We thank all of our clients who joined us today for our webinar focusing on taking your company to the US.
Please find below an overview of the questions asked from our speakers by the participants. The questions were answered by Taavi Annus, partner Bryan Cave Leighton Paisner LLP who co-hosted the event and local start-up representatives Vytenis Buzas from NanoAvionics and Ulla Helm from Veriff.
C Corp vs. LLC in Delaware for foreign individuals. I heard LLC bears additional tax complications. What’s your opinion?
Taavi Annus: We typically strongly discourage LLCs for foreign owners. This would result, in most cases, the foreign owner(s) of the LLC effectively becoming a U.S. taxpayer that foreigners almost always try to avoid. Note – even U.S. startups right now typically choose C-Corp, for various reasons (investor demand, lower corporate income tax rates than previously, “Qualified Small Business Stock” benefit).
Would you recommend a startup keep a contact with US lawyers directly or rather through their Baltic advisors (who can actually filter and chew the information for the client, considering that US law is very different and the advice is usually rather long)?
Vytenis Buzas: I would say I would keep the local lawyers always informed at minimum but maintain direct contact with US myself. At least until you will start feeling how to work with US lawyers, how to ask questions and what to expect. Double checking is recommended.
Ulla Helm: My suggestion is actually vice versa. I would keep the business people focused on getting concurring the market, getting the product fit validated, focusing on making connections with investors etc, and then the legal work are left to the experts, especially using Baltic firms who have good experience with setting up US companies and carrying through the fundraising. They end up saving your entry costs, because they know the legal documents and explain these to you in “human language” later, as well as prep you for the 1st round.
What difficulties might I face, if try to open US Bank account for new Delaware entity, which owned by Baltic entity and its ultimate beneficiaries are all from Baltics (and don’t live in the US) ? How to solve, friendly/unfriendly banks, KYC issues etc.
Taavi Annus: The main hurdle is that you should physically appear in the bank location. My recommendation is typically to handle as much as possible in advance, and then just handle the final KYC issues at the bank after travelling there. There are definitely friendlier banks who are more used to foreign owned companies, although they have told that they focus on certain countries more than others.
Are there any differences from US tax perspective if US employee is granted options of a parent company in the Baltics?
Taavi Annus: Not significant, to my knowledge, but this is a much less common situation I have faced so cannot give a definitive answer. US employees still need to comply with US tax rules, and Baltic company needs to comply with US securities laws when granting options to US employees.
Do the U.S accelerators always expect the parent company to be in the U.S or it can be a subsidiary or a sister company from where you can transfer the investment to other group companies?
Taavi Annus: This depends on accelerator. Not all require this. Need to ask them.
Should you have any further questions, please do not hesitate to reach out to our start-ups experts counsel Kaido Künnapas and senior associate Mirell Prosa. A recording of the webinar is available here.