Structuring asset ownership in the global economy: financial executives may be able to boost returns on investments and pare risk by moving assets out of one jurisdiction and into another. But it's a complex area that needs to be fully explored, both in terms of legal entities and locations.

• Author: Redman, Karen L.
• Position: Global investments

As we all know, there have been major changes in the global investment landscape over the last decade, driven in no small measure by the rise of emerging economies, increased security concerns worldwide, tax issues and the general growth and creation of private wealth. Despite such changes, individuals and corporations are shifting more assets to other countries than ever before.

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Assets are moving both into and out of the U.S. While much of this movement involves capital seeking better returns, in many instances investors are also seeking greater security for their assets. For example, while foreign investors buying businesses and properties in the U.S. are taking advantage of the current, and persistent, weakness of the dollar against the euro and other currencies, they are also looking for a safe, stable investment environment.

For financial executives involved in finding opportunities to increase their company's return on investment, as well as to lower risk and protect assets, choosing the right jurisdiction and ownership structure is critical. Yet understanding and navigating through the complexity of how to best hold foreign or offshore investments may often seem perplexing and daunting.

There are numerous types of legal entities in which asset ownership can be structured, including trusts, corporations, limited-liability companies, partnerships, limited partnerships, limited-liability partnerships and other more esoteric vehicles. And in addition to the myriad choices of entities, the choice of jurisdiction is equally challenging.

There are dozens of industrialized countries with growing or emerging economies, and there are also about 60 islands, duchies and pocket-sized republics offering special advantages to investors. Each of these jurisdictions has different laws and regulations and offers different ownership or entity advantages, and sometimes disadvantages. Add to this the fact that foreign companies and individuals looking for opportunities to form an investment entity in the U.S. are faced with a choice of 50 states plus Puerto Rico and various territories.

Some of these U.S. jurisdictions are more hospitable to investors than others, and a few even have laws that provide exceptional asset protection. Making the right choice can be rewarding; but equally, making the wrong choice can be disastrous. How to choose?

Entity-Management Companies

One of the consequences of the shifting investment landscape has been the rapid growth of a new kind of business--professional entity-management firms that help companies and individuals identify the most suitable jurisdictions and ownership structures for their investments and then handle the paperwork, fees and other details of forming and maintaining such entity structures. Typically, such firms are small companies with very large networks of relationships...