When do I need to incorporate a company in the US?

Eric Save / November, 2017

Description

Eric Save, Partner at K&L Gates LLP explains in what kind of situation as a foreign founder you would need to incorporate in the US.

Video Transcript

When do I need to incorporate a company in the US? 

I think that the the key thing is to understand exactly what you plan to do in the United States. Are you going to have employees here in the US, are you going to have other sorts of operations, like an office here or, you know, a facility of some kind, like a manufacturing facility. How often are you’re going to be here? Do you have customers here? Are you going to be generating revenue, so do you need to have bank accounts here in the United States? I think that if the answer to those questions is yes, then you’re better off setting up a company here in the US to run those operations and to house those operations, rather than trying to do those things from a company that is a foreign company.

There’s a lot of reasons for that but one of the reasons is that you would be subjecting the foreign company to potential liabilities here in the United States. It’s just a lot easier to employee people, to get bank accounts, to start your operations here in the US if you have a US company to do that under. The other situation, where you may find that you need to set up a US entity, even if you don’t have, you don’t expect to have really, any operations in the United States, is when an investor or a big customer or strategic partner sort of tells you to. That’s an important thing to keep in mind because, you know, a lot of times, businesses will not necessarily have people on the ground here.

If it’s an internet based business, maybe they’ll have a lot of customers here but they don’t have sort of marketing people on the ground, or other sort of operations that are actually local in the US. They’re just sort of on the internet, and if it’s that type of business, depending on the circumstances, you may not need to form a US entity. A situation where often people will do so, anyway, is if they’re looking to get investment from United States investors from Venture Capital funds, or other sort of investors that are based here in the United States. Because a lot of times those investors will really require you to be a US company, they will just feel more comfortable investing in a US company then they would investing in a foreign company. That’s not always the case but it often is.

The only thing that I always advise people about when they’re in that situation is, just to give it some thought and talk to a tax lawyer and understand what the consequences would be for you to bring your intellectual property and sort of subjecting all of your revenues in your business to the US tax system, because you know, the taxes in the United States are high and a lot higher than in other countries. So you’ve got to give it some thought and make sure that it really makes sense for you, if you’re not going to be actually operating here in the US.

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QUICK INFO

  • Eric Save, K&L Gates LLP
  • November, 2017
  • 3:18
  • Legal

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