A business in the Cayman Islands can be run as an individual sole trader operation, a partnership or a company. It is also possible for a foreign company to register in the Cayman Islands so as to be permitted to operate locally for such purposes as, for example, being the general partner in a Cayman Islands limited partnership or owning real estate.
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Typically, small owner-operated businesses with few liabilities, might consider operating as a sole trader, often using a ‘trading as’ title such as Fred Smith (t/a Fred’s Fantastic Fences). There are few formalities for formation and few annual fees. However, the sole trader is personally responsible for any debts the business incurs.
Where two or more people want to go into business together but wish to avoid all the formalities and expenses of a company, a partnership structure may be more appropriate. Professional advisors, such as lawyers and accountants, have traditionally used a partnership structure for their businesses. A partnership generally has less legislative governance requirements than a company and can be more flexible in its treatment of the partners’ responsibility for liabilities and shares in profits. Partners are also personally liable for any debts the business incurs, except for in the case of a registered Limited Liability Partnership, where the limited partners generally enjoy limited liability.
A company may be used where the owners and operators of the business wish to ensure limited personal liability for the debts of the business. Companies are commonly used for all sorts and sizes of businesses. There are more formalities and fees associated with forming and operating a company than with a partnership or sole trader business; however, for many, the benefit of the limited liability attached to a company offsets the extra effort and cost for the formation and operation of a company.
Foreign companies that do not wish to establish a Cayman Islands subsidiary have the option of registering a branch operation in the Cayman Islands. The process of registering a branch with the Cayman Islands Registrar of Companies is straightforward. The branch, once registered, is required to maintain a local registered agent and pay annual fees to the CI Government in order to maintain its registration.
If your aim is to operate a business within the Cayman Islands, it is likely that some form of local licensing will be needed. More details on the Local Licences procedure is given later in this section.
For a business that is at least 60% beneficially owned and controlled by one or more Caymanians, the acquisition of a Trade and Business (T&B) Licence is required. Where beneficial ownership and control does not meet this threshold, a Local Companies (Control) Licence (LCCL) may be required. The grant of the LCCL is a matter of discretion for the T&B Licensing Board on the basis of various statutory criteria focusing on the protection of local interests and retaining control of local economic resources for Caymanians versus the benefits that the business would bring to the Islands, in addition to the extent to which Caymanian participation has been sought (which will ordinarily include a requirement for public advertising) and whether the proposed business will compete with any local Caymanian-owned businesses.
Businesses wishing to set up a physical presence in the Cayman Islands, but whose activities are carried out mainly outside the Islands are, in most cases, exempt from the Local Companies (Control) Act. As such, although a T&B Licence is required in order to set up their local office and apply for work permits for any expatriate employees, they would not need a LCCL or need to meet the 60% Caymanian ownership and control threshold.
It should be noted that banks, trust companies, company management firms and a number of other businesses in the financial sector are exempt from the T&B Licence and LCCL, though they would need to secure the necessary licences from the Cayman Islands Monetary Authority (CIMA). A different regulatory regime is available for businesses in certain approved categories seeking to set up within the Cayman Islands’ Special Economic Zone.
For more research and to review a checklist of what is required to set up a Trade and Business License see the Department of Commerce and Investments (DCI) checklist here. To start the Trade and Business Licensing process yourself or to renew a trade and business license, see the Department of Commerce and Investments’ link to their online application and renewal portal.
Corporate Services Providerskeyboard_arrow_right
Cayman has many companies which are very experienced and well equipped to provide corporate services ranging from the formation of local or foreign companies or partnerships, other enterprise-wide support, or simply assisting with the necessary paperwork.
Read MoreSole Traderkeyboard_arrow_right
Due to nationality requirements and the rules governing the grant of a T&B Licence, in practice, only a Caymanian will be able to operate a business as a sole trader if they are competing in the domestic market. A sole trader is able to start their business offering services or goods in return for payment, with very few formalities depending on the type of business.
Read MoreCompanies and Partnershipskeyboard_arrow_right
A partnership is formed where two or more persons wish to carry on business in common for any lawful purpose, with or without other terms, and that business shall be carried on as a partnership.
One form of partnership is where all the partners are ‘general’ partners and participate in the management of the business. In this structure, the only restrictions on sharing profits and withdrawing capital are those agreed between the partners and each partner will be personally liable for the debts and obligations of the business.
Read MoreCompanies and Limited Liability Companieskeyboard_arrow_right
A company that intends to conduct most of its business outside of the Cayman Islands would typically register as an exempted company or a Limited Liability Company.
Read MoreFoundation Companieskeyboard_arrow_right
Foundation companies are ideal vehicles for holding shares in operating businesses. Rather than shares in operating companies being held in the personal name of the business owner or founder, a foundation company can be established for the purpose of holding the family business structure.
