PANAMA

3. Other Forms Of Legal Entities

A. Introduction

The Panamanian legal system recognises various forms of corporate entity that exclude personal liability of shareholders or participants from debts or obligations of the body corporate. These include corporations, limited liability companies, general partnerships with provisions of limited liability of the partners, and limited partnerships by shares. Panamanian entities have been used by publicly held multinational corporations, by private equity funds, by closed-end funds and mutual funds, by active trading corporations and by individuals for their personal investment or estate planning purposes.

Panamanian corporation law is based upon early 20th century Delaware and New York corporate law. Its flexibility has successfully enabled it to be used in many forms in the international environment.

Limited liability companies have become popular with US taxpayers as they qualify for a check-the-box election, which allows the limited liability companies to be treated as disregarded entities for US tax purposes.

Private interest foundations were introduced through Law No. 25 of 12th June 1995 and Executive Decree No. 417 of 8th August 1995. Modelled after the Liechtenstein Family Foundation, they have rapidly become a vehicle of choice for asset protection and estate planning structures in Latin America.

Panama foundations offer a simple, affordable and structured alternative to attain the preservation and transition of an estate to future generations. The main difference is that, unlike a trust, the private foundation has a juridical personality and may own its assets.


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