Key Takeaways
- Both vehicles offer separate legal personality and limited member liability, but they structure ownership and management differently.
- Choosing between them depends on how you weigh formation cost, ongoing compliance, privacy, and your intended use case.
- Taxation and economic substance obligations apply to each, so non-resident owners should confirm how the rules touch their activities.
- Membership and management flexibility differs between the Exempted Company and the LLC, shaping which suits your governance preferences.
Exempted Companies and LLCs in Bermuda: Framing the Choice
For a foreign founder structuring business activity outside the island, the practical choice in Bermuda comes down to two vehicles: the exempted company, formed under the Companies Act 1981, and the exempted limited liability company, registered under the Limited Liability Company Act 2016. Both are designed for non-Bermudian owners and are exempted from the rule requiring 60% local equity, so the decision is rarely about eligibility and almost always about form.
The exempted company is a share-based, director-managed corporate vehicle familiar to banks and institutional investors. The exempted LLC, by contrast, is a contractually flexible, membership-interest vehicle modelled on the Delaware LLC.
This article compares the two on the dimensions that matter to a foreign owner: liability, governance, tax, privacy, formation, ongoing burden, and fit. It is most relevant to investors, fund sponsors, and advisers weighing which Bermuda structure suits a specific cross-border plan.
What Each Vehicle Is: A Quick Recap
The exempted company is incorporated under the Companies Act 1981 by non-Bermudians for business conducted outside Bermuda. Its constitutional documents are a Memorandum of Association and bye-laws, and Bermuda law draws no distinction between private and public exempted companies.
The exempted LLC was introduced as the first genuinely new corporate structure on the island in more than a century. Based on the Delaware LLC model, it combines features of the exempted company and the exempted limited partnership.
Its single constitutional document is the LLC Agreement, a private contract among the members. The governing statute came into force on 1 October 2016, and unlike companies in some other centres, shelf LLCs are not available here.
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Legal Personality and Member Liability
Both vehicles are separate legal persons, and both shield their owners from the entity's debts. In a limited company, the firm's finances sit apart from each shareholder's, and a single-shareholder company is permitted.
An LLC likewise has the capacity, rights, and powers of a natural person, subject to its agreement. Member liability is limited to the agreed capital contribution plus any obligations expressly assumed under the LLC Agreement.
One distinction carries weight for hands-on owners. LLC members may actively manage day-to-day operations without forfeiting limited liability, whereas an exempted company separates ownership from the governance role of its directors.
If you intend to both own and run the business directly, the LLC lets you do so while keeping your liability ceiling defined precisely in the agreement.
Ownership, Membership, and Management Structure
The exempted company runs on a conventional corporate framework. Shareholders hold transferable shares carrying voting rights and the power to appoint directors, who manage strategy and bind the firm.
Requirements are light: one director of any nationality and one shareholder suffice, though a resident company secretary or resident representative must be appointed. The standard share capital is US$12,000 in 12,000 voting shares of US$1, the benchmark that keeps the minimum capital duty in check. The Bermuda Monetary Authority designates every exempted company as non-resident, free from exchange control.
An LLC is governed by its agreement among the members, with minimal statutory override. It can be managed by the members themselves or by an appointed manager, internal or external.
There is no minimum or maximum capital for an LLC. The agreement can set voting thresholds, profit distributions, and managerial duties as the members see fit, and it may even modify or waive the fiduciary duties owed by managers or members, for example allowing them to pursue other opportunities.
| Dimension | Exempted Company | Exempted LLC |
|---|---|---|
| Constitutional document | Memorandum + bye-laws | LLC Agreement |
| Owners | Shareholders (shares) | Members (membership interests) |
| Management | Board of directors | Members or appointed manager |
| Minimum capital | US$12,000 benchmark | None |
| Resident officer | Secretary or representative required | Registered office required |
| Fiduciary duties | Statutory | May be modified or waived by agreement |
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Taxation and Economic Substance
On tax, the two vehicles are treated identically. Bermuda imposes no tax on profits, income, dividends, or capital gains, levies no estate or death duty, and applies no withholding tax on dividends, interest, or royalties paid to non-residents.
Each can obtain the same assurance from the Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966, that future tax legislation will not apply to it. The Corporate Income Tax Act 2023 reaches only in-scope constituent entities of large multinational groups with global revenue of at least €750 million, so founders of smaller businesses sit outside it regardless of vehicle.
Economic substance rules apply equally to both. All registered companies, LLCs, and partnerships fall within scope of the Economic Substance Act 2018, as do overseas entities with a Bermuda branch.
The substance test bites only where the entity carries on a relevant activity, among them insurance, banking, fund management, financing and leasing, headquarters, shipping, intellectual property, distribution and service centre, and holding. An entity conducting no relevant activity files only an annual declaration to that effect.
Where a relevant activity is conducted, the entity must maintain an adequate local presence, including offices, employees, and demonstrable local management. Penalties escalate across notices, from BD$7,500 to BD$50,000 on the first, rising to BD$50,000 to BD$250,000 on the third, after which the Registrar may seek court orders or strike-off.
There is no difference between the two structures on this dimension. The same tax treatment and the same substance framework apply to each.
Privacy and Confidentiality
Neither vehicle exposes much to the public record, but the documents that are visible differ. For an exempted company, the Registrar's public file generally shows the registered office address, the Memorandum of Association, and the date of incorporation; no annual shareholder return is filed, and accounts are not lodged with the Registrar.
For an LLC, the only document filed with the government is the Certificate of Formation, which does not name the members. The LLC Agreement itself remains entirely private and is never filed.
Both vehicles maintain a beneficial ownership register at the registered office, off the public record but open to the Registrar and competent authorities. In both cases, the identities of ultimate beneficial owners must be disclosed to the regulator during formation.
The net effect is broadly equivalent confidentiality. The practical edge for the LLC is that its governing contract stays private, while the company's Memorandum is publicly visible.
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Formation Process and Cost
The two formation paths run in parallel and share the same regulatory gate: the Bermuda Monetary Authority must approve every exempted company and consent to every exempted LLC before filing. In both cases, a Bermuda-licensed law firm, accounting firm, or corporate service provider must be engaged, and each ultimate beneficial owner holding 10% or more must sign a declaration and supply certified identification.
For an exempted company, the sequence is name reservation, BMA permission to issue shares with supporting UBO information, then filing of the Memorandum and bye-laws. The name reservation fee is BD$100 and the application to register is BD$340, both set by the Government Fees Amendment Regulations 2023, effective 1 April 2023.
The LLC follows the same shape: reserve the name, obtain BMA consent, then file the Certificate of Formation with the LLC Agreement. The Registrar typically issues the Certificate of Formation within one to two business days of filing.
Timing depends on whether Ministerial consent is needed. Formation without that consent can be completed within a day; where it is required, the process runs up to a week from the date the Registrar holds all information and declarations.
- Ministerial consent applies only to companies in investment business, trust business, mutual fund business, deposit taking, money services, or insurance. Most general holding or trading structures do not trigger it.
On the annual government fee, the figure for an exempted company is assessed by capital tier, with the lowest band covering assessable capital of US$0 to US$12,000. The published company fee schedule has been amended over time, and a distinct LLC fee schedule appears alongside it in the annual Gazette notices, so confirm the current amounts directly with the Registrar of Companies or ask Expanship before you budget.
The formation documents are the real point of difference. An LLC Agreement is more flexible to shape than a Memorandum and bye-laws, but extracting that flexibility takes more bespoke legal drafting at the outset.
Ongoing Compliance and Reporting Burden
Both vehicles file an annual declaration with the Registrar in January, together with the appropriate annual fee and, since 18 August 2024, regulatory fees reflecting the Registrar's expanded role in economic substance, AML, and UBO matters. Late payment of the exempted company fee attracts a BD$300 penalty, and regulatory fees fall due on or before 31 January.
Neither structure files financial accounts with the Registrar. Where economic substance applies, each must submit an annual substance declaration with financial statements; where it does not, a simple declaration of no relevant activity suffices.
The clearest practical gap lies in the audit waiver. Both vehicles are subject to a requirement to prepare audited financial statements, but an LLC can exclude the audit by a provision in its agreement, whereas an exempted company needs the unanimous consent of all members and directors.
The company carries more fixed formalities: a resident secretary or representative, plus a share register, register of directors, and minute book held at the registered office. An LLC needs a registered office and a beneficial ownership register, with governance run through its agreement and no compulsory AGM or statutory bye-law amendment procedures.
Typical Use Cases and the Ideal Owner for Each
The exempted company suits founders who need shares. Multiple share classes, transferability, and IPO potential make it the natural choice for closed-end and open-ended funds, holding and insurance vehicles, and entities aiming for a listing on a major exchange.
It also fits regulated financial services, where the company form is industry standard, and situations where lenders, investors, or counterparties are simply more comfortable with a share-capital company. Designation as non-resident lets it deal freely in any currency other than the Bermuda dollar.
The exempted LLC, built on the Delaware model, is most often used for joint ventures, investment holding, and private equity, including general partner entities. Sponsors and managers already fluent in Delaware LLCs find the concepts and documentation largely unchanged.
Three features tend to decide it for the LLC owner. Freedom of contract over profit allocation and duties, a membership-interest capital structure mirroring US partnership economics, and a single cash-flow solvency test on distributions rather than the dual cash-flow and balance-sheet tests that bind a company. The statute also permits conversion between an LLC and an exempted company, so the initial choice is not irreversible.
Conclusion
The decision rarely turns on tax or privacy, since the two vehicles are treated alike there, and both rest on the same BMA consent and KYC process. It turns on form: choose the exempted company when you need shares, a conventional board, and a structure that banks, funds, and listing venues recognise without explanation; choose the exempted LLC when you want contractual flexibility, member-led management, partnership-style economics, and documentation that mirrors Delaware practice. The LLC also offers a lighter formalities load and a simpler audit waiver, at the cost of more bespoke drafting up front. Match the vehicle to who your counterparties are and how you intend to run and finance the business.
How Expanship Can Help Your Business in Bermuda
Expanship guides foreign owners through the exempted company versus LLC decision in Bermuda and then handles the chosen structure end to end, from BMA consent and UBO declarations to filing with the Registrar. The same team supports the wider needs of a foreign-owned entity once it is live.
- Incorporating your exempted company or registering your exempted LLC
- Acting as registered agent and providing a registered office
- Handling tax registration and annual filings
- Managing economic substance, AML, and UBO compliance year to year
- Maintaining accounting and bookkeeping records
- Introducing you to banking options for the new entity
To discuss which vehicle fits your plans and the steps to set it up, contact Expanship Bermuda.
Frequently Asked Questions
Yes. Both the exempted company and the exempted LLC are formed by non-Bermudians for business outside Bermuda and are exempted from the rule requiring 60% Bermudian equity, so full foreign ownership is permitted in each case.
No. Bermuda imposes no tax on income, profits, dividends, or capital gains, and both vehicles can obtain the same Minister of Finance assurance under the Exempted Undertakings Tax Protection Act 1966. Only constituent entities of large multinational groups with global revenue of at least €750 million fall within the Corporate Income Tax Act 2023.
Both follow the same regulatory path, including BMA approval, and the Registrar typically issues the formation certificate within one to two business days; where Ministerial consent is needed, allow up to a week. The LLC is generally described as lower in overall cost to form and operate, but professional fees vary by provider, so confirm current government fees with the Registrar or Expanship before budgeting.
Both vehicles are subject to a requirement to prepare audited financial statements, but the waiver mechanism differs. An LLC can exclude the audit through a provision in its agreement, while an exempted company needs the unanimous consent of all members and directors.
Yes. The Limited Liability Company Act 2016 allows an LLC to convert into a Bermuda exempted company, and an exempted company to convert into an LLC, so the initial decision is not permanent.
No. The Registrar's public file shows limited information, and for an LLC the Certificate of Formation does not name the members; both vehicles keep a private beneficial ownership register at the registered office. Those details are disclosed to the BMA and Registrar during formation but are not publicly visible.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
