Common Mistakes to Avoid When Incorporating a Startup in BVI

When you first look at the British Virgin Islands, it seems almost too easy to set up a company. There is no corporate tax on foreign income, incorporation is fast and inexpensive, and the BVI Business Companies Act gives you incredible freedom with share structures. But if you assume that means no obligations, you may find yourself in trouble.

Let’s look at the mistakes that are specific to incorporating a startup in the BVI and that founders, especially in the crypto space, need to understand from the very beginning.

Treating the BVI As a “No Compliance” Zone

A lot of entrepreneurs hear that the BVI has no corporate tax and think that means there are no filings. That is not correct. Since 2019, the Economic Substance Act requires companies engaged in activities like finance, holding assets, or IP to show a local presence. On top of that, every company must now file an annual return with basic financial data through its registered agent. Assuming you can just register and forget is one of the most common mistakes.

Overlooking the Registered Agent Relationship

You can’t incorporate in the BVI without a registered agent. This agent is not a one-time service provider but your long term compliance partner. They maintain your statutory registers, update beneficial ownership records and file annual returns. If you do not pay them or keep them updated, your company can be struck off. Choosing a reliable agent and maintaining a good relationship is critical.

Misunderstanding Beneficial Ownership Transparency

The BVI is not a secrecy haven anymore. Through the Beneficial Ownership Secure Search system, every company must disclose its ultimate beneficial owners to its registered agent. The data is not fully public, but it is available to regulators and international partners. Many crypto founders assume they can stay fully anonymous in the BVI, which is not true. Non-compliance here can mean serious penalties and loss of good standing.

For a deeper look at how the beneficial ownership regime works in practice, see our guide: **BOIR in the BVI: What Business Owners Need to Know.**

Ignoring Banking Challenges

Founders often expect to open a BVI bank account as soon as they have incorporation papers. In practice, banking in the BVI is extremely difficult, especially for crypto businesses. Most local banks do not service startups or Web3 projects. International banks may ask for economic substance, full KYC and audited statements. The mistake is assuming that incorporation alone guarantees banking access. It is better to plan banking outside of the BVI or work with providers that understand crypto.

Getting Share Structures Wrong

One of the best features of BVI law is flexible share design. You can issue shares with or without par value, create different rights, and even issue fractional shares. The mistake is not documenting these properly. Crypto startups in particular sometimes promise token investors “equity-like” rights without legally aligning them with share classes. This creates confusion when investors do due diligence. Careful drafting at incorporation avoids problems later.

Forgetting About Government Fees And Annual Returns

Every BVI company must pay an annual government fee, usually 450 to 1200 U.S. dollars depending on share capital. You also must file an annual return with your registered agent. Missing these deadlines does not just mean fines. The company can be struck off the register, which makes banking and contracting almost impossible. Too many founders incorporate quickly and then forget about these obligations until it is too late.

Assuming the BVI Is Crypto-Friendly By Default

The BVI does not have a dedicated crypto license like some other jurisdictions. What it offers is a flexible corporate structure under general law. Many entrepreneurs mistakenly think incorporating in the BVI gives them a green light for token launches, exchanges or custody services. In reality, depending on the business model, you may fall under securities, investment or money services regulation. Failing to get proper advice is a major risk, especially if you plan to market to investors or exchanges.