If you have a Startup you have probably heard of the striking term “Cayman Sandwich”.

But what is it?

It is a legal structure that involves the use of a parent company in the Cayman Islands with a subsidiary in Delaware, USA in the middle and below it an operating company in the Latin American country where the Startups actually operate (hence the term Sandwich , with the Delaware LLC in the middle).

It is used by Startups to take advantage of tax advantages and regulatory flexibility of this jurisdiction. When looking for investment rounds, jurisdiction is one of the first things that accelerators and venture investment funds (VCs) will be interested in.

Main benefits

1. Tax Benefits: There are no – or very low – taxes on income, capital gains such as profits, dividends, and liquidation in the event of EXIT. Additionally, unlike Delaware C corporations, Cayman Islands holdings are not subject to double taxation (corporate tax + income tax).

2. Regulatory Benefits: The Cayman Islands offers regulatory flexibility, allowing companies to structure their operations efficiently and adapt to changing regulatory requirements.

3. Financial Confidentiality: shareholder confidentiality prevails.

How does it work?

Sandwich Top: Cayman Holding.

• Investments are made directly in Cayman Holding.

• La gobernanza de la startup y todos los acuerdos de financiación se rigen generalmente por la ley de las Islas Caimán, que los inversores prefieren, ya que está fuertemente influenciada por la tradición legal del Reino Unido y tiene un gran parecido con la ley de Delaware.

Middle of the Sandwich: LLC Delaware.

• Acts as a “shell” or blocker between the Local / Operational Subsidiary and the Holding in Cayman.

Bottom of the Sandwich: Operating Subsidiary.

• It will be in charge of carrying out all operations, contracting and local taxation in each of the countries where it operates. This subsidiary will be the one that bears the risks of the operation.