Various types of companies can be registered in the Cayman Islands, each with its characteristics and purposes. The most popular types are:
An exempted company is the type of company that is most common in the Cayman Islands. It is ideal for those who want to do business outside of the Cayman Islands. Exempted companies are exempt from local taxes and can do business anywhere in the world. They are often used for investment, holding assets, or international trade.
An exempt company can additionally obtain a Tax Exemption Certificate from the Cayman Islands government. This certificate ensures that the company will be exempt from paying taxes in the Cayman Islands for up to 20 years, even if direct taxation is introduced in the future. The Tax Exemption Certificate is an additional safeguard for companies that want to protect themselves from possible tax changes. The cost of obtaining a Tax Exemption Certificate is $2,500.
A resident company is a type of company that is incorporated in the Cayman Islands and carries on business on the island. It is subject to the Cayman Islands Companies Law as well as the Local Companies (Control) Law >1995.
The Local Companies (Control) Law 1995 requires all local companies to be licensed and to submit a list of their shareholders annually. Shares in resident companies must be registered shares and not bearer shares. Resident companies must hold annual general meetings and the register of members must be kept at a registered office and be available for public inspection. The name of the resident company must end in “Ltd” or “Limited”.
Limited Liability Company (LLC).
An LLC combines the features of a corporation and a partnership, providing limited liability to its members. This type of company is popular with investment funds and joint ventures. Unlike companies described in the Companies Act, an LLC does not have share capital. Instead, members acquire an equity interest in the LLC. The LLC is managed by its members and/or managers.
The process of forming an LLC is similar to forming a tax-exempt limited liability partnership in the Cayman Islands. The LLC Law provides the ability to merge, consolidate, or convert an existing Cayman Islands company into an LLC. It also allows non-Cayman Islands companies to re-register and continue to operate in the Cayman Islands in the form of an LLC.
Each January, the company is required to file a report with the Registrar confirming compliance with the provisions of the LLC Law during the previous calendar year and to pay an annual fee set by the Registrar.
In the Cayman Islands, partnerships are a company formation structure in which two or more persons pool their resources and participate in the management of the business. There are two main types of partnerships – General Partnership and Limited Partnership. Partnerships in the Cayman Islands provide tax benefits, which makes them attractive for international business. They are not required to set a minimum authorized capital, which gives businesses greater flexibility in financial planning. Privacy laws help keep the owners and operations of the partnership confidential. Flexibility in structure allows for forms to be created to suit specific business needs.
Overseas or foreign company.
Companies incorporated outside the Cayman Islands can enjoy the rights and benefits of companies incorporated in the Cayman Islands. This means that they can own property, conduct business, and associate with other companies in the Cayman Islands.
Most clients prefer to choose a Cayman Islands exempt company because of its greater flexibility and fewer restrictions and requirements than other company formation structures in these islands. Clients who intend to start a business locally in the Cayman Islands will need to set up a company with ordinary residence. It is advisable to seek professional advice before selecting the type of company to ensure compliance with local laws and regulations.