Note: This is the last in the series about Cayman LLCs.
Like Delaware LLCs, a Cayman LLC is a corporate body with a legal status that is separate from its members. Unlike the Cayman Islands exempted limited partnership, the Cayman LLC structure offers members some protection from personal liability.
The members of the LLC have substantial authority to set the internal rules and structure of the business. Cayman LLCs can be managed by one member, a group of members, all the members together, or by a non-member designated to act on behalf of the business. Managers are restricted by the Duty of Care, but are otherwise free to pursue the goals of the LLC in the ways they see fit. Cayman Islands law does not even require these businesses to file their LLC agreements with the Registrar of Companies.
Members of a Cayman LLC have greater flexibility to handle the profits or losses of the business. The absence of shares or share capital funds means members can distribute the proceeds of the business based on internal contractual arrangements. This makes managing a Cayman LLC a much simpler task than overseeing a Cayman exempted company.
In short, Cayman LLCs approach the flexibility of a Cayman exempted limited partnership, while maintaining the liability shield and legal status of a Cayman exempted company.
The drawbacks of the Cayman LLC
There are few drawbacks to the Cayman LLC that are not also true of other offshore arrangements. For people who have never before participated in offshore business ventures, the fees and reporting requirements of the Internal Revenue Service may come as a surprise. For clients who already use Cayman partnerships or exempted companies, there should be no surprises in forming an LLC.
Unlike Delaware LLCs, there is no similar provision in the Bill to create Series LLCs. The Cayman Islands already has a legal entity known as a Segregated Portfolio Company that serves a similar business purpose to the Series LLC. It is unclear if the Cayman LLC will eventually copy the Delaware LLC in incorporating a series arrangement.
If you need additional assistance when it comes to Cayman LLCs, please contact us. We can help.