Cayman Islands Offshore LLC Formation
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The Cayman Islands has long been a renowned offshore financial center, attracting international investors and businesses with its favourable tax environment, economic and political stability, and strong financial infrastructure. An offshore Limited Liability Company (LLC) is the most popular legal structure in the Cayman Islands for business incorporation.
In this article, we will explore all the important aspects of incorporating an offshore LLC in Cayman Islands. We provide an overview of the LLC along with its advantages and top uses. We then outline all the key requirements for incorporating a Cayman Islands LLC and provide details on the key corporate features of the entity.
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Table of Contents:
- Overview Of A Cayman Islands LLC
- Cayman Islands Background
- Advantages Of A Cayman Islands LLC
- Top Uses
- Key Corporate Features
- Package Includes
- Documents Required To Incorporate A Cayman Islands LLC
- Taxation Of A Cayman Islands LLC
- Corporate Details Of A Cayman Islands LLC
Overview of a Cayman Islands LLC
A Cayman Islands LLC is a hybrid corporate structure that combines the limited liability protection of a corporation with the flexibility and tax benefits of a partnership. Its primary advantage is that it is a separate legal entity which provides limited liability protection to its members. There are many other attractive features of a Cayman Islands LLC which have contributed to making it such a popular offshore corporate vehicle, including tax efficiency, reputability, flexibility in management and capital structure, privacy, and a business-friendly and stable legal system.
The Cayman Islands Limited Liability Companies (LLC) Act of 2016 is the main corporate legislature which protects members of a Cayman Islands LLC. It is similar to Delaware’s laws on limited liability companies. The law was recently revised in 2020, which brought forth important changes and updates. Some of these changes have added to the attractiveness of a Cayman Islands LLC, while others have brought about increased restrictions.
Cayman Islands Background
The Cayman Islands is a British Overseas Territory located in the western Caribbean Sea. Although it has strong ties with Britain, it is a self-governing nation and is not part of the United Kingdom. It is composed of three islands: Grand Cayman, Cayman Brac, and Little Cayman. The climate is subtropical with temperatures ranging from 25°C to 30°C throughout the year. English is the official language and the currency used is the Cayman Islands dollar.
The economy of the Cayman Islands is largely driven by tourism and offshore finance. The Islands have been a popular financial center since the 1960s, offering low taxes, stability, and a favourable business environment. Today, it is one of the world’s leading international financial centers. The Cayman Islands is known for its commitment to transparency, which has contributed to its reputation as a secure and reliable jurisdiction for offshore finance.
A Cayman Islands LLC offers many benefits, including:
- Tax efficiency: The Cayman Islands does not levy any corporate or personal income tax on income/profits earned outside of its borders. It also does not impose capital gains tax, dividends tax, or withholding tax.
- Limited liability: Members of a Cayman Islands LLC are not personally liable for the company's debts or obligations beyond their investment in the company, providing them with protection from financial risk.
- Flexibility: A Cayman Islands LLC allows for a flexible and customizable operating structure, with the ability to tailor profit and loss sharing arrangements to suit their needs (for example, altering profit distributions according to the amount of work that each member has contributed).
- No minimum authorised capital requirement.
- Privacy: The Cayman Islands has strict privacy laws that protect the identities of the members and managers of an LLC. The documents which are filed with the Registrar do not make the names of members and managers publicly accessible.
- Strong Financial Infrastructure: The Cayman Islands has an established and well-regulated financial sector. Offshore companies incorporated in Cayman Islands maintain global reputability and avoid undue scrutiny.
- Foreign ownership: 100% foreign ownership is permitted.
- Single-member ownership: Minimum of only one member is permitted, who may also act as the sole manager of the company.
- No language barriers: English is the official language, and all corporate documents and legislation are in English.
- Fast and easy incorporation process: It takes only one day to file the registration documents with the Cayman Islands Registrar and receive the Certificate of Registration. The LLC is legally registered as soon as it has filed the relevant documents before the certificate is even issued.
A Cayman Islands LLC can be used for a variety of purposes. Some of the top uses include:
- Holding company: A Cayman Islands LLC can be used to hold all kinds of assets, such as real estate, investments, intellectual property, and other corporate entities. This provides protection and anonymity to the members of the LLC.
- Trading company: It may be used as an international trading company, providing the benefits of tax efficiency and limited liability protection.
- Private Equity and/or Venture Capital: The company may be used as a private equity or venture capital fund, providing greater asset protection than an individual or group of individuals investing together.
- Estate planning: It may be used as an efficient estate planning vehicle to minimise estate taxes and maximise privacy.
- Yacht and boat registration: Being an Island nation on the Caribbean sea, the Cayman Islands is a popular jurisdiction to register a yacht or boat. It has a well-established maritime industry and offers a range of benefits for yacht owners, including favourable tax rules. An LLC provides the ideal vehicle through which to complete the yacht registration.
Key Corporate Features
- Government Registration Fee (First year)
- Registered Office Address (First year)
- Registered Agent Services (First year)
- Company Secretarial Maintenance
- Certificate of Incorporation
- Memo & Articles of Association
- Appointment of 1st Directors
- Consent Actions of the BOD
- Share Certificates
- Register of Directors
- Register of Officers
- Register of Shareholders
- FREE Phone and/or email consultations
The formation process for a Cayman Islands LLC is straightforward. Only one member is required, and they need only file a signed Registration Statement with the Cayman Islands Registrar of Limited Liability Companies and pay the initial registration fee of $976. The Registration Statement should contain the following information:
- The proposed name of the LLC (in the form of a name reservation form).
- The company’s registered office address in the Cayman Islands.
- The names and addresses of the members who hold a share in the LLC.
- The term for which the LLC will be formed (may be unlimited duration).
- A declaration that the LLC shall not conduct business with the public in Cayman Islands unless it is strictly necessary for being able to carry on their business outside the Cayman Islands.
Once the Registrar has received the registration fee and Registration Statement, they will proceed to issue the certificate of registration. It usually takes 3-5 business days for the Registrar to issue the certificate, and it serves as proof that the company is in compliance with all the requirements of the Companies Act. However, the LLC is officially deemed to be registered already from the day of filing itself.
The Cayman Islands does not impose corporate income tax, capital gains tax, or personal income tax on income earned outside of the country. The tax advantages are further extended in that a Cayman Islands LLC may apply for a special tax undertaking certificate from the Government.
The certificate guarantees that the LLC is exempted for the next 50 years from any law enacted in the Cayman Islands imposing taxes on profits, income, capital gains, and asset appreciation. In the current worldwide context of constantly evolving tax regulations, having such solid surety that the LLC will remain tax free is a significant benefit to say the least.
Privacy (Anonymity, Confidentiality and Disclosure)
A Cayman Islands LLC offers a high level of privacy to members, managers, and beneficial owners. The Statement of Registration is the only document to be filed upon incorporation, and while it includes the names of members and/or managers, this information is not made publicly available.
The LLC is required to keep registries which contains information on members, managers, and beneficial owners. The information should include name and address, the date when they became a member/manager/beneficial owner and when membership/management/ownership ceased (if applicable). However, the registry is not open for public inspection, and need not even be kept in the Cayman Islands itself. The LLC must also keep records of its financial obligations such as loans and mortgages, which should be available for government inspection if so requested.
While the company must maintain its own financial statements, there are no mandatory methods for doing so and the information remains private.
Type of Law
The Cayman Islands has a common law legal system.
Principle Corporate Legislation
The Limited Liability Companies Act (Revised) of the Cayman Islands is the main piece of legislation governing the incorporation and operation of LLCs in the Cayman Islands. The law was enacted in 2016 and further revised in 2020. It was created in line with Delaware’s laws on limited liability companies. The revisions brought about some important changes, and updates and expands upon the provisions of the original 2016 LLC Act. It was designed to make the LLC structure more flexible and user-friendly, while maintain the required legal protections and benefits that were inherent in the original act.
They also brought in a new framework for the governance of LLCs that is more in line with current international standards. The revisions brought about increased transparency, improved efficiency in incorporating and managing an LLC, and strengthened regulations against anti-money laundering and other financial crime.
While these laws may come with a slight reduction in financial privacy, they have overall brought about increased efficiency, flexibility, and reputability. As such, they have helped to solidify the Cayman Islands’ position as a leading jurisdiction for offshore finance and, by many standards, have made it an even more attractive jurisdiction for the formation of LLCs.
Language of Legislation and Corporate Documents
Powers of the Company
A Cayman Islands LLC is a separate legal entity from its members and managers. It has all the same powers and rights as a natural person; including the power to enter into contractual agreements, sue or be sued, and own assets in its own name. Members are not personally liable for the company’s obligations, which means their liability is limited to their investment in the company.
There are no minimum capital requirements.
Members and Managers
A minimum of one member and one manager is required. A sole member may also act as the sole manager. Both members and managers can be of any nationality.
Member and Manager Meetings
Meetings of members and managers can be held in person or remotely and can be held in any location. Annual general meetings are not mandatory.
Financial Statements and Auditing Requirements
The LLC is required to prepare and maintain financial statements; however, there is no stipulated method for doing so and the financial statements do not need to be filed annually. There is also no requirement for an annual audit.
A Cayman LLC is required to file a signed return in January each year, along with an annual fee payment to the Registrar. The return must declare that the LLC complied with all provisions of the LLC Act and relevant corporate law during the business year. It should also provide information about the company’s status, including its members and managers, current registered office address, and other relevant information.
Local Registered Office and Agent Requirements
A Cayman Islands LLC must have a registered office and a registered agent in the Cayman Islands. The registered office must be a physical address, and the registered agent must be a locally licensed individual or company.
There are no restrictions on the types of business activities that a Cayman Islands LLC can carry out, provided they are lawful.
There are no exchange controls in the Cayman Islands.
Shelf Companies Available
Yes, shelf companies are available for immediate incorporation.
The company becomes legally registered as soon as the documents are filed with the Registrar. It can take about one week to prepare and submit the required documentation, and another 3-5 business days to receive the official Registration Certificate.
Language of Name
The company’s name can be in any language that uses the Roman alphabet.
The name may contain the words “Limited Liability Company”, “L.L.C.” or “LLC”, but it is not mandatory. The name must not be identical or similar to an existing company on the register, and it must not contain words that are considered offensive or misleading. Certain words are not allowed in the name without regulatory approval and proper licensing, such as “bank”, insurance”, etc.
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