Where should we incorporate Steem Island Inc?

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I had originally planned on incorporating in the US. After having time to think and looking at other options, I think that it is probably better to incorporate somewhere else.

I have started to do some research and I came across these two articles. I have provided the link to each one after the article.

Any thoughts?

Cayman

Introduction
The Cayman Islands consists of a group of three islands in the Caribbean: Little Cayman, Cayman Brac and Grand Cayman. The main Island, Grand Cayman, is situated approximately 480 miles southeast of Miami.
Population
The population is approximately 55,000.
Political Structure
The Cayman Islands are a British colony and therefore the United Kingdom Parliament at Westminster retains the right to legislate. A “Governor” who is appointed by Queen Elizabeth II heads the Cayman Islands Government. There is a Legislative Assembly consisting of 18 seats; 3 appointed members from the Executive Council (Financial Secretary, the Attorney General, and Administrative Secretary) and 15 members elected by popular vote. An Executive Council, consisting of three official members appointed by the Governor and four members elected by the Legislative Assembly, formulates policy and advises the Governor. Appointments are to a four-year term.
Infrastructure and Economy
The economy of the Islands is strong, enjoying full employment with most of the revenue being derived from the financial services sector and tourism.
Miami is one hour away by air and the Island has direct air links with New York, Atlanta, Tampa, Houston and Jamaica. The Islands are a popular cruise-ship stop.
Language
The official and spoken language is English.
Currency
Caymanian Dollar.
Exchange Control
None.
Type of Law
Common Law based on English Common Law.
Principal Corporate Legislation
The Company Law of the Cayman Islands is based on the English Companies Act of 1948 and can be found in the Cayman Islands:
Companies Law 1961
Companies Law (2007 Revision)
Companies (Amendment) (No 2) Law 2009
Companies (Amendment) Law 2010
Companies (Amendment) Law 2011
Companies (Amendment) Law 2013
COMPANY INFORMATION
Procedure to Incorporate
For Exempt Companies by submission of the Memorandum and Articles of Association and registration fee to the Registrar of Companies, together with a sworn statement declaring that the business activities of the proposed company will be undertaken mainly outside the Cayman Islands. The names and addresses of the proposed first directors must be disclosed to the Registrar.
Restrictions on Trading
Cannot trade within the Cayman Islands; own real estate in the Cayman Islands. or undertake the business of banking, insurance business, or mutual fund business unless licensed. Cannot solicit funds from the public.
Powers of Company
A Cayman Islands Exempt company has all the powers of a natural person.
Language of Legislation and Corporate Documents
English. An Arabic language facility was enabled in 2007.
Registered Office Required
Yes, must be maintained in the Cayman Islands.
Shelf Companies Available
Yes.
Time to Incorporate
Two days.
Name Restrictions
Bank, insurance, assurance, reinsurance, trust, municipal, charter, co-operative, their foreign language equivalents or any name that, in the opinion of the Registrar, would suggest a connection with a Royal family or Government authority.
Language of Name
Names can be expressed in any language using the Latin alphabet, Chinese or Arabic, if the Registrar of Company receives a translation thereof. The corporate documents will however be in English.
Names Requiring Consent or a Licence
Bank, building society, savings, loans, insurance, assurance, reinsurance, fund management, asset management, trust, trustees or their foreign language equivalent.
Suffixes to Denote Limited Liability
There is no requirement to utilise a suffix to denote limited liability, although normally companies are incorporated to include the suffixes Limited, Incorporated, Corporation or their abbreviations.
Disclosure of Beneficial Ownership to Authorities
No requirement.
COMPLIANCE
Authorised and Issued Share Capital
The minimum is US$1, but it is normal to incorporate with an authorised share capital of US$50,000; divided in to 50,000 common voting shares of US$1, this being the maximum for the minimum capital duty payable to the Registrar of Companies.
The minimum issued share capital is one share of no par value or one share of par value.
Classes of Shares Permitted
Registered shares of par or no par value, preference shares, redeemable shares and voting or non-voting shares. Bearer shares may be issued but must be held by an authorised depository.
Taxation
There is no form of taxation in the Cayman Islands relating to individuals, corporations or trusts.
Double Taxation Agreements
The Cayman Islands has no double tax agreements.
Licence Fees
For exempt companies:
with a share capital not exceeding US$ 50,000 US$ 854
with a share capital greater than US$ 50,000 but not exceeding US$ 1 million US$ 1220
with a share capital greater than US$ 1,000,000 but not exceeding US $ 2 million US$ 2420
Financial Statements Required
Companies (Amendment) Law 2010 states that “Every company shall cause to be kept proper books of account including where applicable, material underlying documentation including contracts and invoices. Such documentation must be retained for a minimum period of five years from the date on which they are prepared”. Failure to retain such records shall be subject to a penalty of $5,000.
Unregulated exempt companies do not need to file accounts.
Directors
The minimum number of directors is one. The directors may be natural persons or bodies corporate. The directors may be of any nationality, and need not be resident in the Cayman Islands.
Company Secretary
The Cayman Islands Companies Ordinance does not make any specific reference to a requirement for a company secretary. However, it is customary to appoint one, who may be either a natural person or a body corporate.
NB Effective January 18, 2013 the penalty under Section 56 for failing to file a notice of change in a director or officer has increased to an initial fine of $1,220 plus $122 a day extra for each director which is past due 90 days up to a maximum of 5 days i.e. $610.
Shareholders
The minimum number of shareholders is one.
SIBL (SECURITIES INVESTMENT BUSINESS LAW (2011
Revision) “the SIBL”)
The SIBL applies to all entities organised or established in the Cayman Islands which are engaged in the course of securities investment business, whether or not that business is actually carried out in or from the Cayman Islands. Under the SIBL “securities investment business” includes dealing in securities, arranging deals in securities, managing securities and advising on securities and “securities” are widely defined to include shares, partnership interests, units in unit trusts, debt instruments, warrants, options, futures and contracts for differences.
All entities to whom the SIBL Law applies are required to hold a licence appropriate to the securities investment business they intend to conduct in the Cayman Islands, save for those falling within certain exemptions detailed under Schedule 3 (Excluded Activities) or Schedule 4 (Excluded Persons). Persons engaged in securities investment business must hold either a:
Securities Investment Business Licence, or be
Registered as an Excluded Person.
Applications for a licence are made to the Cayman Islands Monetary Authority (“CIMA”) in the prescribed form and annual licence fees range from US$2,500 to US$10,000 depending on the category of licence required. These categories are:

  • Broker Dealer
  • Broker Member
  • Securities Manager
  • Securities Advisor
  • Securities Arranger
  • Market Maker
    Anyone who carries on or purports to carry on securities investment business without the appropriate licence is guilty of a criminal offence. The penalties on conviction are severe: up to a year’s imprisonment and a fine of US$125,000 and, in the case of a continuing offence, a fine of US$12,500 for each day during which the offence continues.

https://www.offshorecompanycorp.com/countries/cayman?currency=USD

U.S. Startups Should Consider Incorporating Offshore

The tax advantages to a U.S. startupof incorporating offshore typically outweigh the additional administrative and compliance costs in the long run for many successful businesses. The tax advantage is due to the fact that many countries have lower corporate tax rates than the United States, and, unlike the United States, they generally do not tax the income earned outside their jurisdiction.

The conventional wisdom

To understand the long-term tax advantages of incorporating offshore, one should consider the evolution of a typical U.S. multinational formed 40 or 50 years ago and its global tax situation today. Many of these business began as S corporations or partnerships. Later, they became taxable corporations (so called “C corporations”) when they went public. Then, as they expanded overseas, they set up foreign subsidiaries owned by their U.S. parent. Although each of these steps seemed reasonable at the time, companies that have followed this path find themselves at a disadvantage when competing globally.

The U.S. tax system disadvantages U.S. companies in the global marketplace

Foreign corporate tax rates have dropped over the last 20 years when compared with the U.S. corporate tax rate. For example, the U.S. statutory corporate tax rate today (combined federal and state) is about 39%. In a recent report, the Congressional Research Service stated that the average statutory corporate tax rate of the OECD countries (excluding the United States) is only 25.5%. (The U.S. effective corporate tax rate is somewhat lower than the statutoryrate, however, due to tax incentives including accelerated depreciation and the R&E tax credit.)

Tax is a significant cost of doing business, and this tax rate differential has proven to be a significant competitive burden for U.S. multinationals. In order to lower their overall effective tax rate, U.S. companies have implemented foreign corporate structures that locate foreign profit in low-tax jurisdictions. These foreign corporate structures have some major disadvantages, however:

  • The lock-out effect: U.S. companies have accumulated significant amounts of cash in low-tax jurisdictions that they cannot distribute to the United States without paying a substantial U.S. income tax. The United States, unlike other developed countries, ultimately taxes all the profits that U.S. companies earn – even those earned in overseas subsidiaries. This stranded cash, which for some companies is billions of dollars, has been labeled the “lockout effect.”
  • Adverse publicity: This type of planning can draw adverse media attention to a company. For example, Apple, Google, and Starbucks, among others, all have experienced unwanted media coverage over their corporate tax strategies.

The benefits of incorporating offshore

There are two principal benefits of incorporating a start-up offshore and operating through a U.S. branch (or forming a foreign holding company with a U.S. subsidiary). The extent of the benefit depends upon the jurisdiction and the characteristics of the business.

  • No U.S. corporate-level tax on foreign earnings: The principal benefit of incorporating offshore is to avoid the U.S. corporate-level tax on income earned in overseas subsidiaries. Most other countries do not tax the overseas income of their multinationals. They tax only the income earned within their jurisdiction. This is called a territorial corporate tax system. With a foreign parent company, income earned outside the United States by a foreign parent (or one of its foreign subsidiaries) will not be subject to the relatively high U.S. corporate income tax. This income also will bear no other foreign corporate income tax — other than in the jurisdiction in which it is earned.
  • The opportunity to locate parts of the business in lower tax jurisdictions: Having a foreign parent with foreign subsidiaries allows considerable flexibility in allocating assets, risks and functions of the group to foreign companies in lower tax jurisdictions. Consider the tax rates today in some well-known European jurisdictions: the Dutch corporate income tax rate is 25%, the United Kingdom’s main corporate tax rate is 21%; and the Irish corporate tax rate is 12 ½% for “trading income.” For many start-ups, their intellectual property is their most valuable asset. The United Kingdom, the Netherlands, Belgium and Luxembourg, among other countries, have special tax regimes to encourage R&D. The tax rate on eligible income generally is in the range of 5% – 6%.

Congress has blocked the exits

Is it feasible for the founders of a start-up to defer incorporating offshore by forming a U.S. business entity today and contributing their shares to a foreign holding company at a future date? Congress effectively blocked this path with legislation enacted in 2004. Today, when a foreign corporation acquires substantially all of a U.S. corporation (or partnership) and the owners of the U.S. corporation (or partnership) become the owners of at least 80% of the foreign corporation, that foreign corporation is treated as a U.S. corporation for all purposes of the Internal Revenue Code and U.S. income tax treaties, unless the business has very substantial activities in the foreign jurisdiction. The transaction, in effect, is ignored. Thus, in order to be effective for tax purposes, the foreign corporation usually must be formed at the inception of the business.

Some caveats

Incorporating a start-up offshore brings its own set of U.S. tax issues that must be addressed. The issues include:

  • The foreign corporation may be a “controlled foreign corporation” for U.S. tax purposes, depending upon how concentrated its share ownership is in U.S. hands. For this reason, while the U.S. founding group owns all or most of the foreign corporation, there likely will be additional U.S. tax filings required. Also, additional tax planning may be necessary because of the U.S. subpart F rules. After a foreign company goes public, however, this should not an issue.
  • Transfers of appreciated assets by the U.S. founders to a foreign corporation may result in the recognition of taxable gain by those founders. Also, special tax rules apply to the transfer of intangible assets such as patents, copyrights, etc. to a foreign corporation by U.S. persons.
  • Incorporating offshore does not avoid U.S. income tax on income attributable to activities carried on in the United States, which typically will be substantial. The foreign corporation, if it has a U.S. branch (or a U.S. subsidiary, if the mutlinational carries on U.S. operations through such a subsidiary) will have to file a U.S. income tax return and pay tax on the income generated by these U.S. activities at regular U.S. corporate tax rates.
    Conclusion
    Whether incorporating a startup offshore is worth the cost and effort depends upon the characteristics of the business and the founders’ objectives. If the founders’ vision is, in the long run, to go public and operate globally, then incorporating offshore is a tax-efficient route that should be seriously considered. Just how compelling is incorporating offshore for a budding global enterprise? Some years ago, in testimony before Congress, the VP of Tax, Licensing and Customs of Intel Corporation at the time said that if Intel were to be formed today he would strongly recommend that the parent company not be formed in the United States.

http://www.alleywatch.com/

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Not sure why anyone would be interested to implement anything to do with cryptocurrencies, in the US considering tight regulations.

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I'm going to have to scan through that on my break.

That is a lot of information, I trust you to make that decision! 😬

Upvoted. Nice post! Also, fun fact: Americas top selling ice cream flavour is vanilla O_o

Great post!

I like the Cayman idea. I have been hearing that there is huge tax incentives to set up in Puerto Rico as well. You might want to look into that option as well. I can tell you have done far more research than me.