For companies, investment platforms, and individuals subject to United States jurisdiction, the 175-pages published in the Gaceta Oficial by the Ministry of Justice of the Republic of Cuba on 19 August 2021 were profound in that by their existence they conveyed deficiencies and provided opportunities within the commercial environment of the Republic of Cuba. LINK To Document

The private sector in the Republic of Cuba as currently structured is not sufficient, the private sector as structured is devoid of capital, the private sector as structured is unable to preserve existing societal demands nor create opportunities required by current and future generations of Republic of Cuba nationals.

Doubtful that ideological acolytes, purists of the Partido Comunista de Cuba (PCC) believe in the inherent value of private enterprise let alone crafting and implementing a legal structure create it, to protect it, and then to nurture it.

Within the PCC, pragmatists, however, seek inspiration, and thus survival from commercial, economic, and political models of the People’s Republic of China and Socialist Republic of Vietnam rather than Democratic People’s Republic of Korea.

Most striking in the 175-pages were the letters in Chapter II, Constitution of MPIYMES [micro, small, and medium-sized enterprises], Section On, Generalities:

Article 11. MIPYMES are constituted as commercial companies, which adopt the form of a limited liability company, hereinafter SRL, by deed public, which is registered in the Mercantile Registry and with its registration acquire personality legal.
Article 12. The form of LLC implies the existence of a commercial company, with own legal personality, whose capital is divided into social shares and is composed of the contributions of all the partners, who do not respond personally of social debts.
Article 13. MIPYMES can be made up of one or more partners.
Article 14.1. The name of the MSMEs necessarily includes the indication "Limited Liability Company" or its abbreviation "S.R.L."

The government of the Republic of Cuba was adopting, legalizing, the Limited Liability Company, known as the LLC.

The definitions and regulations thus far adopted by the government of the Republic of Cuba do not mirror precisely those found amongst the fifty states of the United States, although there are remarkable similarities- and those similarities will over time shift increasingly toward United States norms. LINK To State of Florida LLC Requirements

While some observers may dismiss the decision as insignificant, as a gesture absent substance, as a morbid joke, careful- and artful analysis belies any concern about appearance. True, the sixty-two years of the Revolution is littered with initiatives created and implemented only to be reformulated or abandoned once a particular need has been achieved- a crisis averted or survived.

Could the same operational trajectory curtail the LLC? Yes, it could. Is it likely? No, it is not. Why? The Republic of Cuba no longer has the commercial, economic, and political elasticity to retake, and not replace, what has been given. There are no countries today which will support the Republic of Cuba so that it might remain an “amusement park of decay” at the expense of taxpayers in another country or countries.

Why would the government of the Republic of Cuba adopt a business structure that while rooted in the German Empire during 1892 as Gesellschaft mit beschränkter Haftung (GmbH), has for decades been widely adopted throughout the United States?

Perhaps… Because the LLC is familiar. The LLC is explainable. The LLC is relatable. The LLC creates increased commonality and functionality when a company or individual subject to United States (or other country) jurisdiction is contemplating providing direct investment to and direct financing for an individual or group in the Republic of Cuba who want to start a business or who have a business and want it to grow.

For the Biden-Harris Administration, the adoption of the LLC by the government of the Republic of Cuba provides another reason for the establishment of direct correspondent banking, the re-authorization of U-turn transactions, and an operationally efficient direct means for electronic remittance transfers to support direct investment to and direct financing for the re-emerging private sectors. Implementing each will in the near term overwhelm the financial infrastructure of the Republic of Cuba, but that consequence is nothing compared to the eventual benefit.

Now is opportune to provide the re-emerging private sector, and the entrepreneurs who are their foundation, with the most efficient means for engagement with companies and individuals subject to United States jurisdiction.

The government of the Republic of Cuba may not have adopted the LLC because it would send a message to the government of the United States. However, the adoption of the LLC is a message- delivered directly or indirectly. The message is helpful rather than an additional obstacle.

The definitions of the LLC as outlined in the 175-pages published in the Gaceta Oficial on 19 August 2021 are not the final definitions and regulations. They are vague in some instances. They are contradictory in other instances. They require clarification in other instances. The role of individuals not subject to Republic of Cuba jurisdiction remains unresolved. However, the definitions and regulations exist and that is important. They didn’t on 18 August 2021.

Salient points: First, the process for defining the LLC was not one where the PCC was an energetic participant for an expansive result. Second, as LLCs are created and begin to operate the regulations will evolve. There will be pushback from some members of the PCC. The unfolding process will be confrontational. There will be investigations to ensure “ideological integrity” of individuals owning and managing LLCs- and this will likely be particularly acute for those with more than 100 employees. The LLC will survive. With support from the Biden-Harris Administration, the LLC will thrive.

While the United States business community would prefer the government of the Republic of Cuba embrace a holistic and expansive approach for changes to the commercial and economic infrastructure, there are opportunities for engagement within the incremental model deployed currently in the Republic of Cuba.

The last ninety days for the Republic of Cuba have, from a commercial perspective, been astonishing in swiftness and depth. Some of what has been approved:

Duties and fees eliminated on certain imports
Regulation of cryptocurrency
Postal service to provide financial services
Financing for purchases
Private sector increases access to suppliers, foreign currency
Suspension of tariffs and fees for residential solar systems
Regulations for micro, small, and medium-size enterprises
Adoption of the LLC as an ownership format

Since 1 January 2021, the government of the Republic of Cuba merged its two operational currencies, the Convertible Peso (CUC- 1 to US$1.00) and the Cuban Peso (CUP- 24 to US$1.00) leaving the CUP. The CUP remains overvalued (“street” value is 60-70 to US$1.00). Further official devaluation is expected perhaps by the end of 2021. There has been decentralization within the commercial sectors, though there remain opportunities for additional changes. Expanded use by private companies of Republic of Cuba government-operated Fincimex-created American International Services (AIS) card cards issued by Republic of Cuba government-operated Banco Metropolitano. Expanded use of Moneda Libremente Convertible (MLC) for transactions. Republic of Cuba government-operated companies and private sector companies may retain from 80% to 100% of revenues from exports.

Changes within the Republic of Cuba have never been about a moment, but rather a series of moments. Commercially and economically, 19 August 2021 was an important moment- and more will come because the government of the Republic of Cuba has no other option.

The Diaz-Canel-Valdes Mesa Administration will not collapse. It will adapt. As did its predecessors Raul Castro Administration (2008-2019) and Fidel Castro Administration (1959/1976-2008). For the Biden-Harris Administration to influence the behavior of current management in the city of Havana, Republic of Cuba, it too must adapt to the realities on the ground.

LLC Background

From the Internal Revenue Service (IRS): “A Limited Liability Company (LLC) is a business structure allowed by state statute. Owners of an LLC are called members. Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner. A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”). Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.”

Investopedia: A limited liability company (LLC) is a business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

From dummies: The limited liability company (LLC) didn’t come out of nowhere. Business entities with the same characteristics as LLCs have been around for many years. The origin of LLCs can be traced back to the Germans. In 1892, German law enacted what was called the Gesellschaft mit beschränkter Haftung (GmbH) — a modern-day variation of the English private limited company. After Germany established the GmbH, the concept soon spread throughout Europe and Central and South America. By the 1940s, in France especially, the concept of the limited liability company was becoming more popular than the traditional corporation. Not that Germany can take all of the credit. In 1874, Pennsylvania authorized the use of a Limited Partnership Association. By 1875, Michigan, New Jersey, Ohio, and Virginia had enacted similar legislation after seeing how the entity type was gaining popularity in Pennsylvania. Unfortunately, the laws of the time required that the company headquarters remain in one of those five states. Because those states weren’t huge epicenters of American commerce, the new legislation began to lose popularity. In 1977, Wyoming decided to spearhead an effort to build upon the antiquated Limited Partnership Association and enacted the first true LLC act. The legislature modeled the act after the German GmbH and the successful Panama version of the LLC. Because of Wyoming, the modern-day LLC protects all partners from the liability of the business and has a double layer of liability protection that protects the business from your personal creditors. After Wyoming, Florida followed suit in 1982. However, LLCs weren’t popular entities. Because they were hybrid entities — between a corporation and a partnership — the IRS had yet to decide how it was going to tax the LLC. After all, would you really want to form a business entity without knowing what sort of tax structure would be imposed on you? Finally, in 1988, the IRS ruling came: LLCs would be taxed as partnerships. The business’s profits and losses would flow through to the owners, and the LLC wouldn’t be recognized as a separate entity for tax purposes. After this ruling occurred, states began to form their own versions of LLC law.

LINK To Complete Analysis In PDF Format

LINKS To Recent Remittance-Related Analyses

Healthcare Crisis In Cuba Provides Additional Questions And Opportunities For Biden-Harris Administration To Address Electronic Remittance Transfers... And Do So Practically August 19, 2021

Binary: Electronic Remittance Transfer Decision For Biden Administration And Diaz-Canel Administration; And Putting US$20 Million Into Perspective August 12, 2021

Cuba Issues 175 Pages Of Regulations For Micro, Small And Medium-Sized Enterprises (MSME's) August 20, 2021

Defining "Transformative"- Cuba Ratifies Decree-Law Authorizing SME's: Micro (1-10 employees), Small (11-35 employees), Medium (35-100 employees). The Private Sector Has Returned. August 07, 2021

Cuba Links Resumption Of Remittances From United States To Expanding Investment Opportunities For Cuban Residents Abroad August 06, 2021

Cuba Expands Again Role Of Private Sector- Suppliers, Foreign Currency Access August 05, 2021

Cuba Suspends Tariffs And Fees For Non-Commercial (SME's Next?) Solar Systems. Another Opportunity For Biden-Harris Administration To Support U.S. Exporters And Florida Companies Should Benefit. July 30, 2021

Biden-Diaz-Canel Remittance Compromise: U.S. And Cuba Companies Suspend Transaction Fees Until 31 December 2021. Impact On 800 Publix Markets July 27, 2021

U.S. Department Of State Memorandum: The 17 Company Members Of The CRWG- Moving Remittances And Using Remittances; Cuba Entities Need Be Part Of The Process July 26, 2021

If A Product Costs At Least 2,500 Pesos (US$104.16), Customers In Cuba Now May Obtain Financing: Terms Are 2.5% Interest With 20% Down July 24, 2021