In The Bahamas, many business owners choose to form limited liability companies instead of another type of business entity. Limited liability companies have several advantages that make this type of entity popular.

First, as the name indicates limited liability companies provide some protection from liability for their members. The limited liability company structure separates members' personal assets and liabilities from those of the company. Members, officers, and directors of limited liability companies are not liable for company debts unless they did not act in good faith or otherwise are held legally responsible for wrongdoing. One crucial exception to this rule is that members can be liable for any unpaid amounts up to the total of their investment in a limited liability company or another agreed upon amount.

Members' liability may be limited in one of two different ways: by shares or by guarantee. In companies limited by shares, members' liability is limited to the amount unpaid on the shares the member holds. In companies limited by guarantee, members' liability is limited to the amount agreed upon in the company's Memorandum for each member to contribute if the company is wound up. Companies may be limited by both shares and guarantee. If a company is neither limited by shares or limited by guarantee, then the company is called an unlimited liability company. Companies Act, Sections 4-8; International Business Companies Act, Sections 7-9.

Limited liability companies must draft a Memorandum of Association when the company is first formed. In the Memorandum, the company should indicate whether it is a company limited by shares or by guarantee. Companies limited by shares should state the authorised capital of the company, including the aggregate of the par value that the company can issue and the amount of capital represented by shares without par value. Companies Act, Section 5; International Business Companies Act, Section 13. Companies limited by guarantee should state the amounts that each member plans to contribute to the company in the event of a winding up to pay the company's debts and liabilities and the expenses associated with winding up. Companies Act, Section 7; International Business Companies Act, Section 13

Limited liability companies must indicate in their names that they are incorporated with limited liability. For example, a company's name might end in “Limited” “Ltd.” or “LLC”. Companies Act, Section 13; International Business Companies Act, Section 12.

To find out more about structures for business ownership, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.