coming to america. legal issues for international startups

COMING TO AMERICA LEGAL ISSUES FOR INTERNATIONAL STARTUPS

Tytus Cytowski, Managing Partner

JFE ACCELARTOR

SAN FRANCISCO, CALIFORNIASEPTEMBER 3, 2014

2CYTOWSKI LLC

Disclaimers

Any US federal tax advice contained in this presentation is not intended to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend any transaction or matter addressed herein.

This material is for informational purposes only and do not constitute advertising, a solicitation, or legal advice and should not be construed as legal advice for any purpose whatsoever.

Information contained herein is not intended to create, and receipt thereof does not constitute formation of, an attorney-client relationship.

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TYTUS CYTOWSKI

Attorney at Law

EDUCATION

• HARVARD LAW SCHOOL (LLM)• WARSAW UNIVERSITY (Mag Iur)

EXPERIENCE

• STARTUPS• VENTURE FINANCING• FLIP TRANSACTIONS

ADVISOR

• STARTUP WISEGUYS (Estonia)• DEFY VENTURES (NYC)

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HELLOJFE ACCELATORSTARTUPS!

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BASICS:

• FLIP STRUCTURE• FUNDRAISING• SECURITIES LAW• TAX• IP• IMMIGRATION

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STRUCTURING A FLIPTRANSACTION

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Create Delaware C-Corp

Exchange/Transfer Shares

C-Corp owns Non-US Subsidiary

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DANKE!

WWW.CYTLAW.COM

FLIP PROBLEMS:

- CORPORATE GOVERNANCE

-FOUNDER RIGHTS

- US & FOREIGN TAX

- IP

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DANKE!

WWW.CYTLAW.COM

FLIP FIRST & THEN GET FINANCING

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NOTE VS. EQUITY

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DANKE!

WWW.CYTLAW.COM

SECURITIES LAW*

*Very Important

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REGULATION DREGULATION SRULE 4 - 1/2

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US TAX - FLIP §§ 351 & 368 of IRS

CODE

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US TAXCONTROLLED FOREIGN CORPORATION (CFC)

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FOREIGN TAX – FLIP

- EXIT TAX

- DEFERED TAX

- HOLDING PERIODS

- TAX CREDITS

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IP IN THE USA?

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DANKE!

WWW.CYTLAW.COMTRANSFER PRICING

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US TECH INC.

If the profits from the sale of a product stay in the United States, they would be subject to a federal tax of 35 percent. But if money is paid to an Irish subsidiary as royalties on patents the company owns, it can ultimately be taxed at far lower rates.

IRISH SUBSIDIARY

If the Irish subsidiary is controlled by managers elsewhere, like the Caribbean, then the profits can skip across the world tax-free.

MANUFACTORING SUBSIDIARY

CARRIBEAN SUBSIDIARY

NO TAX

OVERSEAS CONSUMER

Product is sold overseas, money from the sale is sent to a second Irish subsidiary

SECOND IRISH SUB

Irish tax treaties make some inter-European transfers tax-free, the company can avoid taxes by routing the profits through the Netherlands

Netherlands

Irish subsidiary sends the profits to the overseas tax haven

Source http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html?_r=2&

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DANKE!

WWW.CYTLAW.COMFOUNDER

IMMIGRATION

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DANKE!

WWW.CYTLAW.COMTRADER VISA

E-1

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DANKE!

WWW.CYTLAW.COMINVESTOR VISA

E-2

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DANKE!

WWW.CYTLAW.COMINTRACOMPANY

VISAL-1

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DANKE!

WWW.CYTLAW.COMTODA RABA!

WWW.CYTLAW.COM

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WANT SLIDES

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