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Setting Up a Cayman Islands Company [pdf] (stuartslaw.com)
179 points by dvasdekis 11 months ago | hide | past | web | favorite | 70 comments

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.

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

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.

Also EU Courts are very defensive of Online players and apply the Law mostly in their favor.

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.

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 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 which is the largest, but there are just shy of 300 on a wide range of topics.

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.

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/

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.

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

It already is open-source... 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 :)

I can wholeheartedly echo your concern. Operating from Europe I am looking for the same.

For me, it is not just about protecting free speech by not having to fear litigation costs, but also privacy: Extremists from left to right make heavy use of what private data they can find about owners of websites and try to destroy them publicly or use threats/actions of violence against them.

(Other example: I repeatedly run across pyramid schemes. Setting up a simple, yet convincing set of facts as a website, that would keep people from being fooled into these is my initial response. But I always restrain from doing so when I look at two things:

- how litigious these schemes often are (it often takes years for authorities to catch up to them)

- how emotionally attached (and often shady) the scheme's propenents are)

New Zealand?

The courts here are pretty sensible. They have 0 issues with telling someone they are just being silly and to leave.

They can still bring a case against you - but, it isn't expensive to defend like the US is.

Are you serious? After what they did to Dotcom? Heck no.

The New Zealand court system has not been unfair to Kim Dotcom.

The actions of NZ police in his arrest are inexcusable, and so is the use of government spy agencies to spy on a resident.

But the courts are independent of all that. Kim Dotcom actually just won a $90k settlement from the Human Rights Tribunal.

Didn't protect Kim Dotcom.

OP isn’t looking for shield from the US Government. Your “didn’t protect” comments aren’t really relevant.

In my case, I'm not involved in any copyright infringement. I'm merely trying to protect myself from frivolous libel threats. The problem with these threats is that you're forced into making a choice: spend real money to defend yourself (my site makes no income) or give in to the assholes and take down posts. When the disputed post concerns a shady for-sale transaction, removing the post effectively whitewashes the shady seller's reputation and potentially exposes innocent future buyers to getting hosed. It's a crappy situation and I just want to be immune to it all.

So just run the site anonymously. If you're really paranoid, on a Tor onion. If you only somewhat paranoid, on a server from Host Sailor or another tolerant host.

Edit: If you're really really paranoid, on a Tor onion, hosted on an anonymously leased server, from a tolerant host. And know your OPSEC.

Didn’t protect Ross Ulbricht :)

True. But he made stupid mistakes. Such as leaking his true-name email address in posts about SR on Bitcoin Forum and StackExchange. And misconfiguring Apache so it leaked error messages from its clearnet IP. And having an iptables rule in the server that pointed to a private VPN server that he'd created. And buying a bunch of fake driver's licenses, and having them sent to him in SF.

If the suits are truly frivolous, you are fine. Threats and letters are utterly meaningless in and of themselves. No attorney will actually take a frivolous suit to court, although they will try to bully and scare your with formal letterhead and words.

And if there is a real suit, being offshore won't protect you from the suit. You may be able to get it tossed out for lack of jurisdiction, and ultimately be immune from consequences, but that still means you need to either argue that point yourself it court or hire legal help to get it tossed.

Panama might be a good place to start looking for a lawyer. I have friends in other Central American countries who can’t stop singing the praises of Panamanian incorporation. They seem very confident that they can get away with all sorts of cringe inducing shenanigans. Your use case is mild by comparison but of course ymmv.

Didn't protect Liberty Reserve.

The US government coming after you for facilitating massive fraud and countless other illegal activities is hardly the same as some idiot suing you.

China, Russia, North Korea, and Iran are probably the only places in the world where you would be relatively safe from the US government.

Just a different sort of idiot, as I see it.

The only thing that guarantees you protection from the ire of the U.S. federal government is possession of at least one thermonuclear weapon. The goal for these corporate vehicles is to shield oneself from civil lawsuits, not the wrath of the Justice Department.

Keeping them from knowing who you are also helps a lot.

>Didn't protect Liberty Reserve.

According to wiki, it was in Costa Rica, not Panama.

Oops, my bad :(

OK, didn't protect Noriega.

Not sure if its completely ideal but uk companies are cheap to set up and its hard work and costly to sue for libel.

Any chance you can drop the name here? I'm a motorhead and my beloved community-supported mazdaspeed community has basically dried up and migrated to facebook...

IANAL, but that's not useful for hackers. This is more useful for hackers: 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

- 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.

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


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.

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).


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.

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.

law abiding *US citizen, but yes.

Which is why I started my comment with "US citizens.." but also, if you're not a US citizen (for most countries anyway) you can register a corporation in a dozen other tax havens and avoid any taxation without those ludicrous fees given you are living abroad.

If you can pull off the tax-nomad thing. There are fewer places in which you can basically "buy" work permits and live income tax-free semi-permanently. (The Caymans will "roll you over" / send you home for a year after 8-9 years if you don't apply for Permanent Residence (more expensive).)

Malta has economic residency program with fixed 15% tax rate (minimum 15K).

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.

„...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

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-Bullion

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

The idea is for the money to get out of and back into the US financial system. The courts will stomp on whomever is facilitating the illicit payments and making that connection. Anti-money laundering regulations and regulators are competent and experienced.

If you want to start an online casino that just works for the cayman islands, sure. If you want it to work anywhere else you're going to have trouble.

> 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.

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.

If I'm not mistaken, Gold and silver is considered money under the US constitution, not a commodity... You would have to use something like Bitcoin or some other commodity.

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.

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".

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

And so does the headline of this submission. :)

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.

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

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.

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

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.

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.

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.

That would work, although it might be illegal, depending. Probably not, but IANAL.

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

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.

> 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?

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).

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.


I believe Cayman Islands is for hiding your money whereas Delaware is for legit business.

Not true. If you’re a foreign entity it can cause tax issues to be directly investing in a Delaware structure so sometimes you need a blocker entity.

Blocker entities are purely for "bypassing my local laws and country from make sure I follow said laws".

Sure, I understand the appeal - it's the equivalent of hiding a bag of cash somewhere and having a trusted third-party provide the location to whoever you want after your death. No laws, no lawyers, security for your wishes - exactly what you want.

"Tax issues" are synonymous with "I'm liable to pay more taxes if I'm up-front, direct and transparent with my legal structure"

That isn't entirely true. For instance, if you are investing on behalf of a foundation or other nonprofit structure, or a similar non-taxed or tax-deferred entity (like a pension fund), you have a reason to preserve your legitimate tax free status. This is one reason you'll see US hedge funds with both Delaware and Cayman entities even if they only have US subscribers - because some of those US subscribers will be entities outside the conventional person/corporation tax model.

AFAIK 5013C's are exempt in that case?

“Tax issues” like having to pay taxes? Isn’t that what I’m saying?

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