The choice of jurisdiction within which to establish an offshore fund is an important one.
     In the recent past, several offshore jurisdictions have enacted laws to provide for limited liability (hybrid) companies ("LLC"), which companies can be viewed as partnerships for U.S. federal tax purposes. We understand that the Netherlands Antilles firm of Smeets Thesseling & van Bokhorst (STvB), with offices here in New York City, approached the Netherlands Antilles Ministry of Justice (the "Ministry"), the government authority supervising the incorporation of companies in the Netherlands Antilles, to approve and adopt the formation and structure of an LLC in the Netherlands Antilles in an attempt to keep the Netherlands Antilles competitive.
     Generally, for U.S. income tax purposes an LLC will be treated as a partnership if it contains at least two of the partnership characteristics. In most cases, the LLC will have a limited life, which is a partnership characteristic (as opposed to the perpetual existence of a corporation) and will restrict the transferability of its equity interests (unlike freely tradeable shares in a corporation.) To conform to these U.S income tax conditions and make the use of a Netherlands Antilles entity attractive to U.S. practitioners, in determining the status of a foreign entity, such as a Netherlands Antilles Naamloze Vennootschap or "N.V.", as a partnership, STvB recently presented a form of articles of incorporation to the Ministry (constituting the organizational documents of the N.V.), in which the foregoing characteristics were addressed. We note that as of the date hereof, no formal approval has been granted by the Ministry in the Netherlands Antilles. Neil della Porte of STvB has reported that we may hear of formal approval of this new legislation shortly.

     The family limited partnership continues to be an exciting estate planning tool. It affords an individual the opportunity to give away property at a discounted value and still retain control of the gifts. Rulings issued by the Internal Revenue Service hold that if a general partner makes gifts of L.P. interests to family members, the gifts will not be included in the donor's estate even though as general partner he (she) has retained control over the management of the partnership. Investment managers often overlook their own estate planning needs (they are so busy handling the finances of others) so we call this technique to your attention. In our experience, it would not be unusual to obtain minority and lack of marketability discounts in the 35% to 45% range thereby reducing the value of the taxable gift significantly.
     Further information is available from our Trusts and Estates partner, Herbert Bockstein, who is fully familiar with these and other estate planning techniques.

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