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As you know, Latitud Formation does all of the heavy lifting for you during the company formation process. That leaves you with some light lifting: your part of the job is basically signing documents.
We wish you were left with no lifting at all, but we're afraid signing things for you would be forgery. And that's just not how we do things here, you know...
What we can do, however, is break things down for you. As much as we encourage you to go through all pages, we know that takes mental stamina.
We're sure you've already started. You were probably dying to make that your weekend read.
But time is of the essence and you don't want to sign documents without understanding what they mean. And you're right, you shouldn't – so here's a brief summary of everything:
For the Cayman Islands
On top of the incorporation forms, Cayman regulation requires all founders to prove they're really them in a process known as ‘Know Your Customer (KYC)’. We'll be needing your autograph on:
- The Client Information form, signed by every founder that owns ≥ 10% of the company OR is appointed director; it's a confirmation that our partners at Carey Olsen will verify the information passed on by the administrators and ensure that the company is in compliance with local anti-money laundering rules.
- The Beneficial Ownership form, containing all of the relevant information about each individual and also required in case the shareholder in question is an entity; it’s signed by every shareholder that owns ≥ 25% of the company, so you'll most likely need one per co-founder.
- The Initial board resolutions, the first document issued by the board, through which shares are distributed – to the founders and, if you're creating one, towards the stock options plan as well. This is signed by all directors.
- A Registered office agreement, similar to a rental contract for the registered office in Cayman, which is a government requirement; this is included in the Latitud Formation package, no need to go office-hunting in the islands!
- The Economic substance form, a filing required to ensure that your business is legit and operating under the guidelines of the international tax cooperation legislation.
- A Share restriction agreement, which is a vesting agreement between the founders and the company, protecting the latter; it follows the standard 4-year vesting with 1-year cliff, and you can learn more about it here.
There'll be a separate agreement for each co-founder, signed by them and the co-founder who's acting as the incorporator. For example:
Given the following cap table:
- John (incorporator)
- Mary
- Camilo
We require three batches of signatures:
- John (and John)
- John and Mary
- John and Camilo
For the Delaware LLC
All the documents below are signed by the incorporator only:
- The AWC, which appoints a member of the Latitud team as a temporary assistant secretary for the LLC. The assistant secretary will then be able to sign documents on your behalf – if they didn't, you'd have to go to the United States to sign them in person.
- An LLC agreement, defining the company's bylaws and members. This document isn't filed during the opening process, that's why it comes last. The LLC agreement defines that the Cayman company is its only member and grants the validity of the AWC (which is signed by the member that was appointed on the LLC agreement).
Once your company structure is all set up, we'll remove the temporarily appointed assistant secretary.
All of these signatures piled up comprise what is called the "complete chain of power." That means that having several documents that reference each other ultimately makes more reliable a document that gives to the founders the ability to act on behalf of the LLC. This allows you to open an operating company in your country with the LLC as a partner.
After your LLC is created, we will notarize and apostile your documents in the US. This is necessary for getting a tax ID for the foreign entity in your country, and for setting up the LLC as the sole owner of your LTDA. Once the docs are ready, we'll ship them over to Brazil via FedEx.
For the operating country
At this stage, you will be assisted by our partners BHub. You can opt-in or out of their additional accounting services based on your needs and preferences, and a corresponding Service Agreement will need to be signed with them.
For your LTDA's company formation, your signature will also be needed on:
- An Instrument of Constitution (Contrato Social) to establish your local entity's bylaws, members and internal regulations, with signature required from all administrators.
- A Power of Attorney document that grants the BHub team the authority to make the necessary filings to open your company.
For banking purposes
In order to be able to set up bank accounts for your legal entities, you will first need to establish their Employer Identification Number, often referred to as "EIN". An EIN is a unique nine-digit number that identifies your business in the eyes of the IRS (Internal Revenue Service, the US tax collection agency), much like a tax ID.
You will need one EIN for your Delaware LLC, and one for your Cayman Holding company – it may sound odd, but since our banking partner Silicon Valley Bank operates in the US, your Cayman Islands entity will also be subject to the IRS's oversight and regulation, so both of your legal entities will need their own nine-digit number in order to have access to banking services.
We'll take care of setting up both your LLC and Cayman EINs, and will need your signatures on:
- Form SS-4, the IRS application for an EIN; you will need one for the Delaware entity, and one for the Cayman Islands holding.
- Form 8821, which authorizes the IRS to disclose your confidential tax information to the person you designate – in this case, the partner taking care of your US incorporation; you will need one for the Delaware entity, and one for the Cayman Islands holding.
- The W8 form package, a collection of three IRS forms that foreign individuals or companies need to file to verify their country of residence for taxation purposes; foreign individuals are eligible for lower rates in tax withholding, and these forms are to be delivered to the tax withholding agent, a.k.a. banking institution, to make sure you're not overtaxed.
Final documentation
A few final touches needed to make sure everything is signed, sealed, delivered:
- Consent for resignation of assistant secretary, which removes the Latitud partner previously appointed as assistant secretary for your LLC. Having this temporary appointment is absolutely crucial to enable us to open your local operating company on your behalf, but once everything is all set, it's just as easy to reverse.
- PIIAs, a.k.a. Proprietary Information and Inventions Assignment, to transfer all of the intellectual property generated by the founders to the company. Whenever you’re going through a due diligence process, this is the first set of documents investors will ask for! Each co-founder will sign their own individually.
We're here to help!
Yes, it's a lot to take in – but you'll be back to your more pleasant weekend reads in no time, we promise!
We want the procedure to be as low-effort on your side as possible, and hope this overview of the actions required on your end can make you sleep easier at night.
Still have questions? Reach out at formation@latitud.com and we'll be happy to answer them.