The Bahamas recognizes many different types of legal vehicles for doing business, often referred to as business entities. The entity types vary in form, advantages, method of formation, and legal compliance. This article briefly summarizes the most common types of business entity available to you.
Domestic companies generally are local Bahamian companies incorporated under the Companies Act, 1992. They can be privately held or public. A domestic company has directors and officers who run the company and shareholders who retain ownership in the company. It may be a subsidiary of a parent company or part of a group of companies owned by the same parent company.
International Business Companies (IBCs)
IBCs are companies incorporated under the International Business Companies Act, 2000. In most cases, these companies operate outside the country. IBC directors and shareholders do not have to be Bahamian residents. If the IBC operates in The Bahamas, it is subject to exchange control and banking regulations, so many IBCs are established here but operate elsewhere.
Companies established under the law of a foreign jurisdiction may operate in The Bahamas, but they must be registered in The Bahamas if they are operating an “undertaking” in the country. Examples of activities which constitute operating an undertaking include keeping a place of business in The Bahamas or having a local telephone number.
Limited Liability Companies and Companies Limited by Guarantee
Both the Companies Act, 1992 and the International Business Companies Act, 2000 permit incorporation of limited liability companies, in which each member's liability is limited to the amount unpaid on the member's shares, or an amount that each member agrees to contribute if the company is wound up. (Companies Act, 1992, Sect. 4.) Companies limited by guarantee operate on a similar principle – members guarantee the company's debts up to a certain agreed-upon amount per member, as stated in the memorandum of association. The articles may allocate different amounts of the assets and liabilities to different members. One advantage of a company limited by guarantee is that The Bahamas does not require a list of members on the company's annual return.
Segregated Account Companies (SACs)
SACs are companies that have a series of bank accounts with assets linked or tied to specific accounts. Using a SAC can protect assets from creditors by limiting the accounts that a particular creditor may levy against to satisfy a debt.
Partnerships are undertakings between two or more partners for a business purpose. (Partnership Act.) Each partner can be personally liable for partnership debts. However, his liability may be limited to the value of his investment or his share in the partnership. Partners do not need to be Bahamas citizens, and pay some fees but face no particular adverse consequences for operating as a partnership. Partnerships may have limited liability or be exempted limited partnerships. (Partnership Limited Liability Act.)
Not all businesses need to be organized by groups of people to be recognized in The Bahamas. The sole proprietorship is a business undertaken by just one person. No registration is required, but the owner must ontain a business license or shop license. The business's name may need to be registered. (See Business Names Act.)
Many other types of legal structure for doing business are recognized in The Bahamas, such as trusts, asset protection trusts, purpose trusts, joint ventures, investment condominiums and foundations.
If you are seeking to do business in The Bahamas, consult an attorney to learn more, or visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.