Most offshore hedge funds are established as Cayman Islands exempted companies, and a significant majority of offshore hedge funds appears to issue management shares – which are the sole voting shares in the fund – to the investment manager and non-voting shares to investors. Management shares typically do not participate in the economics of the offshore hedge fund. In a guest article, Philip S. Gross, partner at Kleinberg Kaplan, discusses the U.S. tax issues – and some non-tax issues – raised by the use of management shares in Cayman Islands exempted companies and explores how the U.S. tax issues, which are often overlooked, need to be taken into account and weighed against the non-tax issues in determining whether to use management shares. For additional insights from Gross, see “The Impact of Revenue Ruling 2014‑18 on Compensation of Hedge Fund Managers and Employees” (Jun. 19, 2014); and “Hedge Fund Managers May Be Required to File TIC Form SHC” (Feb. 9, 2012). For further commentary on the issuance of voting versus non-voting shares in Cayman funds, see “Hedge Fund Seminar Addresses Fund Structuring Trends, Governance Best Practices, Fee and Liquidity Terms, Irish Vehicles, Marketing in Asia and FATCA” (Feb. 12, 2015).