehicle, most business owners choose a form that best suits the needs of their business at that point in time.

However, over time, the business or the commercial environment can change dramatically. New laws or regulations can be introduced that affect important aspects of a business such as tax liability, risk exposure or disclosure requirements. The nature of a business can also change, which may necessitate a change to an entity’s legal form. Accordingly, such changes may mean that a particular commercial form may no longer serve its original purpose and objectives.

Fortunately, Bermuda has recently made legislative amendments that afford certain business owners more choices – including the flexibility to convert an existing entity into another type of entity through a simplified and streamlined process without having to dissolve and create a completely new entity. These amendments serve to further enhance Bermuda’s attractiveness to international businesses as a flexible commercial jurisdiction able to meet its needs, even as they evolve.

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Insight

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Bermuda

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