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
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:
- Start with an entity information document, like this one, to gather the information you would need.
- 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!).
- The Irish/NI company will have to appoint a registered agent –we use National Registered Agents. They charge $95/year.
- 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.
- 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.
- 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.
- 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.
- 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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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.