ESTABLISHING A BUSINESS IN CAYMAN
Cayman offers a well-regulated and internationally respected, tax-neutral, offshore business environment. The type of Cayman structure required or best suited for a particular endeavour will depend largely on the type of business and whether it will be conducting its affairs locally or outside of the Cayman Islands. If the business is operating in another country, advice from that country's legal and tax counsel will be of prime importance in understanding the benefits that can be derived from setting up a business in Cayman. A fully operational physical presence with locally based staff, as opposed to a nominal presence through a registered office address, can be an essential component in ensuring compliance with many international and local reporting requirements.

There are many reasons why Cayman is a great place to have a business. We are a small, yet sophisticated, jurisdiction with a stable government, a well developed Common Law system based on English law and a proliferation of world class corporate and service companies, all contributing factors in the smooth and efficient running of a business. As one well-known business leader in his field was fond of saying, "We are a very, very safe oasis in a troubled world".

LEGAL FORMALITIES

A business in the Cayman Islands can be run as a sole trader operation, a partnership or a limited 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. 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 limited company 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 an adviser qualified to discuss what might best fit your situation.

Typically, small owner operated businesses with few liabilities might consider operating as a sole trader (often using a 'doing business as' title such as Fred Smith d.b.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 expense of a company, they would use a partnership structure. Professional advisors, such as lawyers and accountants, have traditionally used a partnership structure for their business. A partnership has less legislative governance than a company and can be more flexible in its treatments of the partners' responsibility for liabilities and share of profits. Partners are also personally liable for any debts the business incurs.

A company will be used where the owners and operators of the business want to have limited liability for the debts of the business. Companies are very commonly used for all sorts of businesses from one man operations to multi-million dollar, multi-national businesses. There are more formalities and fees associated with forming and operating a company than with a partnership or sole trader business but many people feel the limited liability a company affords is well worth the extra effort and cost.

Foreign businesses who do not wish to establish a Cayman Islands subsidiary do have the option of registering a branch operation in the Cayman Islands. 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 such registration.
If your aim is to operate a business on-Island, then (depending on the nature of the 'on-island' business to be conducted) it needs to be borne in mind that a Trade and Business Licence ("T&B Licence") or some other form of local licensing will be needed. (More detail on the T&B Licence 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 T&B Licence can be a formality. Where beneficial ownership and control is less than 60% by Caymanians, a Local Companies Control Law Licence ("LCCL") may be required.

The grant of an LCCL is a matter of discretion for the Trade & Business Licensing Board which will consider, amongst other things, the benefit such business will bring to the Islands, 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 local Caymanian owned businesses.

Businesses wishing to set up a physical presence in the Cayman Islands whose activities are carried on mainly outside the Islands are in most cases exempted from the Local Companies Control Law. Therefore, although they would require a T&B Licence to set up their local office and secure work permits for any expatriate employees (as discussed further in the Immigration chapter), they would not require an LCCL or 60% ownership by a Caymanian Status holder. (It should be noted that banks, trust companies, company managers 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 Caymans' Special Economic Zone.
There is a strong desire on the part of the Cayman Islands Government to encourage investment into the local economy, therefore businesses that are willing to move to Cayman and set up a physical presence on-Island are encouraged.

Cayman Island Branches

An overseas company which i) establishes a place of business; ii) commences carrying on business within the Cayman Islands (even "offshore" business); or iii) proposes to own real estate situated in the Cayman Islands, must register as a "foreign company" (essentially register a branch) under Part IX of the Companies Law. A registered Cayman Islands branch will not have a separate legal personality from the main company headquartered overseas. In many cases, this is desirable for group operations which are required to maintain tax residency in a certain jurisdiction but wish to have a Cayman Islands presence from which to conduct certain business of the group. In the case of a bank, trust company, insurance company, management company, mutual fund, mutual fund administrator or any entity carrying on securities investment business, a licence to conduct such business will be required from the CIMA even though such business is actually conducted outside the Cayman Islands. Care should therefore be taken to ensure that the 'off Island' activities of the foreign company do not inadvertently create a requirement for local licensing beyond that envisaged by its principals. A Cayman Islands branch is able to secure a T&B Licence and, if necessary, an LCCL to provide it with the necessary locus standi to set up a physical presence in the Cayman Islands. Again, you are advised to consult a local attorney who will be able to legally assist you.

INCORPORATION/REGISTRATION

If you wish to establish a Cayman Islands company, an application must be made to the Registrar of Companies for Company Incorporation and a Cayman Islands registered office must be designated. The documents which are required to be filed are not pro-forma and most people seek help with these from attorneys or corporate services and management firms.

Application Process
Your local legal counsel or incorporation consultants can:
1) Contact the Registrar of Companies and ask if the company name you want is available;
2) Prepare the following documents:
         a)     Memorandum of Association;
         b)     Articles of Association; and
         c)     A cover letter providing details of the proposed business;
3) Provide a minimum of two sets of copies of both signed forms (you may need a certified copy for a bank account); and
4) Submit paperwork with the filing fee payable to the Cayman Islands Government.

As a matter of practice, the Companies Registry will require some categories of companies, such as exempt companies, to have a local licensed corporate service provider maintain the company's registered office.

Company Registry Fees
The registration and annual fees for any company are dependent on the size of the authorised share capital. Also worth noting is that licence fees are due annually in January of each year, but the Companies Registry is under no obligation to notify the company that the fees are due. Every company is responsible for paying these annual fees and if you do not pay them the company will usually be struck off the register of Cayman Islands incorporated companies. If the company had any assets at the time it was struck off, those assets would then become the property of the Government of the Cayman Islands and dealings with such assets deemed to be illegal. It is possible, if you were ignorant of the fact that annual fees are due, that your company could be struck off without your knowledge. This is one of the benefits of using a local licensed corporate services provider, as they will process the annual paperwork and remind you of the amount and timing of annual fees. Their fees are a lot less than the fees you would pay to an attorney to make the necessary application to the Cayman Court for the company to be re-instated to the register!

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