Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Using a Professional Corporation to Protect Owners from Liability

Posted in Corporate & Financial Services

2015_ice_cream_gratisographyFor many years, one of the perils of being a doctor or lawyer was having to shoulder total responsibility in the event of any sort of professional mistake, and knowing that there was broad public support behind such consequences. It used to be that such professionals were barred from forming corporations, which would provide a limited amount of security should a physician or attorney be accused of malpractice, misconduct or other error related to their area of practice.

Now there are a growing number of professional corporations, which are able to provide backing, support and other professional services to shareholders. The shareholders in a professional corporation — also known as a professional service corporation or professional association — must be licensed within their state or territory, and they must be actively working in their particular field. In addition to the legal and medical professions, accounting and engineering professionals are among those who are likely to form professional corporations.

The advantages of a professional corporation include limited liability for shareholders and some benefits related to taxation. Should a shareholder become the target of a lawsuit, no other shareholder may be sued in the process. Similarly, should the corporation itself be targeted, no individual shareholder can be sued for the corporation’s mistakes, including business debts.

In both of these situations, the protection offered through the professional corporation differs from that provided by many other types of corporations and partnerships. With respect to taxation, a professional corporation may purchase group term life insurance, for which premiums are tax-deductible. In addition, they are allowed to purchase health and accident insurance for their shareholders and deduct those premiums as well, while shareholders can enjoy those benefits tax-free.

When forming a professional corporation, shareholders must file articles of incorporation and state that the corporation’s purpose is solely related to the practice of the relevant profession. The state regulatory or licensing board that oversees the professionals in the state must also approve of the formation and verify that all shareholders are appropriately licensed.

The laws surrounding the establishment of professional corporations can be complicated, and a variety of factors may make your situation different from the norm. An experienced business and corporate law attorney will provide the counsel you need if you have questions about how membership in a professional corporation may affect you and your professional activities. 

BoltNagi is a respected and established corporate and business law firm serving clients throughout the U.S. Virgin Islands.

Tax Incentives Available in U.S. Virgin Islands

Posted in Corporate & Financial Services

2015_taxes_flickr_tax_credits_taxcredits.netFor businesses aiming to expand their reach or those interested in enjoying the benefits of operating in an environment that welcomes them, the U.S. Virgin Islands provides such a location. From an official economic development organization that works on their behalf to the numerous tax incentives they can enjoy, business owners have many reasons to consider the U.S. Virgin Islands as an appealing and attractive place to operate and grow.

The U.S. Virgin Islands Economic Development Authority, a government-affiliated agency charged with promoting economic growth in the territory, has several different components through which it strives to make “America’s Paradise” a site for efficient, cost-effective and dynamic business operations. Of primary interest to business owners looking to launch a company in the Territory is the Economic Development Commission, which oversees a robust tax incentive program in an effort to attract more businesses to the territory.

The EDC program offers numerous advantages to businesses. Most tangible are the benefits provided by the tax incentive program, which offers considerable deductions and exemptions. For example, businesses may receive a reduction of up to 90 percent in federal and territorial corporate and personal income taxes, and up to a 100 percent exemption on various taxes and payments—including excise tax payments, business property tax and gross receipt tax. These and other tax incentives help make the U.S. Virgin Islands an attractive place for new businesses, as well as those looking to relocate or expand here.

Although the advantages offered through tax breaks and exemptions are often easy to quantify, there are also many other, less obvious benefits of operating a business in the Territory. Although the U.S. Virgin Islands may seem like an exotic location to tourists, it’s important that business owners remember how easily it can be accessed from the U.S., Europe, South America and the rest of the Caribbean.

The Territory also boasts a skilled and educated population, strong infrastructure, duty-free exports to the U.S. and all of the benefits associated with sharing a currency and a court system with the United States. To business owners currently based on the U.S. mainland, the Territory will seem familiar in many ways. All of these advantages make it clear just how friendly the Territory is for businesses and explain just why economic activity throughout the U>S. Virgin Islands is on the rise.

The EDC program has had an impact on the Territory through its success in attracting manufacturing, service industry, pharmaceutical, outsourcing and other businesses. By taking advantage of the tax incentives available to them, these businesses have been able to play a key role in the continued growth and development of the U.S. Virgin Islands.

BoltNagi is a well-established and widely respected business and corporate law firm serving clients throughout the U.S. Virgin Islands.

EB-5 Immigrant Investor Program Offers Funding to Entrepreneurs

Posted in Corporate & Financial Services, Immigration

2015_eb-5It’s a fairly well known fact that obtaining U.S. residency can be a process rife with difficulty, including considerable expenses and time delays. For foreign investors interested in becoming permanent American residents, one useful route involves making investments in businesses or specific employment areas, and applying for an EB-5 visa.

The EB-5 visa program provides an attractive path to obtaining permanent U.S. residency, as it depends on making a minimum initial investment, maintaining that investment for at least two years and creating at least 10 full-time, permanent jobs. Once these conditions have been successfully satisfied, a permanent green card may be issued. The minimum investments required are $500,000 in targeted employment areas such as the U.S. Virgin Islands as opposed to customary $1 million in other areas. The projects must be approved by one of the U.S. Citizenship and Immigration Services’ EB-5 Regional Center Projects which the Virgin Islands Economic Development Authority is attempting to establish.

During the two-year period in which the investment is maintained and other conditions are being satisfied, the investor has provisional U.S. residency, with all of the benefits and advantages it provides. This is an attractive alternative to many other paths to residency, as the two-year waiting period is much shorter than most other options.

The benefits that come along with the EB-5 visa include the freedom to travel outside of the country—a useful benefit to many foreign investors—and the ability to lead full lives anywhere in the U.S. There is also the fact that the EB-5 program does not place many of the restrictions on applicants that other programs do. For investors interested in eventually becoming U.S. citizens, the two years of provisional residency also count toward the five years required for full citizenship.

The EB-5 process begins when a Regional Center Project provides necessary documents to an interested investor, who then deposits the required funds into an escrow account prior to filing an I-526 petition with USCIS. Once that petition is approved, the investor files for the appropriate visa. Once that application has also been approved, the investor is granted provisional residency for the two-year period. Prior to the end of this period, the investor must file an I-829 petition for the removal of conditions and the granting of permanent residency.

The U.S. Virgin Islands Economic Development Authority has joined with American Regional Center Group to provide services that benefit the organization themselves, as well as potential investors and the overall economic environment in the territory. The promotion of EB-5 investment opportunities is just one aspect of this work. To learn more about the specifics of the EB-5 program and potential opportunities in the U.S. Virgin Islands or the U.S. mainland, contact an experienced business law attorney.

BoltNagi is a widely respected and established corporate and business law firm serving clients throughout the U.S. Virgin Islands.

The Process of Setting up a Business in the U.S. Virgin Islands

Posted in Corporate & Financial Services

2015_open_flickr_tara_huntThe U.S. Virgin Islands is a great place to be an entrepreneur. The Territory offers a wide range of tax incentives, and various organizations and agencies have programs available that are geared toward helping new businesses establish themselves and obtain the tools needed for growth and long-term success.

However, many things need to happen before would-be business owners can actually start operating in the U.S. Virgin Islands. After coming up with a workable business plan — a challenging endeavor in its own right — a business owner must fulfill some requirements designed to legitimize and sanction their organization. Incorporating, registering a trade name and obtaining a business license are the three key steps all prospective business owners should consider when setting up shop in the Territory.

The first step to starting a business in the U.S. Virgin Islands is filing articles of incorporation or organization with the Lieutenant Governor’s Office. The articles include some basic information about the company, such as its name and purpose, corporate structure, principals, directors and incorporators and certain data about current finances.

Filing a trade name typically occurs in conjunction with the filing of articles. A trade name is any variant on the full legal name of the business that could be reasonably expected to be used when operating in the territory.

Once the articles and trade name registration have been accepted, a business owner must apply for a business license. To receive a license, the Department of Licensing and Consumer Affairs must first conduct a review process with the police and fire departments, the health department (for food-related businesses) and government departments in charge of tax clearance and zoning. Other requirements may also need to be fulfilled, depending on the nature of the company. For example, board certification is necessary for a number of specialized occupations.

Upon the acceptance and approval of all the required paperwork, a business license will be issued. It’s very important to note that conducting business of any sort prior to the issuing of the license is strictly forbidden.

The steps detailed above are just some of the key items the owner of a new business in the U.S. Virgin Islands must address to ensure the company is starting off on the right foot with the territorial government and the local business community. If you’re considering the launch of a new company in the U.S. Virgin Islands, it’s best to seek the input of a skilled business law attorney to make sure you have a complete understanding of all rules, regulations and processes involved.

BoltNagi is a well-established and widely respected business law firm serving clients throughout the U.S. Virgin Islands.

The Basics of Tax-Exempt Businesses: Nonprofit Organizations

Posted in Corporate & Financial Services

2015_volunteerWhen considering the issue of taxation, one of the most common points in need of clarification is the distinction between having nonprofit status and having tax-exempt status. It’s possible for an organization to have both, but a nonprofit organization does not automatically have tax-exempt status, and vice versa.

Before an organization may apply for tax-exempt status, it must first be recognized as a nonprofit. However, being a nonprofit does not mean an organization cannot make money. The point is that a nonprofit doesn’t exist merely to make money for its members — any profit made must go right back into the organization. The territorial government grants nonprofit status rather than the federal government.

On the other hand, the federal government confers tax-exempt status on corporations, unincorporated organizations and trusts that apply for the designation. The most common classification for tax exemption occurs under Section 501(c)(3) of the Internal Revenue Code, which allows organizations dedicated to charitable, religious, educational and various other types of pursuits to be declared exempt from federal corporate and income taxes.

Nonprofit and tax-exempt statuses offer certain advantages. For example, an organization that is officially recognized as a nonprofit may have additional opportunities such as contracting with the territorial government, utilizing reduced postal rates or applying for tax exemption. Meanwhile, nonprofits interested in reducing their tax obligations, as well as the obligations of potential donors, have good reasons to apply for tax-exempt status. It also provides additional independence and the ability to directly apply for grants, as many grant applications require proof of 501(c)(3) status.

At the same time, these statuses may also have some disadvantages for organizations. Particularly for organizations just starting out, the time, energy and money required to pursue nonprofit and tax-exempt statuses may be a deterrent, and it might be better to focus on establishing the organization’s operations and track record first.

For groups that have been around a while, have experienced some success and intend to continue operating and growing for the foreseeable future, it might be a good idea to pursue nonprofit and tax-exempt status. This is particularly true if the organization intends to apply for grants or expects to do a lot of business selling goods and services in the future.

To be officially classified as a nonprofit or tax-exempt business, your organization must first file the appropriate applications. This process takes into consideration many of the factors outlined above, and to be certain you’re making the best decision and following the proper procedures, it’s best to seek the counsel of an experienced and qualified business attorney.

BoltNagi is a well-respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.

Issues to Consider Before Signing a Contract to Purchase a Home

Posted in Real Estate

2015_curtainThe process of buying a home in the U.S. Virgin Islands often comes with uncertainty and emotional ups-and-downs, as well as numerous questions and concerns related to mechanics of a closing in “America’s Paradise” and the financial aspects of the transaction. So when it’s finally time to close the deal, it might be tempting to let excitement and relief take over a little too early, at a time when taking a microscope to all aspects of the real estate deal would actually be in your best interest.

One of the best protections buyers have is the ability to draft and include contingencies in the purchase contract, which require that certain conditions must be met by the seller or the buyer during the period between the signing of the contract and the final closing. These contingencies must either be met or removed to avoid either party calling off the deal, or the deal must be renegotiated. The following are some of the most common contingencies to look out for:

  • Buyer’s inspection contingency: This contingency is very common, and a smart buyer will almost always insist upon its inclusion in the contract. Requiring that the house pass muster in the eyes of professional inspectors is a necessity to ensure all aspects of the home — including the roof, electrical work, AC system, plumbing, foundation, floors and more — are in good and safe physical condition. Separate inspections for pest infestations, natural disaster hazards and environmental hazards like mold or asbestos may also be included. Ultimately, having this contingency in the contract protects the buyer from being unexpectedly saddled with an unsound home or responsible for major repair needs that the seller failed to disclose.
  • Financing contingency: A financing contingency protects the buyer in the event that a projected loan happens to fall through. A significant part of many financial contingencies is that the buyer will be able to get back his or her earnest money — typically anywhere from 1% to 5% of the sale price, and put down as an indicator of seriousness — should the loan fail to be approved. Avoiding this financial risk may be in your best interest, although some buyers forego including a financing contingency if they’re confident their loan will go through or are competing with other potential buyers.
  • Insurance contingency: This may be surprising, but some insurance companies have been known to reject applications from homebuyers in locations with a high risk of natural disasters, severe weather damage and proximity to toxic sites. It may be wise to include a contingency that allows the purchase to be completed only if you’re able to apply for and receive homeowners’ insurance.

If these contingencies are not already in the contract, look into adding them. As buying a home is a complex legal process, having an experienced attorney look over your contract is one of the best decisions you can make during the real estate purchasing process. This will help ensure you’re in the best position possible as the transaction moves forward.

BoltNagi is a widely respected and well-established law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

Tourism Industry Continues to Drive USVI Economy

Posted in Community Affairs

2015_stxThe latest economic reports indicate that the summer tourist season in the U.S. Virgin Islands for 2014 was among the strongest in recent memory. This is good news for the territory, following a winter tourist season in which activity actually declined 0.9 percent compared to the same period the year before. The summer numbers, however, reveal a jump of 7.6 percent over the summer of 2013, bringing this year’s overall numbers to nearly 1.5 million cruise visitors and more than 560,000 stopover tourists, both of which represent 3 to 4 percent increases over last year.

As tourism remains the prime contributor to the USVI economy, this news is being met with much enthusiasm, and there are additional plans to expand the industry’s growth in the territory. Particularly since the 2012 closure of the Hovensa oil refinery, the U.S. Virgin Islands has become increasingly dependent on tourism as the primary driver of the economy. Whereas the tourism industry once employed about a third of the territory’s labor force, that number has now risen above 50 percent. Marketing efforts across the United States, the construction of new resorts and the addition of flights from Atlanta, New York and Boston all seem to be having positive effects on the local economy.

The U.S. Virgin Islands combines an important history, a booming sustainable tourism industry and the allure of duty-free shopping, all in a picturesque natural setting that makes the territory very attractive to potential tourists. The ease of travel for Americans, who don’t have to deal with a language barrier, passports or currency exchange, helps make the territory especially attractive to citizens from throughout the U.S. and its territories.

Although it’s well known that Christopher Columbus first landed in the Caribbean in 1492, fewer people are aware that he reached St. Croix just a year later. Additionally, the Jamestown settlers stopped off in St. Thomas in 1607 en route to Virginia. Remnants of this history and more can be part of the USVI tourism experience.

Preserving the character of the islands so they can be experienced, at least visually, in much the same way explorers did years ago is a true priority. To this end, there has been an increasing focus on ecotourism and sustainable tourism, which allow visitors to experience as much of the natural beauty of the USVI as possible.

Meanwhile, for those who want to shop, there are no customs duties or sales tax on tourism-related purchases, and U.S. citizens benefit from a $1,600 duty-free shopping quota. This allows travelers to enjoy many of the territory’s great shopping bargains, from cameras and leather goods to fine china and jewelry.

With all of the growth occurring in the U.S. Virgin Islands, it has become an attractive moment for businesses looking to open in the Territory, as well as for groups connected with the tourism industry. Entrepreneurs considering a move to the USVI are encouraged to speak with an experienced local business law attorney to ensure a successful relocation.

BoltNagi is a widely respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.

Dealing with Digital Assets Upon Death

Posted in Tax & Estate Planning, Uncategorized

2014_digitalAs more aspects of people’s lives move online, managing numerous digital accounts becomes a complex process, and one that presents numerous challenges. These issues are not limited to just the account holders themselves. In fact, the real test may come after people pass away and their families are left to make sense of their digital assets.

What constitutes “digital assets” may vary from case to case, but in a broad sense the term can be applied to a variety of online content and accounts, as well as devices themselves. In other words, your computers, tablets, cell phones and Internet-equipped devices may all qualify. So does your email, social media content, accounts with online businesses and digital content, such as movies or photos you’ve posted or stored online.

One of the major challenges involved in protecting your digital assets after your death is all of those user agreements you’ve most likely clicked through and signed or accepted, often without reading. They actually place certain restrictions on your online content and records, including on how they may be used or accessed, and by whom. When these user agreements turn out to contradict federal or territorial laws, the process of dealing with your digital assets can quickly become quite complicated.

To help make the process of handling your digital assets substantially easier for your friends and family members, it’s helpful to include them as part of your estate planning process. As a way of getting started, you can make a list of all of your online accounts — basically anything that requires a user ID, password or other login information, including secret questions and answers — and put all of that information in a password-protected document or spreadsheet. Be sure to update the document any time you are required or otherwise compelled to change any of the information, or when you create a new account.

Once you’ve created this comprehensive list, you will want to document its existence, providing information on where to find it and how to access it. Work with an attorney to make sure you cover everything you need and that you remain in compliance with territorial and federal laws. You may wish to store this information at your attorney’s office or in a safety deposit box. Finally, in your will or in a statement drafted by your lawyer, you should authorize the disclosure of your account records to the executor of your estate.

In any matters related to estate planning, it’s best to consult with an experienced legal professional to ensure you’re covering all your bases, while also making the process of settling your estate substantially easier for your loved ones.

BoltNagi is a widely respected and well-established estate planning law firm serving families, businesses and organizations throughout the U.S. Virgin Islands.

Importance of Sound Estate Planning

Posted in Tax & Estate Planning

2014_heaven_gratisographyLike the old saying goes, there are only two certainties in life—death and taxes. Through effective estate planning, you can prepare for the future and address these two very important issues, as difficult as they may be and as little as you’d like to think about them on a daily basis.

A comprehensive estate plan allows you to avoid most of the common challenges family and friends of the deceased face immediately after someone passes away. These issues are most often associated with the following:

Estate taxes

Especially for wealthy individuals, it’s important to engage in this planning process to avoid unnecessary and costly estate taxes upon your death. If not addressed ahead of time, the federal government may take a significant portion of your estate away from your loved ones and beneficiaries.

To help reduce these taxes, you may choose to gift certain assets directly to your heirs, charitable organizations or a trust, which will disperse the assets to your chosen beneficiaries at a time you see fit—such as after you pass away. You may also wish to gift some or all of the interests in a closely held business, such as a limited liability company (LLC) or a corporation. By doing so, you essentially decrease the value of your estate because you no longer own the assets in question, reducing estate tax liabilities in the process.

Asset protection

For business owners and wealthy individuals, the threat of a potential lawsuit or divorce can be significant. Advanced estate planning strategies, including spousal lifetime access trusts and other mechanisms, protect assets and property from any threats that could arise in the future. There are also some offshore trusts and asset protection trusts that are formed specifically to keep assets out of the hands of divorced spouses and creditors. You may also gift assets through a family-owned LLC, which provides another level of protection for you and your loved ones.

Legacy creation

In addition to eliminating or reducing estate taxes and protecting assets, your estate plan can also help create an ongoing legacy that lasts for the generations that come after you. It’s possible to set up trusts that last for more than 100 years into the future, establishing dynasty trusts for future family members. Another common example is the establishment of a charitable trust or private foundation that will continue to receive endowments from your estate many years down the line.

There’s no doubt about it—estate planning is absolutely critical toward minimizing estate taxes, protecting your beneficiaries and ensuring your legacy lives on after you pass away. Work with a skilled estate planning attorney to learn more about your options and to set up a plan that meets your specific needs and circumstances.

BoltNagi is a well-established and widely respected estate planning law firm serving individuals and businesses throughout the U.S. Virgin Islands.

Addressing Key End-of-Year Tax Planning Issues

Posted in Tax & Estate Planning

2014_taxes_stockmonkeyscomAlthough you don’t need to officially file your taxes until April 15, 2015, there are numerous steps individuals and businesses should take before the end of the calendar year 2014 to help reduce the amount of taxes owed to the IRS next spring.

Unfortunately, gridlock in the U.S. Congress did not make it easy to predict which tax breaks would be extended as we reach tax season. Lawmakers only acted in the last month on deductions for college tuition and private mortgage insurance payments, among other deductions.

There are some things you should consider doing before the end of the year to better manage your tax bill. These include the following:

Income deferment: If you make more than $406,750 as a single person or $457,600 for a married couple filing jointly, you fall into the top federal tax rate category of 39.6 percent. As you look at the amount of income you’ll receive by the end of the year, you should think about whether it will put you over the edge of this top tax bracket. If so, consider asking your employer to delay your bonus until January or contributing more money to a tax-deferred retirement plan. If you own a business, you might consider holding on additional invoices until 2015 begins.

401(k) contributions: Regardless of your tax circumstances, it’s always a good idea to contribute as much as possible to your 401(k) or other retirement savings plan. Most of these contributions occur pre-tax, and thus you’ll be able to report a lower amount of income to the IRS. You will also see greater tax-deferred earnings the earlier you contribute to the account.

IRA contributions: Like a 401(k), contributing to an individual retirement account allows you to deduct some or all of the amount on your taxes. Even if you are not able to claim any tax credits this year, you are still taking the steps necessary to protect yourself and your loved ones in the years to come.

Capital losses: If your portfolio includes assets that have decreased in value, you may be able to offset the tax impact of capital gains you have experienced over the past year. In years in which your losses total more than your gains, you may reduce your regular income amount by up to $3,000. It’s also possible to carry more than this amount into future tax years.

Mortgage payments: If you own a home, consider making your January mortgage payment and property tax payment before the end of 2014. This will allow you to deduct the interest on the mortgage and your property tax amount on your upcoming return.

Charitable donations: One of the best ways to reduce your tax liability is to make a donation to a charitable organization, which may come in the form of a monetary contribution, furniture, household goods, clothing, motor vehicles and a wide range of other items. You may even choose to donate stocks that you’ve held for at least 12 months.

Although tax season hasn’t quite begun, keep these concepts in mind as you round out 2014, and work with an experienced tax planning attorney if you have any questions or wish to receive sound legal guidance.

BoltNagi is a well-established and widely respected and well-established estate and tax planning law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.