What type of a company should I setup?
In the Cayman Islands your business will be usually setup as a Exempt Company. It is also possible to register as an Ordinary Resident Company or as Cayman Limited Liability Company (LLC) and foreign companies can register a branch in the Cayman Islands in order for the foreign company to operate locally.
Most of our clients choose for a Cayman Exempt Company since it is more flexible and has less restrictions and requirements then the other company formation structures in the Cayman Islands. Those clients seeking to start a business in the Cayman Islands locally, will need to setup a Ordinary Resident Company.
An exempt company is the most common used Cayman company and is ideal for those wishing to conduct business outside the Cayman Islands. Cayman Exempted Companies are frequently used to structure transactions in an efficient and cost effective way because of the Cayman Islands tax neutral and proportionate regulatory environment. There are no restrictions on the nationality of the directors or shareholders of an exempted company and an exempted company is not required to hold an annual shareholders meeting. The name of an Exempted Company does not need to include the words "Limited" or "LTD".
OPTIONAL: Tax Exemption Certificate - 20 year Tax Free
An exempted company may obtain an Tax Exemption Certificate from the Cayman Islands Government, that if direct taxation were ever to be introduced in the Cayman Islands, the company would be exempt for a period of 20 years. This Tax Exemption Certificate is sort of like an insurance, that whatever happens, you will be garanteed the 20 year tax free status. This optional certificate is provided at a one-time fee of 2500 USD, which includes all government fees, legal fees and courier fees.
Exempt Company - advantages:
- 100% Foreign Owners: Foreigners can own all the shares.
- Limited Liability: Only the unpaid amount for all the shares is a shareholder’s liability.
- Privacy: The names of the shareholders and directors are not available to the public. Bearer shares are permitted.
- No Taxation: The Cayman Islands do not levy any type of taxes on the company and shareholders. However, United States residents must declare all global income to the IRS just like residents of other countries taxing global income.
- One Shareholder/Director: Only one shareholder and one director is required who can be the same person.
- No Required Meetings: There are no requirements to hold shareholders or directors meetings.
- No Audits: There are no required accounting standards and no required audits.
Where the proposed activities of a company are to be carried out mainly outside of the Cayman Islands – offshore – the registrants can apply for registration as a Limited Liability Company (“LLC”) under the Limited Liability Companies Law. Like companies under the Companies Law, this type of company has separate legal identity therefore the members of the company cannot be held personally liable for the company’s debts or liabilities.
Unlike Companies under the Companies Law, an LLC has no share capital but members acquire LLC interest. The management of an LLC rests with its members and/or managers.
The formation of an LLC is similar to the process of forming a Cayman Islands exempted limited partnership. The filing of a signed registration statement containing certain prescribed information and payment of the registration fee is required in order to register an LLC with the Registrar of Limited Liability Companies. When a change occurs in any matter specified in an LLC’s Registration Statement, the LLC must file a certificate of amendment to the Registration Statement.
The LLC Law makes provision for an existing Cayman Islands exempted company to merge with, consolidate with or convert to an LLC and permits non-Cayman Islands entities to re-register and continue into the Cayman Islands as a LLC.
In January of each year, the company must file with the Registrar a return certifying that during the previous calendar year it has complied with the provisions of the LLC Law and pay to the Registrar a prescribed annual fee.
Ordinary Resident Company
An ordinary resident company is usually formed for the purposes of carrying on local business. In addition to the Companies Law, it is subject to the terms of the Local Companies (Control) Law 1995 which requires licensing, and the annual submission of a list of shareholders. Only registered, and not bearer, shares are allowed. An annual general meeting must be held, and a register of members must be kept at the registered office, open to public inspection. The name of the company must end in Ltd or Limited. The list of shareholders of the company must be filed with the Registrar of Companies in January each year; the Immigration Board should also receive a similar list showing those shares beneficially owned by Caymanians.