Limited Liability Companies (LLCs) in Roatán, Bay Islands

Limited Liability Companies (LLCs) in Roatán, Bay Islands

In 2019, Próspera ZEDE, a local government within the Caribbean island of Roatán, a former British colony, enacted the Roatán Common Law Code (RCLC). The RCLC is comprised of the American Law Institute’s Restatements of the Law, and several uniform and model acts published by the American Bar Association and the Uniform Law Commission, including the uniform Limited Liability Companies Act (2006). The local government, Próspera ZEDE, operates under the special Zones for Employment and Economic Development (ZEDE) regime, which is anchored in the National Constitution, CAFTA-DR, and Bilateral Investment Treaties.

Limited Liability

The Roatán LLC is an entity with a legal existence separate and distinct from its owners, it has perpetual duration, and may have any lawful purpose, regardless of whether for profit. The capital structure of LLCs is based on membership interests, and they can be either member-managed or manager-managed; the manager of the company may be a natural person or a legal person. Members and managers are not personally liable, directly or indirectly, by way of contribution or otherwise, for a debt, obligation, or other liability of the company solely by reason of being or acting as a member or manager.

Freedom of Contract

The Roatán LLCs are based on the principle of freedom of contract, allowing ample flexibility for the management and organization of the company. The members of the LLC are required to authorize an Operating Agreement, which is a private contract that will govern the relationship amongst the company’s members, the rights and duties of the manager, the procedure for amending the agreement, and all activities and affairs of the company. The Operating Agreement may be kept private and is not required to be filed to the public entities registry.

Through the Operating Agreement, the parties may determine nearly all aspects of their relationship with one another. The parties may provide for various classes of members or managers (each with different rights, powers, and duties), or even classes of limited liability company interests or assets. To the extent that a member or manager has duties (including fiduciary duties), the Roatán LLC operating agreement may expand or restrict or eliminate such duties (other than the implied contractual covenant of good faith and fair dealing).

Ease of Formation

The LLCs can be formed by filing a Certificate of Organization with Próspera’s General Service Provider (GSP) and will then be registered in the Próspera Entities Registry. There is no minimum capital required. All members of the company are required to have, at least, an e-residency agreement with Próspera, which allows the parties to do business within the jurisdiction and use its e-governance system. The applications for e-residency can be made at eprospera.hn

Regulation and Insurance

The LLC and its members are required to obtain a liability insurance policy from a qualified insurance service provider in the jurisdiction (See, Financial Responsibility Statute). If the company operates in a regulated industry, supplemental insurance is required.

The regulated industry company can elect to do business under the regulatory code of any of 30 Best Practice Peer Countries (Australia, Austria, Belgium, Canada, Chile, Denmark, Dubai, Estonia, Finland, France, Germany, Iceland, Ireland, Hong Kong, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Spain, Sweden, Singapore, Switzerland, United Kingdom, and the United States of America). The company must declare its regulatory choice in the Entities Registry and must disclose it in all of its contracts (See, Industrial Regulation Statute).

Low Taxation

The Roatán LLC is taxed only on income sourced from within the Próspera ZEDE jurisdiction. Because the jurisdiction operates under a territorial tax system, income derived from foreign sources or operations is not taxed. Business income sourced in Próspera is taxed at a 1% rate on gross income; there is no capital gains tax, asset tax, solidarity tax, or any other tax on profits or income. There is a 2.5% sales tax on retail activity sourced within Próspera. The Roatán LLC is also subject to a 1% Land Value Tax, without accounting for improvements.

Non-residents are subject to a 1% withholding tax on the payment of dividends, service contracts, interests, royalties, rent, or any other sort of business income. There is a 5% withholding tax on labor compensation and pension payments to non-residents. The Próspera Tax Statute offers a Most Favored Nation treatment that allows companies to apply to sufficient tax credits and exemptions to match a lower tax burden that may be offered by another tax jurisdiction or special regime.

Próspera is also a free port, allowing the resident companies to import goods and services with zero taxation, tariffs, duties, charges or surcharges.

Cost Structure

An e-residency agreement for natural or juridical persons has an annual cost of US$130.00; currently, the general liability insurance policy required for both the founding member and the company has a cost of US$260.00; additionally, an LLC must have a registered agent within the jurisdiction, whose annual cost is usually around US$250.00, depending on the provider; finally, the LLCs are subject to an annual report filing obligation, which has a US$100.00 fee. The total annual cost of a Roatán LLC with a single member is US$1,130.00

Investment Protection

Investors in Próspera ZEDE enjoy the Most Favored Nation Treatment without regard to their nationality, granting them any better treatment afforded to any commercial partner country. Próspera ZEDE’s autonomy and legal stability are guaranteed by the National Constitution, by Bilateral Investment Treaties, and, since its Promoter and Organizer is United States of America based company, by the Central American Free Trade Agreement (CAFTA-DR).

Advantages of Honduras Offshore Corporations

Common Law Business Entities in Honduras Próspera Special Economic Zone

Honduras is home to Latin America’s most innovative special jurisdictions, the Zones for Employment and Economic Development (ZEDE). The first Honduran ZEDE, Próspera, located in the Caribbean island of Roatán, within the Bay Islands Department of Honduras, has enacted the Roatán Common Law Code (RCLC), which allows for the incorporation of traditional common law entities, in Honduras.

The RCLC has made the American Bar Association’s Model Business Corporation Act, Uniform Business Organizations Code, Uniform Partnership Act, Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act, into local Honduran law. Therefore, as an alternative for your offshore needs, Honduras offers the opportunity to create traditional common law Corporations, Partnerships, and Limited Liability Companies in what is expected to become the region’s most competitive jurisdiction for doing business.

Contact our firm to learn more about the opportunities made available by the Roatán Common Law Code of Honduras.

National Corporations (Sociedad Anónima)

Remote Incorporation (No Travel Necessary)
Interested parties need not travel to Honduras to incorporate a company. Through nominee incorporators that execute the corporate charter and bylaws, your company can be incorporate remotely.

Low Incorporation Costs
Honduras offshore corporations have very low incorporation costs. Our firm offers new company incorporations for US$400.00

Sole Shareholder Allowed
The Commercial Code of Honduras allows for the incorporation of companies with a single shareholder.

Electronic Shareholder and Board of Directors Meetings
The Shareholder Assemblies and Board of Directors sessions may be convened by electronic mail (email) and held by electronic means such as Skype, Zoom, or Teams. The shareholder and board minutes book, as well as the shareholder registry book, may be kept in electronic format, without having to notify or get authorization from any governmental agency.

Electronic Accounting in IFRS
Corporate accounting must be done in accordance with the International Financial Reporting Standards (IFRS) and the accounting books may be kept electronically, without the need to notify or get authorization from any governmental agency.

Electronic Signatures
Honduras recognizes the legal validity of electronic signatures and data messages for commercial purposes, allowing the corporation to contract internationally through electronic means.

Very Low Maintenance Costs
There is no annual corporation or franchise tax, no annual reports, nor registered agent fees. However, a corporation must maintain a fiscal domicile in the country, which our firm offers for an annual cost of US$360.00

No Need to Deposit or Pay Registered Capital
The registered capital for the corporation does not need to be paid or deposited when the incorporation is done through the simplified incorporation mechanism contained in the Law for the Generation of Employment.

Foreign Sourced Income is Not Taxable
Since the new Tax Code came into effect in 2017, the tax system of Honduras is governed by the territorial source principle. This means that any income obtained from operations outside of Honduras is not taxable.

5-Year Tax Exemptions
If the corporation will operate locally, a 5-year exemption on income taxes, municipal taxes, and administrative fees can be obtained if the shareholders are natural persons. The process usually takes one month and has a total cost of US$650.00

Fast Incorporation
The incorporation of a Honduran company usually takes between 3-5 business days.

Shareholder Privacy
When nominal shares are issued, the identities of shareholders are kept confidential and registered only within private company books, without the need to register them in the Public Merchant’s Register. However, bearer shares are also allowed.

Bearer Shares
The Commercial Code of Honduras allows local corporations to issue bearer shares, making Honduras one of the few countries in the world that can guarantee complete privacy of the shareholders. The bearer shares are not subject to guardianship or custodianship regulations.

Honduras is Not Black or Gray-listed as a Tax Haven.
Though providing ample tax advantages and complete shareholder privacy as an offshore jurisdiction, up to 2021 Honduras is not listed in the European Union’s (EU) List of Non-Cooperative Jurisdictions for Tax Purposes, nor in the Organization for Economic Cooperation and Development’s (OECD) List on Uncooperative Tax Havens.

No Nationality Restrictions.
Persons or companies from any nation or territory may participate freely in the share capital of Honduran corporations.

No currency exchange controls.
A Honduran corporation can open local bank accounts in US Dollars and there are no currency restrictions for transferring abroad.

Zones for Employment and Economic Development (ZEDE)

The special Zones for Employment and Economic Development regime was created in 2013 through a constitutional amendment to articles 294, 303, and 329 of the Constitution of the Republic of Honduras. The constitutional amendment was followed by the enactment of the ZEDE Organic Law. The ZEDEs are territorial and political subdivisions of the Republic of Honduras that enjoy broad levels of political, administrative, legal, and economic autonomy. The ZEDEs are exempt from most of the national legislation, and are subject only to the Constitution, the International Treaties ratified by Honduras, the ZEDE Organic Law, legislation concerning territorial waters and national symbols, and the criminal legislation of Honduras; from these foundations, ZEDEs are free to adopt their own forms of government, policies, and legal norms.

The ZEDEs are authorized to adopt their own legal norms, including commercial, financial, labor, civil, administrative, and procedural legislation; they can design and adopt an independent tax regime, a local public administration, commercial and property registries, as well as their own security, investigation and criminal prosecution bodies. The ZEDEs and companies operating within are not subject to any import or export taxes, tariffs, duties, charges or surcharges; ZEDEs have the authority to authorize international ports within their jurisdiction, adopt their own monetary policy. ZEDEs also enjoy a special judiciary, where national and foreign persons may act as judges, and which may operate under a common law legal system, or any other legal system that provides, at least, as much protection for human rights as afforded by the Constitution of Honduras.

There are currently three authorized ZEDEs in Honduras: a) Prospera ZEDE, promoted by Honduras Prospera, Inc.; and, b) Ciudad Morazán, promoted by Centroamerican Capital & Consulting; and c) ZEDE Orquidea, promoted by an agroindustrial exporting business group in the Choluteca Department. Economic researchers from Universidad Francisco Marroquín in Guatemala have calculated the economic potential of Próspera ZEDE, concluding that Honduras could raise its current Per Capita Income from US$ 2,500.00 to US$ 20,000.00 in 40 years, if at least 11% of the population goes on to work and live under Prospera’s jurisdiction. Within the Próspera, the economists estimate that GDP per capita could exceed US$ 40,000.00 in the same period of time.

The ZEDEs are supervised and authorized by the Committee for the Adoption of Best Practices (CAMP). The ZEDE can be developed in private lands with low population density in the Departments of the Bay Islands, Cortés, Atlántida, Colón, Gracias a Dios, Valle, and Choluteca.

The official source of Próspera ZEDE norms: https://pzgps.hn/

The official source of Ciudad Morazán norms : https://www.morazan.city/laws/

The official source of ZEDE Orquídea norms: https://zedeorquidea.com/

Legal Foundations of the ZEDE regime

Background Special Development Regions (RED)

Customs

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