The Cayman Islands remain a jurisdiction in which individuals and businesses are attracted to register their companies for various reasons, such as favorable tax policies, uncontested political focus, and a strong status as one of the world’s financial centers.
Nevertheless, the business setup process within this jurisdiction also has its challenges. To prevent such mistakes, it is essential to realize what mistakes should be avoided during company formation in the Cayman Islands—detailed information on the site.
Failing to Appreciate Local Compliance
One standard error is assuming that there is no need to conform to local laws. The fact that these Islands are business-friendly does not mean there are no business rules about AML and KYC. One such standard of practice is that, if not adhered to, it can attract harsh sanctions and damage the organization’s image.
Not Taking into Consideration the Sustainability of the Budget
Setting up a company in the Cayman Islands is generally considered an easy process, but other operational costs must be considered, such as the annual registration costs, the costs of the service providers, and the costs associated with the government.
Ranking these expenses as the last priority in a budget can bring cash flow problems or even the risk of being dissolved after failing to pay the necessary compulsory dues.
Disregarding Economic Substance Requirements
All companies incorporated in the Cayman Islands must satisfy the Economic Substance Requirements (ESR) provisions only if they engage in relevant activities.
Not meeting such requirements may incur sanctions or even result in being struck off the register. This is important in determining whether one’s business activities fall under these regulations and how the compliance measures would be carried out.
Taking Total Anonymity
Although the Cayman Islands are famous for jurisdictional advantages concerning privacy, this area somehow changed due to worldwide anti-money laundering and combating the financing of terrorism regimes. It is incorrect to assume that setting up a company in the Cayman Islands offers complete protection for company owners. Other disclosures are sometimes rare, but one needs to understand them for legal purposes in the future.
Avoiding Proper Due Diligence
Proper due diligence should be exercised when forming business companies in the Cayman Islands. This entails knowledge of the market where they operate, the tax regimes involved, and the credibility of local service providers or partners.
Inadequate due diligence may result in operational difficulties, problems in legal compliance, and excessive expenses.
Wrapping Up
Company formation in the Cayman Islands has many attractive features. However, every step of the process must be carefully undertaken so that important aspects are not overlooked.
Once local compliance is understood, the appropriate business structure is selected, and ongoing needs are envisioned, a healthy and problem-free company formation process in the Cayman Islands will be possible.
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