Free Resources for Irish and Northern Irish Companies Forming US Affiliates

I’ve written several times (Minimizing ‘Alter Ego’ Risk for Irish and Northern Irish Parents of US Affiliates; and Effectively Using a Lightning Rod) about the need for Irish and Northern Irish companies to form a formal US affiliate as part of their US expansion strategy. I know that several US law firms have free online forms libraries/generators for US startups. That got me thinking—where are the free online forms/resources for Irish and Northern Irish companies looking to expand to the US? Well, it’s right here.

Let’s assume that the Irish/Northern Irish company will form a Delaware corporation (which is what I’d recommend in many cases). For a proper/complete formation, the Irish/NI company would need to draft (i) articles of incorporation (to be filed with the Delaware Secretary of State’s Corporations Division); (ii) bylaws; (iii) an initial action/consent of the incorporator; (iv) initial consent of the Board of Directors; and (v) SS-4/application for an employer identification number (to be completed and filed with the IRS). The filing with Delaware requires payment of a filing fee—and a filer can pay more for expedited service and other items; also, since the Irish/NI company is, well, in Ireland/NI, they will have to engage a registered agent (the registered agent serves as a point of contact between the company and the State of Delaware). And, filing can be made directly by the Irish/NI company—no real need to incur third-party filing or convenience fees. Continue reading

Minimizing ‘Alter Ego’ Risk for Irish and Northern Irish Parents of US Affiliates

Previously, I’ve written how forming a U.S. affiliate can be like using a lightning rod for U.S. litigation risk. Properly used, a U.S. affiliate can help keep U.S. litigation risk away from the Irish/NI parent and its investors. Forming a U.S. affiliate is not enough, and the lightning rod is useless if the U.S. affiliate is considered to be an ‘alter ego’ of the Irish/NI parent.

The corporation (and limited liability company) form in the U.S. generally shields an entity’s investors from the entity’s liabilities; investors would stand to lose their investment, and nothing more, if the entity collapses. There are some limited circumstances where an American court can ‘pierce the veil’ of this liability shield, and impose entity liabilities on an investor—one of those circumstances is when the entity in question is an ‘alter ego’ of one if its investors. In other words, if a U.S. affiliate were deemed to be an ‘alter ego’ of its Irish or Northern Irish parent, the parent and its investors could be responsible for the U.S. affiliate’s liabilities.

When determining whether a subsidiary is an alter-ego of its parent, U.S. courts consider many factors, including whether the:

  • Parent owns all of the stock in the subsidiary;
  • Subsidiary is adequately capitalized;
  • Corporate formalities are observed;
  • Parent and subsidiary share corporate officers and directors;
  • Subsidiary has its own offices, employees and bank accounts;
  • Parent pays the salaries of the employees of the subsidiary;
  • Parent siphons money out of the subsidiary;
  • Subsidiary and parent share administrative services, employees or insurance arrangements without proper, arm’s length compensation between them;
  • „Parent uses the subsidiary’s property as its own; and
  • Subsidiary’s function is a mere façade for the parent company.

Irish and Northern Irish parent companies can minimize the risk of having their U.S. affiliate being deemed to be an ‘alter ego’ of the parent by:

  • Properly capitalizing and insuring the subsidiary. U.S. courts are less likely to extend jurisdiction over foreign parent if the plaintiff can collect the full amount of a judgment against a properly capitalized U.S. corporation;
  • Complying with corporate formalities;
  • Creating the subsidiary’s own bank account;
  • Documenting rationale for the subsidiary’s capital structure;
  • Documenting inter-company loans;
  • Maintaining appropriate debt/equity balance;
  • Having the subsidiary hire and pay for its own employees; and
  • Creating the subsidiary’s own board of directors.

None of this is bullet-proof, of course, but the above steps should help the U.S. affiliate act like the lightning rod as intended.

Everything You Need to Know About Forming a US Corporation (for free!)

Lawyers are often of two minds about providing ‘free stuff.’ Some look at it as a straight economic loss; others look at it as a service that can build to something even bigger. One of my good friends was, as he has said, ‘in the room’ when the first model forms from the International Swaps and Derivatives Association were drafted. Several US West Coast law firms have free online forms libraries/generators for startups. That got me thinking—where are the online forms/resources for Irish and NI companies looking to expand to the US? Well, they’re here.

One of the first questions I get from Irish and NI companies is whether, as part of their US expansion strategy, they need to or should form a formal business entity and if so, what kind of entity and where. If you want a more fulsome discussion about why forming a US entity is a good risk-mitigation strategy for the Irish/NI parent, take a look at my earlier post, https://irishexportinsights.com/2015/03/03/effectively-using-a-lightning-rod/. The second question is usually about how much that formation would cost.

For purposes of this post, let’s assume that the Irish/NI company will form a Delaware corporation (which is what I’d recommend in about 90% of the cases). For a proper/complete formation, the Irish/NI company would need to draft (i) articles of incorporation (to be filed with the Delaware Secretary of State’s Corporations Division); (ii) bylaws; (iii) an initial action/consent of the incorporator; (iv) initial consent of the Board of Directors; and (v) SS-4/application for an employer identification number (to be completed and filed with the IRS). The filing with Delaware requires payment of a filing fee—and a filer can pay more for expedited service and other items; also, since the Irish/NI company is, well, in Ireland/NI, they will have to engage a registered agent (the registered agent serves as a point of contact between the company and the State of Delaware). And, filing can be made directly by the Irish/NI company—no real need to incur third-party filing or convenience fees.

Here’s the relevant information:

  1. Start with an entity information document, like this one, to gather the information you would need.
  2. The Delaware certificate of incorporation form is fairly simple/straightforward, and a sample can be found here. This contains the bare minimum required by the Delaware statute. If you have any questions about the certificate—like about the number of shares you may need or the indemnification provisions—consult a lawyer (preferably me!).
  3. The Irish/NI company will have to appoint a registered agent –we use National Registered Agents. They charge $95/year.
  4. The certificate needs to be filed with the State of Delaware. The fee structure is available at http://corp.delaware.gov/Julyfee.pdf; as of today, the filing fee is $89, and I’d recommend that companies spend the extra $50 to get a certified copy of the filing, for corporate records. The Delaware Secretary of State Corporations Division generally takes about two days to complete a filing—as indicated on the fee structure, you can pay extra for expedited service. In terms of filing logistics, the company should use this covering memo, http://corp.delaware.gov/cvrmemo.shtml, to file the articles. You can mail or fax in the filing request, and pay for it using a credit card.
  5. Draft a set of bylaws—a sample/template is here. These are internal to the company and do not need to be filed with any regulator, but should be included in the company’s minute books/records.
  6. The incorporator (the signatory on the articles of incorporation) should use this sample/template to appoint the initial board of directors of the company, and to resign. This also is internal to the company and does not need to be filed with any regulator, but should be included in the company’s minute books/records.
  7. The first meeting of the board of directors can happen without an actual meeting, using this consent in lieu of meeting template. Perhaps the most important provision of this form is the authorization to open a bank account, which is required by banks as a condition of opening an account. This document does not need to be filed with any regulator, but should be included in the company’s minute books/records.
  8. Lastly, (although required before opening a bank account), the company needs to obtain an employer identification number (EIN) from the US Internal Revenue Service. Additional information about this process, and the SS-4 form, can be found at https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online. Irish/NI companies should be aware that they can only apply for an EIN via mail or fax, since the person likely making the request—filing the SS-4 for the company—is not a US citizen or permanent resident.

Of course, these are the basic documents/forms and your specific situation may require specific solutions or considerations. You should always consult with a lawyer and your tax accountant if you have any questions or concerns about this process. I’m posting this to help educate Irish/NI companies on this process.

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Everybody is an Employee…Maybe…Possibly

Businesses operating in or expanding to the US, including those from Ireland and Northern Ireland, use independent contractors to avoid some of the baggage associated with the employer/employee relationship under US law.  The use of independent contractors recently has gotten more complicated due to the US Department of Labor’s publication of Administrator’s Interpretation 2015-1.  The Interpretation is part of the Department’s closer monitoring of the ‘independent contractor’ designation. Businesses from Ireland or Northern Ireland operating in or expanding to the US, and using the services of an independent contractor (such as a sales agent) should take another look at how they designate a person as an ‘independent contractor,’ as soon as possible. Continue reading

Selling to the US Government: A Brief Guide for Irish and NI Companies

Irish and Northern Irish companies expanding to the US market should consider selling to the US government as part of their expansion strategy. Last year, the US government purchased almost $500 billion in products and services—it is the single largest customer in the world and it pays its bills. By law, the US government publishes its formal solicitations for purchases valued at more than $25,000 on http://www.fedbizopps.gov. An Irish/Northern Irish company can customize its search for opportunities to sell its products and services to US government. Continue reading

Effectively Using a Lightning Rod

It’s been a while…my apologies! Waiting at an airport on a winter weather delay has me thinking of all the times I’ve been delayed because of summer weather like…lightning storms. It also gave me a chance to talk to a non-US company client about doing business here, and their structuring options; which also relates to my earlier post about when a company is deemed to be doing business here, for jurisdictional purposes.

Continue reading