A business in the Cayman Islands can be run as a sole trader operation, a partnership or a company. It is also possible for a foreign company to register a branch in the Cayman Islands in order for the foreign company to operate locally, for such purposes as, for example, being the general partner in a Cayman Islands limited partnership
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The main distinction is that sole traders and general partners have unlimited liability to third parties doing business with them, whereas the shareholders of a company typically have limited liability to third parties doing business with the company.
The differences in, and suitability of, various types of business structure are highly technical and are best discussed with a qualified Cayman Islands attorney. 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 business. 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 share of 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 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 limited liability attached to a company offsets the extra effort and cost for the formation and operation of a company.
Foreign businesses 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 on-Island, then depending on the nature of the ‘on-Island’ business to be conducted, some other form of local licensing will be needed. More details on the Local Licences procedure is given later in this section.
For a business, wholly or 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 is less than 60% by Caymanians, a Local Companies Control Law Licence (LCCL) may be required. The grant of the LCCL is a matter of discretion for the Trade and Business Licensing Board on the basis of various statutory criteria focusing on the protection of local interests and 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, whose activities are carried out mainly outside the Islands, are in most cases exempt from the Local Companies Control Law (LCCL). 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 Local Companies (Control) Licence or need to meet the 60% Caymanian ownership threshold.
In April 2017, Cayman enacted legislation for the formation and registration of Foundation Companies. These companies allow for there being no shareholders and their objectives being entrenched. Read more about Foundation Companies further in this section.
It should be noted that banks, trust companies, company management firms and a number of other businesses are exempted from requiring both a T&B Licence and LCCL, though they would need to secure any requisite licensing with the Cayman Islands Monetary Authority (CIMA). A different regulatory regime is available for businesses in certain approved categories seeking to set up within Cayman’s 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 immigration requirements and the rules governing the grant of a T&B Licence, in practise, 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 his/her business without any formalities by simply offering services or goods in return for payment.
The sole trader can employ people to work in the business, but is personally responsible for all the liabilities of the business (e.g. rent, T&B Licence fees, salaries and benefits of employees) and is also the person who receives all the profits.
Read MoreCompanies and Partnershipskeyboard_arrow_right
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. As well as general partnerships, the Partnership Act sets out the rules for “ordinary” limited partnerships. However, limited partners must not participate in the management of the business and a limited partner’s right to share in the profits or withdraw capital is restricted.
Read MoreCompanies and Limited Liability Companieskeyboard_arrow_right
Foreign businesses that do not wish to establish a Cayman Islands subsidiary, do have the option of registering a branch operation in Cayman. The process to register a branch with the Cayman Registrar of Companies is straightforward and the branch, once registered, is required to maintain a local registered agent and pay annual fees to the Cayman Islands Government to maintain its registration.
Foundation Companieskeyboard_arrow_right
The Cayman Islands government is constantly creating new legislation and financial products to support its thriving business community. In April 2017, the government enacted legislation for the formation and registration of foundation companies. Unlike the traditional company, a foundation company may have no shareholders and may entrench its objectives.
