Cayman Islands, Doing Business, Income-earning, Island-Living

5 GREAT REASONS TO LICENSE YOUR BUSINESS AS A SOLE TRADER

There are two primary categories of business licensing within the Cayman Islands, these are licensing as a Sole Trader or licensing as a Registered company; you can find out more about the main differences between the two by checking out this informative post.

The Sole Trader business licensing application process is usually used by micro and small businesses; often called “mom and pop establishments” in other parts of the world. Mini Marts, salons, barbers, take-out and tiny restaurants, small car repair and building maintenance companies or janitorial and babysitting companies choose this option for various reasons; usually due to the fast and easy process and more straight-forward paperwork requisites.

When you opt for the Sole Trader business licensing process it is an easier process indeed. Typically the only department you will have to deal with is the Department of Commerce and Investment (the “DCI”); the local Government department responsible for the registering of local businesses and issuance of liquor and music & dancing licenses among other services provided. The Sole Trader application process involves a business owner applying either with a paper application or online for the Trade and Business License to operate their new business in the Cayman Islands.

Applying for a Sole Trader business license as a locally owned business requires a short two page form and the submission of the requested documents which will include the identification documents of the owner/s, business location confirmation, a cover letter detailing the business’ operations and other documents depending on the type of business the individual will be starting.

Businesses that often impact public health such as cafes, restaurants, barber shops and salons will also require a submission to the Department of Environmental health in relation to inspection of the proposed business’ premises prior to the approval of the business license.

Previously there was also a requirement to seek a letter from the Cayman Islands Department of Planning if the business owner intended to use a residential address as the business’ address; this requirement has recently been dropped once the operations of the business within the residential address will be limited to administrative tasks with no coming and going of clients and/or customers at the residential address.

Another great incentive provided by the Cayman Islands Government to assist new businesses is the micro and small business incentive which has been in effect for over five years. This exciting opportunity allows small and micro businesses up to a 100% waiver of business licensing fees; take advantage of this great incentive by learning how to access the benefit; you can learn how with my soon released post on this topic, subscribe so you don’t miss it!

Now, let’s talk a bit more about the pros and cons of using the sole trader business licensing route.

BENEFITS

  1. Simpler process – the business owner needs only to submit the form and other required documents which are Application Form Completed, Proof Applicant(s)/Partner(s) is/are Caymanian (Birth or Status Certificate and Passport), Police Clearance, Head of Department Annual Approval (Government
    Employees Only), Copy of Lease Agreement and Letter of Intent, Medical Practice Commission Board (if applicable), Public Transport Board (PTB) Approval (if applicable), Port Authority Approval (Boats/Vessels) (if applicable), Outsourced Employee List (T&B Agent Category) (if
    applicable), Partnership Agreement (if applicable);
  2. Less expensive – when a business owner chooses to apply for a business license as a Sole Trader they reduce their start-up expenses by a few thousand dollars in some instances. This is because the legal and Government fees required to license as a Registered Company will not be incurred when choosing the Sole Trader business licensing option.
  3. Reduced documentation – when applying as a Sole Trader the application requires far less documentation than the Registered Company application.
  4. Faster process – the Sole Trader application will not require the additional step of enlisting the services of an attorney or other corporate services professional to first register a legal entity in the manner required for a Registered Company business license and facilitating the up to four week process of drafting company documents and registering the new legal entity.
  5. Less long-term expenses – opting to license your business as a Sole Trader means that there will be a single fee related to the legal licensing of your business each year in most instances – whereas licensing as a Registered Company can cost thousands more per year by way of company annual returns fees, corporate services and registered office fees, etc.

Well that all sounds fantastic, so why should a business owner consider not licensing their business in the Cayman Islands as a Sole Trader?

CONS

  1. Legal liability – when a business owner licenses their new business as a sole trader they become liable for any debts and/or liabilities the business may from time to time acquire – this means they can be sued personally in relation to the businesses legal issues. In addition, the business can be held liable for the personal financial issues of the individual to whom it is licensed; licensing as a Registered Company can create a buffer for these types of issues.
  2. Death of the license holder – when the individual to whom the business is licensed to passes away, the business in a sense does too. All bank accounts, legal agreements, client contracts and any other written document the business ever had would have been bound by the individual as a person controlling the business and there are numerous, separate processes which sometimes require legal help to get straightened out upon their death.
  3. Less privacy for the business owner – when licensing as a sole trader the business owner’s affiliation with the business is all out in the open; some people like this, others prefer to quietly do their business operations and build their business empire which is privacy provided by licensing as a Registered Company.

There are so many great reasons to become an entrepreneur and share your skills and talents with the community through the provision of products and services that your unique person can bring to life in a whole new way; this is a topic that I am so passionate about learning and sharing with others – what are your experiences or aspirations with business ownership? Also, comment below on a topic you would like to learn more about when doing business in the Cayman Islands!

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