LLCs May Be Right Unless They’re Wrong

As I’ve posted before, I usually advise non-US companies to form a corporation when expanding to the United States. Every now and then, I get some pushback because the non-US company has heard about ‘limited liability companies’ (LLCs) in the US and wants to take advantage of the pass-through tax advantages of the LLC form. Before diving too deeply on this, let me get some definitional items out of the way. Corporate law in the US is predominately a creation of, and within the control of, the states. That’s why you hear about a ‘Delaware corporation’ or a ‘New York corporation’ and not a ‘United States corporation.’ That’s our Federal system at work (when it works). The corporation form in the US is similar to the limited company forms in Ireland and Northern Ireland, in that the shareholders/investors in each are only liable for the entity’s debts to the extent of their investment. Continue reading

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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Protecting Your Trade Secrets in the US

Remember earlier posts about non-disclosure agreements, and the role they play in defining and protecting trade secrets? Of course you do—but in case you don’t, one of them is here. I even drafted a brief two-page outline for NDAs, here.

The macro point of those posts, at least as to protecting trade secrets, is that in the US, a trade secrets owner must take all “reasonably available steps” to protect their trade secrets. In an unpublished opinion filed on May 8, 2015, the US Court of Continue reading

Learning, Knowing, and Living Incoterms (Or, How Fast Times at Ridgemont High Can Help Your Export Strategy)

In a prior post, I revealed that I am a child of the 1980s.  This post will start with a quote from the movie Fast Times at Ridgemont High: “Learn it. Know it. Live it.”

While the context of that quote was the Brad Hamilton character (Judge Reinhold) trying to get the Jeff Spicoli character (Sean Penn) to wear a shirt and shoes in a fast-food establishment, this post will focus on the terms of trade and that Irish/Northern Irish companies need to learn, know, and live: Incoterms. This is probably the first time, anywhere, that Incoterms and Fast Times at Ridgemont High have been linked, but I digress.

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You’re Not Doing Business in the US…Unless You Are

I spoke recently with the owner of an Irish company that sells its products online to purchasers in the US and other countries. The US isn’t a true focus of this company’s expansion efforts, but the US market is a nice added benefit to the company’s revenue stream. They don’t have a US-specific website, but if you go to their order page you can enter a US address for delivery. In discussing their sales efforts, I asked what the company does in terms of US-focused terms/conditions of sale and related agreements. Nothing, I was told, because the company isn’t ‘doing business’ in the United States. In a limited way, that answer is correct. But, that answer also is wrong, and dangerously so. Continue reading

NDAs and You: Perfect Together

I’m about to betray that I made questionable music choices in the 1980s–but the song most relevant to this post is “Voices Carry” by the band ‘Til Tuesday. If those voices include your company’s confidential or sensitive information, your company will suffer competitive harm.  That’s why I recommend that non-US companies expanding into the US get familiar with non-disclosure agreements (NDAs), also known as confidentiality agreements. Continue reading

Webinars for Irish and Northern Irish Companies (free content, too!)

Late last year, we held a series of webinars directed to Irish and Northern Irish companies looking to do (or doing) business in the US. The webinars were well-attended, and, in part, led to the creation of this blog. We want to share those webinars, and their content, with you.

The first webinar introduced the concept of ‘smart exporting’ and provided a high-level view of some key legal issues relevant to Irish and Northern Irish companies in the US market. The presentation for this ‘smart exporting’ webinar can be found here; the recording of the webinar (requires registration) can be found here.

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