WB Group supports clients throughout the Cayman startup lifecycle, providing formation, registered office, compliance, and accounting services with a focus on simplicity, responsiveness, and clarity. We help founders and fund managers structure for growth, investment, and exit. If you’d like to find out more, please contact us to set up a meeting.

Getting your structure wrong can cost you investors. Or worse, your exit.

For startups chasing global growth, the foundations matter. Whether you’re a fund manager, founder, family office or DAO, building on solid ground isn’t just about legal compliance. It’s about creating the right platform for capital, scalability and long-term success.

That’s why so many startups choose the Cayman Islands.

In this article, we break down the strategic decisions founders need to make, from choosing the right Cayman vehicle to managing cap tables, preparing for exit, and staying on the right side of substance rules.

Why incorporate offshore at all?

The Cayman Islands offers a neutral, internationally recognised platform for startups seeking investment from multiple jurisdictions. Founders typically establish a Cayman company to create legal separation from personal liability, issue and hold equity, formalise governance, prepare for funding rounds and mitigate onshore tax and regulatory complexity when managing cross, border investor pools or digital asset structures. Cayman offers clear advantages, including:

  • Tax neutrality: while there is no corporate income, withholding, or capital gains tax in Cayman, entities with income from relevant activities may be subject to reporting under the Economic Substance Act
  • Modern corporate law: the Companies Act supports efficient governance and share capital structures
  • Familiarity with investors: many venture and private equity funds are already structured in Cayman, making the jurisdiction a natural fit
  • Institutional infrastructure: the Cayman legal system, regulatory framework, and professional service sector are internationally respected and well equipped to support startup scaling and cross-border transactions

For more detailed advice on why Cayman is the best location for your structure, check out this article.

Choosing the right Cayman vehicle

The standard vehicle for most startups is the exempted company limited by shares. It offers limited liability, shareholder flexibility, and straightforward administration. Shares can be issued with or without par value and may carry different rights (e.g. preferred, common, or founder shares), allowing founders to create tailored capital structures as the company evolves.

Startups engaged in Web3, or decentralised governance may consider other Cayman structures, such as the foundation company (commonly used to provide legal personality to DAOs), or the LLC, which combines corporate and partnership characteristics and is modelled on U.S. state law.

LLCs are more suitable for closed, group joint ventures than for investor, heavy startups unless modelled on U.S. investor expectations.

Foundation companies, while increasingly popular for DAOs, may still require regulatory or legal analysis, particularly if issuing tokens or holding assets on behalf of a community.

Equity, debt or tokens: funding Cayman startups

Startups in Cayman typically raise capital by issuing equity or taking on shareholder loans. Equity financing provides long-term capital without repayment obligations but dilutes ownership. It also brings additional governance considerations, such as voting rights, board appointments, or information rights.

Debt, on the other hand, avoids dilution but adds financial pressure, particularly if cash flows are uncertain. Convertible debt and other hybrid instruments are increasingly common. In Web3 and fintech contexts, token issuances or revenue-share models may also be used, subject to regulatory review and careful structuring to avoid triggering licensing under the Virtual Asset Service Providers Act (VASP) or registration under the Securities Investment Business Act (SIBA), depending on the nature of the tokens or investment instruments.

Avoiding early cap table mistakes

Getting the equity right at incorporation matters. Over-issuing shares, failing to document founder equity, or promising equity informally can create long-term problems. Similarly, issuing investor equity too freely (e.g. board seats or veto rights) may set precedents that are hard to unwind in later rounds. Every round should be considered in the context of long-term growth and potential future dilution. Founder shares should ideally be subject to vesting schedules, reverse vesting or lock-up provisions to align incentives and reassure investors of long-term commitment.

Equally important is governance. From the outset, shareholders should enter into an appropriate agreement (such as a shareholders’ agreement or investment agreement) and ensure alignment with the company’s memorandum and articles of association. These documents should address board structure, transfer rights, decision-making thresholds, and dispute resolution.

Preparing for sale or IPO

Whether or not an IPO is the goal, having a Cayman structure that is clean, compliant and investor-ready makes exit planning easier. Cayman exempted companies are recognised by major exchanges, and their constitutional documents can accommodate dual class share structures and enhanced voting rights, where permitted by listing rules. Cayman companies are accepted by exchanges including NYSE, NASDAQ, LSE, HKEX and others, subject to meeting jurisdiction, specific listing requirements.

If the startup is acquired, robust documentation, clean share registers, and compliant filings with the Cayman Registrar can reduce execution risk. Preparing early for due diligence, and operating like a public company well before it becomes one, remains best practice.

Substance matters

While most startups fall outside full economic substance requirements, any Cayman company conducting relevant activities (like IP income, intra, group services, or lending) may need to file substance reports, unless tax, resident elsewhere. WB Group helps clients assess and manage these obligations annually.

Final thoughts

Cayman is often the right platform for startups seeking global reach and investment, but structuring must be done deliberately. Avoiding missteps around share capital, governance, tax treatment, or substance early on can save significant time, cost, and frustration later.

At WB Group, we help you get your Cayman structure right from day one, advising on formation, fundraising, tokenization, governance, and compliance so you can focus on building and scaling. Whether you’re launching a new venture or raising your next round, we’re here to guide the journey.