A Guide to Setting Up an LLC in the Cayman Islands

What Is a Cayman Islands LLC?

A Limited Liability Company (LLC) is a separate legal entity combining corporate limited liability with partnership-style contractual flexibility.

Members’ liability is capped at their agreed contributions. An LLC may be member-managed or manager-managed as set out in its LLC Agreement, which governs management, voting, and distributions.

Advantages of a Cayman Islands LLC

1. Separate Legal Entity

A Cayman LLC has its own legal personality, allowing it to own assets, enter contracts, and sue or be sued in its own name.

2. Tax-Neutral Jurisdiction

There is no corporate income tax, capital-gains tax, or inheritance tax in the Cayman Islands, making it a preferred vehicle for holding or investment structures.

3. Confidential Ownership

The Register of Members is not publicly accessible, ensuring privacy for investors and beneficial owners.

4. Flexible Structure

There is no minimum capital requirement and no residency requirement for members or managers, offering full flexibility in ownership and management.

5. Long-Term Tax Assurance

A Cayman LLC can apply for a Tax Undertaking Certificate, guaranteeing up to 50 years of tax exemption under current Cayman law.

Official Fees and Common Service Costs (2025)

Service-provider costs (registered office, company secretary, legal drafting) vary. Prefer transparent pricing? Air Corporate’s offshore company secretary service offers fixed-fee packages for filings and compliance.

How to Set Up an LLC in the Cayman Islands (2025 Guide)

Step 1: Choose a Company Name

Select a unique name and reserve it through the Cayman Business Portal (CBP). Name reservations are optional but recommended to secure availability before filing.

Step 2: Appoint a Registered Office

Every Cayman LLC must have a registered office in the Cayman Islands as required under Section 7(4) of the Limited Liability Companies Act (2025 Revision). Operating without one may result in a penalty of KYD 200 per day.

Step 3: File the Registration Statement

Submit the Registration Statement electronically via the Cayman Business Portal along with the official registration fee.

Once approved, the Registrar of Companies issues a Certificate of Registration, confirming the LLC’s legal existence.

Step 4: Adopt an LLC Agreement

Prepare an LLC Agreement defining the company’s management structure, member rights, capital contributions, and profit distributions.

This document is private and not publicly filed, but it becomes legally binding upon registration.

Step 5: Complete Post-Incorporation Filings

• Register of Managers: File within 60 days of the first appointment and report any change within 30 days.
• Statutory Registers: Maintain a Register of Members, Register of Mortgages and Charges, and Register of Security Interests at the registered office. These are not public records but must be available for inspection by authorized parties.

Governance and Member Rights

Unless the LLC Agreement provides otherwise:

• Management vests in members by majority vote, or in managers if appointed.
• Managers owe a duty of good faith by default; fiduciary duties may be added or limited contractually.
• Written resolutions signed by the required majority are valid instead of meetings.
• Distributions allowed if the LLC passes a solvency (cash-flow) test; no capital-maintenance rule applies.

Books, Records, and Annual Return (2025 Requirements)

Registers

• Register of Members: Maintained privately at the registered office and not publicly accessible.
• Register of Managers: A copy must be filed with the Registrar of Companies. A public extract of manager information is available from the Registrar for a small fee.

Books of Account

Every Cayman LLC must maintain proper books of account that clearly reflect its assets, liabilities, income, and expenditure, ensuring a true picture of its financial condition.

If the records are kept outside the Cayman Islands, copies must be maintained at the registered office and made available to the Tax Information Authority (TIA) upon request under the Limited Liability Companies Act (2025 Revision).

Record Retention

Accounting and supporting records must be kept for at least five years from the date of completion of the relevant transactions.

Annual Return

Each LLC must file an Annual Return in January through its registered-office provider.

• To remain in good standing, all fees must be settled by 31 January.
• Late penalties apply after 31 March.

Beneficial Ownership (Effective 1 January 2025)

Under the Beneficial Ownership Transparency Act 2023 and Regulations 2024:

• Every LLC must maintain a Beneficial Ownership Register through a licensed Corporate Services Provider (CSP).
• Exemptions exist for entities listed on approved exchanges, licensed under Cayman regulatory laws, or registered under the Mutual Funds Act or Private Funds Act.
• A beneficial owner is an individual who owns or controls 25 % or more of interests or voting rights, or otherwise exercises effective control.
• If no one qualifies, record the senior managing official.

Economic Substance (ES) Obligations

All Cayman entities must file an annual ES Notification (ESN) via the Cayman Business Portal, and if conducting a Relevant Activity, submit an ES Return through the DITC Portal.

To satisfy the ES Test under the International Tax Co-operation (Economic Substance) Act, an LLC must:

• Perform Core Income-Generating Activities (CIGA) in Cayman.
• Be directed and managed from Cayman.
• Maintain adequate premises, employees, and expenditure locally.

The TIA / DITC oversees compliance. Non-compliance may lead to administrative penalties or strike-off.

Anti-Money-Laundering (AML) and KYC (2025)

LLCs and CSPs must comply with the Anti-Money Laundering Regulations (2025 Revision):

• Customer Due Diligence (CDD)
• Enhanced Due Diligence (EDD) for higher-risk clients
• Verification of source of funds and source of wealth

These standards follow FATF recommendations and are enforced by the Cayman Islands Monetary Authority (CIMA).

Restrictions on Local Activity

An LLC may not carry on business with the public in Cayman unless licensed under local laws or listed on the Cayman Islands Stock Exchange (CSX).

Taxation

The Cayman Islands impose no direct taxes on income, profits, or capital gains.

Tax treatment for members depends on their country of residence.

An LLC may apply for a Tax Undertaking Certificate guaranteeing freedom from future Cayman taxes for up to 50 years.

Oversight and Penalties

If you want a hassle-free formation process, expert guidance on economic substance, or ongoing registered-office and compliance support, Air Corporate can handle everything for you so you can focus on growing your business!