
Setting Up a Cayman Islands Company [pdf] - dvasdekis
https://www.stuartslaw.com/cms/document/Setting_up_a_Cayman_Islands_Company.pdf
======
MikeEhrmantraut
I'm curious if any HNers have any ideas for ways to use off-shore status to
protect your website from frivolous libel claims. I run some forums in the
automotive industry that have been around for about 15 years. I take pride on
being pro-free speech and loosely moderating things, only taking down
obviously illegal posts, copyright infringements, etc. Despite that, I still
occasionally get legal threats from people who have gotten their feelings
hurt. In one case, the threats came from an actual attorney who was
representing a shady commercial seller who got into it with some of our
members.

I would love to move the ownership of the forums to some sort of arrangement
(offshore) where they are essentially immune to frivolous libel claims. I want
attorneys to look at us and tell their clients that it's simply not worth
going after us. Is there such a place?

edit: I forgot to mention that my site runs no ads and makes no money
whatsoever...a rarity in the forums world. I keep it like this because I love
the hobby and I hate all of the other shitty forums sites that are filled with
adware garbage. Given this, it's a real hardship when some attorney threatens
me with a lawsuit because I just don't have the cash to properly defend
myself.

~~~
buro9
I run just under 300 forums on much the same basis and have been sued in the
past in the UK.

Feel free to co-opt my very expensive lawyer T&Cs which were designed
specifically for this scenario (if you haven't actually had a lawyer draw up
yours they may be a better default for you): [https://github.com/microcosm-
cc/legal](https://github.com/microcosm-cc/legal)

Ultimately in Europe I now feel fine:

\+ EU e-commerce directive has "mere conduit"

\+ Reactive moderation sets you aside from a publishing company and fits into
"mere conduit"

\+ Key thing for you is to not engage in any incidents as a participant, deny
you even know that they are occurring... but if someone contacts you and tells
you something is shady, etc you should shut that down ASAP - bear in mind that
to some extent this does mean the admin of a forum shouldn't be an active user
of the forum.

So for just shutting stuff down within a reasonable time, you basically get to
be very immune from any libel, defamation, slander, etc that occurs as a
result of your users.

Together with the change in UK law that shifted burden onto those raising a
claim (they must prove actual damages - a surprisingly hard thing to do), I
have not now had any legal threats in about 4 years despite still running as
many forums that are barely (if at all) moderated.

~~~
alex_hitchins
Side questions, but what sort of hardware & connectivity do you have for
supporting that number of forums? I'd have thought at that level you would be
in to duplicate hardware etc.

~~~
buro9
Just a few linodes run them all and we tend to have low thousands of
concurrent users at any time but can comfortably handle high hundreds of
thousands of guests.

A friend and I wrote a forum platform for them :)

As a startup that didn't get anywhere, but the main premise was that forum
hosting is expensive (almost 1 server per forum, not very optimised for
caching, every page is dynamic, etc) due to them not being on a true platform
(shared costs, optimisations, and less waste in CPU and bandwidth), and we
also hypothesised that forums have a natural life and when they die they
cross-pollinate new forums (total growth in user engagement across communities
continues even when a single community dies)... hence it's best to make a
platform, and that the reduced costs for all actually makes them financially
viable (though when we shut the startup I chose non-advertising and to do
donations instead).

This is the forum platform: [https://microco.sm](https://microco.sm) but it's
not really open for new forums, as I manually have to enable them and I'm
concerned about future offboarding requests (not something I support at all).

This is an example of a forum on the platform:
[https://www.lfgss.com](https://www.lfgss.com) which is the largest, but there
are just shy of 300 on a wide range of topics.

~~~
alex_hitchins
Thanks for taking the time to give a detailed answer. I'll have a look at the
links you included. Sounds like you were on to a decent idea with regards to
re-thinking how forums can be built/operate.

~~~
buro9
It gets even weirder when you look at the fact that we put structured objects
in forums... such as events:
[https://www.lfgss.com/events/3931/](https://www.lfgss.com/events/3931/)

We thought we were on to a good thing... but couldn't secure the A round in
London. The seed only gets you so far.

~~~
alex_hitchins
Are you looking to make this open source or keep it under wraps and try again?

~~~
buro9
It already is open-source... [https://github.com/microcosm-
cc/](https://github.com/microcosm-cc/) but as it was designed to be a platform
I cannot claim it is easy for anyone to install or get started with it.

I have a slow burning background task to move it from PostgreSQL + Go + Python
+ Django to PostgreSQL + Go. This will make it a super easy single-binary
install, that can also scale out by simply running multiple versions of the Go
binary in different modes (API or Web). But frankly... this is a very slow
burning background task :)

------
rdrey
IANAL, but that's not useful for hackers. This is more useful for hackers:
[https://www.caymanenterprisecity.com/](https://www.caymanenterprisecity.com/)

\- 100% foreign ownership

\- No corporate/capital gains taxes

\- 5-year work/residence permits for the team

\-- No personal income tax in the Caymans for anyone moving here

From a friend who has gone through the process of setting one up for
consulting, the initial setup cost ~30k USD and renewal costs ~15k USD per
year.

\- you still need an office package
[https://www.caymanenterprisecity.com/service-
packages](https://www.caymanenterprisecity.com/service-packages)

\- setup is not _really_ that quick and painless

If you'd otherwise pay income tax pretty much anywhere else it might still
make financial sense.

~~~
mattsfrey
US citizens still owe taxes on any income over a certain threshold as per:

[https://en.wikipedia.org/wiki/Foreign_earned_income_exclusio...](https://en.wikipedia.org/wiki/Foreign_earned_income_exclusion)

There is no more tax advantage to the law abiding citizen in this scheme
versus just registering an llc in wyoming/nevada and living abroad.

~~~
jmalicki
There are a number of advantages to Cayman Islands incorporations, such as
(under some complicated circumstances) delaying recognizing income until
repatriation (allowing for the money that would have gone to taxes to compound
for some time), or avoiding Unrelated Business Income Tax for an IRA or non-
profit entity that invests in a business that takes on debt (the latter being
an extremely common reason above-board entities use Cayman Islands blocker
corporations).

[http://www.taxpolicycenter.org/taxvox/why-do-us-
investment-f...](http://www.taxpolicycenter.org/taxvox/why-do-us-investment-
funds-operate-tax-havens)

~~~
ThrustVectoring
Tax deferral doesn't help you if you pay at the same rate at repatriation.
Multiplication commutes, paying either before or after compounding doesn't
matter. It could help for, like, maintaining ACA subsidy eligibility.

~~~
jmalicki
Yes, it does:

Imagine 39% tax, where you compound at 10%.

If you pay tax once per year, that becomes 6.1% after tax.

1.061^5 - 1= 0.34455

Now imagine you compound for 5 years at 10%, then repatriate and pay 39% on
your profits:

(1.1^5-1)*.61 = 0.37241

You have 10% more if you defer taxes.

------
Mandatum
The data on places to incorporate are slowly becoming more and more open.

Generally you incorporate off-shore for one to many of these three reasons:
tax minimisation, privacy and corporation structuring.

For most people, an LLC in New Mexico, US (provided you are able to enter the
US) with a parent company in the BVI is the easiest option.

Overall this will cost you less than $1,000/yr to operate as an LLC with none
of your identification or documentation on it, bank accounts and services
available in a first-world country, however operating as a proxy corporation
for a BVI-based company therefore not subject to corporation tax.

However there are risks associated with this setup, plenty of people have had
bank accounts frozen or assets seized temporarily if their accounts are
included in a "probably tax evader or drug cartel" report. So it's suggested
to never keep funds in your US-based corporation. Use a reputable, US-based
accountant for your annual filing to minimise this risk. If you're not a US
citizen or resident, the only risk is the possibility you won't have access to
your funds for a long period of time (and you'll likely have to fly back to
the US to sort things out).

Now, what I've written above is technically legal provided you're not a US
citizen, or if you aren't obligated by law to pay federal or state taxes.
However, it - and many, many similar structures are used every day for
corrupt, illicit and morally bankrupt reasons.

Nobody is interested in fixing this. We've put in Anti-Money Laundering and
Know Your Customer regulations whilst simultaneously PROVIDING ways to make
sure people can still get away with tax evasion and hiding dirty money (US:
insane protection for corporate entities, UK: owning and operating some of the
largest tax havens in the world). As the world begins to wise up to these
methods, we're already seeing other super-powers begin to offer the same and
in some cases much better services. Taiwan and China, I'm looking at you.

~~~
philfrasty
„...or if you aren't obligated by law to pay federal or state taxes...“ this
is the key sentence here and mostly not talked. Many people do not understand
that you may have to pay income tax even though a foreign company/entity holds
all profits/cash/assets. For Germany see the „Außensteuergesetz“
[https://www.gesetze-im-internet.de/astg/__7.html](https://www.gesetze-im-
internet.de/astg/__7.html)

------
sargun
So, dumb question. One of the biggest impingements upon grey businesses
(prostitution, pornography, imitation goods, gambling, social media profiles)
is payment processing.

Now, VISA, AMEX, etc.. will never want to process these payments. If the
Antigua, The Cayman Islands, or Panama have a healthy banking system, what
prevents someone from setting up a VISA clone there? As a service provider, if
you can work in their banking system as a legitmate bank, all you need is
client banks -- And getting a bank account there is reasonable easy from my
understanding.

Similar to:
[https://en.wikipedia.org/wiki/E-gold](https://en.wikipedia.org/wiki/E-gold)
[https://en.wikipedia.org/wiki/E-Bullion](https://en.wikipedia.org/wiki/E-Bullion)

Could you build a similar model to "GoldMoney"
([https://en.wikipedia.org/wiki/GoldMoney](https://en.wikipedia.org/wiki/GoldMoney))
without KYC?

~~~
JumpCrisscross
> _Now, VISA, AMEX, etc.. will never want to process these payments_

Lots of legitimate business happens through the Caymans (for international
finance) and Bermuda (for insurance). Wiring U.S. dollars between the Caymans
and New York is instantaneous.

~~~
Mandatum
This _used_ to be true as they'd modernised their banking systems very early
compared with many heavily-regulated countries and companies. However this is
no longer the case, technology and platforms exist for similar speed and
security offered by the aforementioned nations.

The only real exceptions are countries currently embargoed or labeled as a
"risk" by the IMF for money laundering.

------
oceanswave
Well, not quite. From the article, 731.71 for the paperwork, but also an
annual fee of 853.66. Additionally, a Registered Office is required, which
they will provide for 2,500/yr. Rates are tiered based on income, and may be
higher based on class of business. 731.71 just gets you in the door.

~~~
ocdtrekkie
For what it's worth, this likely was submitted because of the California post
that's currently #1 on HN, claiming you can have a California LLC for $70. It
also states you'll need "An $800 LLC “tax” paid annually at tax time".

~~~
loufe
To be clear, the HN post you're referring to only claims the $70 is to FORM
the LLC.

~~~
ocdtrekkie
And so does the headline of this submission. :)

------
eloff
So $700 for setup and $3300/year? It's way, way cheaper to do this in Panama,
same tax advantages, and the country uses the US dollar.

~~~
bigtones
Panama has corporate tax of 25% and personal income tax rate of between 15%
and 25%, Cayman islands has zero tax.

~~~
eloff
Panama has zero tax on foreign source income, which unless you're going to
open a local business, means it has effectively zero tax - personal or
corporate.

~~~
StavrosK
How much are formation/annual fees for Panama, do you know?

~~~
eloff
About $1000-$2000 for initial setup if you use a law firm to do it for you.
$300/year if you registered it as offshore, meaning you don't do business in
Panama. In that case you do not even need to file taxes. Otherwise you have
$65 filing fees for taxes as well, which you just declare the company as
offshore, and have no taxes owing.

~~~
StavrosK
Oh huh, that's pretty cheap. Cheapest I've found in the Caymans is $2500 setup
and $1500/yr, and many lawyer firms rip you off by billing you hundreds of
dollars to give you unsolicited advice (yeah, it's that bad). Panama sounds
like a much better idea, unfortunately it's impossible to get Stripe/another
processor for a company outside the EU/US.

~~~
eloff
I've thought of structuring that by having a Panama company develop and own
the IP, and using a US, EU, or Canadian company to do the payment processing,
and just pass the revenue through. That company would have no profits, and
thus no taxes. I'm hardly an expert though, so I don't know if it would really
work.

~~~
StavrosK
That would work, although it _might_ be illegal, depending. Probably not, but
IANAL.

------
mozumder
What are the advantages/disadvantages over a typical Delaware C-Corp?

~~~
caymanjim
Cayman has no taxes. There are various fees required to register a
corporation, but income and capital gains aren't taxed (for businesses or
individuals). Note that the IRS still requires US citizens to file personal
income tax returns, and they still have to pay taxes on foreign earned income.

I am not a lawyer or accountant, but I did live and work there for years. The
main benefits are tax avoidance, but it's much more difficult for US citizens
than for others (most countries don't tax their citizens on foreign income;
capital gains laws vary).

People will make all the obligatory jokes about shady rich tax dodgers, and
there are rich people and corporations that like to keep money in Cayman for
ethically questionable reasons, but the majority of Cayman finance is
completely legal, ethical, and above-board.

~~~
artwr
> People will make all the obligatory jokes about shady rich tax dodgers, and
> there are rich people and corporations that like to keep money in Cayman for
> ethically questionable reasons, but the majority of Cayman finance is
> completely legal, ethical, and above-board.

This sounds like it might be true in terms of number of individual accounts
maybe, but do you think that's true in terms of overall asset value?

~~~
caymanjim
It'd be hard to draw a line on what's sketchy and what's not. Taxes are
incredibly complicated. Defining what's legitimate business vs. ethically
questionable vs. illegal (and whose laws are being violated) makes it hard to
even categorize the money, even if there were data available on how much is
there and who controls it.

My guess is that there's probably much more there that's completely legal, but
pushes people's buttons because they want to see it taxed at home. Like
Apple's overseas billions (which are largely sheltered elsewhere, but you get
the idea).

~~~
colechristensen
What is clear that the world governments are and have been accelerating their
efforts to quash tax avoidance.

For example, in 2013 the oldest running Swiss bank, Wegelin, (itself older
than the US) shut down as a result of a guilty plea for a case brought by the
justice department.

[https://www.reuters.com/article/us-swissbank-
wegelin/swiss-b...](https://www.reuters.com/article/us-swissbank-
wegelin/swiss-bank-wegelin-to-close-after-guilty-plea-idUSBRE9020O020130104)

