Key Takeaways
- Bermuda's LLC has separate legal personality, so the entity is distinct from its members and limits their personal liability.
- Members make capital contributions and hold ownership interests, while internal governance can be arranged through managers or appointed officers.
- Specific statutory rules establish the LLC's legal basis, shaping its defining features, compliance treatment, and tax position.
- Non-resident owners often choose a Bermuda LLC for flexible ownership and management, weighing its advantages against the structure's limitations.
Understanding the Limited Liability Company (LLC) in Bermuda
A limited liability company in Bermuda gives foreign owners a vehicle that combines the contractual flexibility of a partnership with the liability shield and separate legal personality of a corporation. The structure became available on 1 October 2016, when the governing legislation came into force, and it was drawn deliberately along the lines of US LLC practice. For a non-resident, the version that matters is the exempted LLC, which can be owned entirely by non-Bermudians and is built for business conducted outside the territory. You can read the government's overview of Bermuda LLCs for the official framing.
This guide explains how the vehicle works, what it costs to hold, how it is taxed, and where its limits lie. It is most relevant to fund managers, holding-company sponsors, and corporate groups already comfortable with the LLC form elsewhere.
Two categories exist. Local LLCs are formed by Bermudians to trade on the island; exempted LLCs are formed by non-Bermudians to carry on business externally and are released from the rule requiring at least 60% Bermudian ownership.
Legal Basis and Governing Law of the Bermuda LLC
The framework rests on the Limited Liability Company Act 2016 (statute number 2016:40), which took effect on 1 October 2016. Where an LLC agreement is silent on a point, the Act fills the gap.
The legislation tracks Delaware LLC law more closely than comparable statutes in other offshore centres, which gives US advisers a familiar starting point and a body of persuasive authority to draw on. Its declared purpose is to give maximum effect to freedom of contract and to the enforceability of the LLC agreement.
Every LLC must have an agreement among its members to regulate the firm's business and affairs, and that agreement must be governed by Bermuda law. The members can enter into it before, at, or after the filing of the certificate of formation.
Bermuda is a British Overseas Territory whose legal system rests on English common law, supplemented by local statute. That foundation gives foreign owners a recognisable and predictable backdrop for dispute resolution and contract interpretation.
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Defining Features and Characteristics of an LLC
The LLC is a separate legal entity that, subject to its agreement, has the capacity, rights, powers, and privileges of a natural person. It merges traits of a partnership and a company limited by shares.
Unlike a limited partnership, the entity needs no general partner, and all members enjoy limited liability. The default rule vests management power in the members in proportion to their interests, though the agreement can reorder this entirely.
There is no minimum capital requirement, because members hold capital accounts rather than shares. By default, a member's interest corresponds to the value of capital contributed.
Two features stand out for structuring purposes. First, the entity is not dissolved simply because it has no members, which can be useful in orphan and special-purpose arrangements. Second, fiduciary duties owed to the company or among members and managers can be expanded, restricted, or eliminated by the agreement, with the single bar that no provision may permit fraud or dishonesty.
The Act also allows conversion. With the consent of the Bermuda Monetary Authority (BMA), an LLC can convert into a Bermuda exempted company or into an exempted limited partnership with separate legal personality, and the reverse routes apply as well.
Membership, Capital Contributions, and Ownership Structure
One or more persons may form an LLC for any lawful purpose, with no statutory ceiling and no minimum member count. For an exempted LLC, foreign nationals may hold the full 100% of interests.
Ownership runs through capital accounts rather than share certificates. The default position ties each member's interest to the value of the capital that member contributes, and no authorised capital figure is required.
An LLC interest can be assigned in whole or in part, but in certain cases the transfer of interests requires the consent of the Bermuda Monetary Authority. Build that step into any planned exit or restructuring.
An assignee who is not admitted as a member gains no management rights unless the agreement provides for it, or, where the agreement is silent, unless all members approve admission. Distributions to members turn on a single solvency test: managers must have no reasonable grounds to believe the firm would be unable to pay its debts as they fall due after the distribution.
A member, manager, or assignee is bound by and may enforce the LLC agreement whether or not they signed it.
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Management, Officers, and Internal Governance
Management sits with the members by default, in proportion to their interests. If members prefer a more conventional structure, the agreement can appoint a slate of managers, which the members may even style "directors", and none of them need be members themselves.
A member may take part in day-to-day operations without forfeiting liability protection, and few statutory formalities attach to running the entity. Manager duties, including fiduciary duties, can be widened or narrowed by the agreement, short of permitting fraud or dishonesty, which makes it possible for a manager to owe loyalty to a specific appointing member.
There is no requirement for a Bermudian director or manager. The local-presence obligation is met through a resident representative, an individual or company ordinarily resident on the island, unless the firm engages a corporate service provider that holds an unlimited licence.
Proper records of account must be kept at the registered office or another place the managers choose, open to inspection by members and managers subject to reasonable restrictions in the agreement. The company is not required to hold a bank account in Bermuda.
Member Liability and Separate Legal Personality
A member's exposure is limited to that member's capital contribution or agreed contribution obligation. Beyond that, members are not personally liable for the firm's debts.
Separate legal personality means the entity can sue and be sued, own property, sign contracts, and incur obligations in its own name. The law also shields the company and its assets from seizure by a member's personal creditors, working the protection in both directions.
The one statutory floor is that the agreement may not permit or condone fraud or dishonesty. Everything else around duties and liability can be tailored.
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Typical Uses and Who Chooses a Bermuda LLC
The vehicle suits investment funds, asset holding, special purpose vehicles, joint ventures, venture capital, and private equity structures. Its alignment with Delaware practice makes it attractive to hedge fund managers and groups whose existing arrangements already rely on US LLCs.
US law firms recognise the form as a familiar choice for private equity funds and asset holding, and it works well as a standalone holding entity. A foreign LLC can also continue into Bermuda and become a Bermuda LLC by filing a certificate of continuance with the Registrar of Companies together with the BMA's consent, giving groups a re-domiciliation path.
One boundary is firm. An exempted LLC may be resident in Bermuda and operate from there only in connection with business external to the island; competing for local business requires a licence.
Regulated activities such as banking, insurance, and fund management need the relevant BMA licence and are not open to an ordinary exempted LLC without it.
Taxation and Key Compliance Treatment
Bermuda imposes no income or profits tax, no withholding tax, no capital gains tax, and no capital transfer, estate, or inheritance tax on a Bermuda company or its members, save for members ordinarily resident on the island. The same zero-rate position applies to LLCs.
An exempted LLC can apply for a Tax Assurance Certificate under the Exempted Undertakings Tax Protection Act 1966, by which the government undertakes that any future tax on profits, income, or capital gains will not apply to the entity for the assurance period.
One change narrows that picture for the largest groups. Effective 1 January 2025, Bermuda introduced a 15% corporate income tax for large multinational enterprises with annual group revenue of EUR 750 million or more, in line with the OECD Pillar Two rules. An LLC inside an in-scope group will be affected; standalone and smaller structures are not.
US members remain subject to US tax on their share of the entity's income, and check-the-box elections may be available.
Economic substance
LLCs formed under the 2016 Act are registered entities for the Economic Substance Act 2018, which has applied from 1 January 2019, so they fall within scope. The regime targets entities carrying on a relevant activity: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service centre, intellectual property, and holding entity.
Tax residence drives the outcome. An entity that can show it is tax resident outside the territory, in a jurisdiction not on the EU list of non-cooperative jurisdictions, is treated as non-resident and only files confirmation of that residency rather than meeting the full substance tests.
A pure equity holding entity faces a reduced standard, needing adequate people and premises to hold its participations rather than the five full requirements. Penalties for non-compliance run from USD 7,500 for minor first breaches to USD 250,000 for persistent and significant ones, with strike-off a possibility. The Carey Olsen substance guide sets out the detail.
Beneficial ownership
Every Bermuda LLC, unless exempted by the Minister, must establish and keep a beneficial ownership register at its registered office and take reasonable steps to identify each beneficial owner. Specified information is filed with the BMA, changes must be notified within 14 days of the firm becoming aware, and the register is not open to public inspection.
Advantages and Limitations of the LLC
The strengths are mostly structural. Separate legal personality, broad freedom of contract, member participation without loss of protection, and the ability to reshape fiduciary duties make the form adaptable to bespoke deals.
| Advantages | Limitations |
|---|---|
| Separate legal personality with natural-person capacity | No shelf LLCs; every entity is freshly formed |
| Wide freedom of contract in the LLC agreement | A local law firm, accountant, or CSP must assist formation |
| Members can manage without losing limited liability | Exempted LLCs cannot do local business without a licence |
| Single solvency test for distributions | Economic substance obligations where tax-resident on island |
| Zero tax outside Pillar Two in-scope MNE groups | BMA consent needed to form exempted LLCs (unless CSP holds an unlimited licence) |
| Close alignment with Delaware LLC law | Higher cost base than BVI or Cayman |
| Conversion and continuance flexibility with BMA consent | Limited local case law given the form's age since 2016 |
| Member names absent from the public filing | Certain interest transfers require BMA consent |
The single document filed with the government, the certificate of formation, does not list members, so ownership stays off the public register. Against that, the absence of shelf entities, the mandatory local intermediary, and the higher professional and government fees relative to rival centres are real considerations.
Formation Overview at a Glance
Formation is covered in full in the separate incorporation guide; what follows is the shape of the process. An exempted LLC registers with the Registrar of Companies by filing a certificate of formation, executed by one or more authorised persons, with BMA consent and the prescribed fee.
- The proposed name must be reserved before filing and carry the suffix "LLC", "L.L.C." or "Limited Liability Company"; reservation is usually confirmed within about 24 hours.
- BMA consent to formation is required, except where a corporate service provider holding an unlimited licence is engaged.
- A Bermuda law firm, accounting firm, or corporate service provider must assist; you cannot file without a local intermediary.
- An LLC agreement governed by Bermuda law is mandatory.
- The firm needs a registered office in Bermuda, and a resident representative unless an unlimited-licence CSP acts.
- Each beneficial owner holding 10% or more must sign a personal declaration and supply certified identification; ultimate beneficial ownership is disclosed in all cases.
Where Ministerial consent is not needed, formation can be completed within a day of a complete application; where it is needed, expect up to about a week from the point the Registrar holds all information and declarations. The process can be completed remotely without travelling to the island.
On cost, official registration fees for an LLC have been reported at around BMD 1,750, but the schedule was amended in April 2023 and again in August 2024, so the current figure should be confirmed directly with the Registrar's online Catalyst portal or with Expanship. Annual regulatory fees for exempted LLCs fall due, with annual fees, on or before 31 January each year, following the position set on 18 August 2024.
Records of account must be kept, but there is no requirement to file accounts publicly with the Registrar and no mandatory audit for a non-regulated LLC, though regulated activities can trigger separate BMA requirements.
Conclusion
A Bermuda LLC gives a foreign owner a Delaware-style vehicle with limited liability, separate legal personality, and wide contractual freedom, set in a zero-tax framework that touches only the largest multinational groups. The trade-offs are a higher cost base than some competing centres, a mandatory local intermediary, and economic substance and beneficial ownership obligations that demand ongoing attention. For fund sponsors, holding structures, and groups already at home with US LLC practice, the form is a credible fit. Confirm the current government fees and your substance position before committing.
How Expanship Can Help Your Business in Bermuda
Expanship handles the formation and upkeep of exempted LLCs in Bermuda end to end, from name reservation and the certificate of formation through BMA consent and the LLC agreement, and supports the wider needs of a foreign-owned entity once it is live.
- Forming your exempted LLC and preparing the LLC agreement
- Acting as registered office and resident representative
- Tax registration, Pillar Two assessment, and filing support
- Economic substance and beneficial ownership compliance
- Accounting and bookkeeping
- Introductions to banking providers
To discuss your structure and the steps that fit it, contact Expanship Bermuda.
Frequently Asked Questions
Yes. An exempted LLC is released from the rule that at least 60% of equity be beneficially owned by Bermudians, so foreign nationals may hold the entire interest. The local LLC, by contrast, must be controlled by Bermudians.
Bermuda imposes no income, profits, withholding, or capital gains tax on an LLC, and an exempted LLC can obtain a Tax Assurance Certificate covering future taxes. The exception is the 15% corporate income tax effective 1 January 2025 for LLCs that belong to multinational groups with annual revenue of EUR 750 million or more.
There is no requirement for a Bermudian director or manager. The local-presence rule is met through a resident representative, an individual or company ordinarily resident on the island, unless you engage a corporate service provider holding an unlimited licence.
No. The certificate of formation, the only document filed with the government, does not contain member names, so ownership stays off the public register. Beneficial ownership information is filed with the BMA but is not open to public inspection.
Only local LLCs may carry on and compete for business on the island without a licence. An exempted LLC is confined to business external to Bermuda unless it obtains the relevant licence.
Where no Ministerial consent is required, an LLC can be formed within a day of a complete application. Where consent is needed, allow up to about a week from the point the Registrar holds all information and the beneficial owners' personal declarations.
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.
