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I want to start a company and have 2 foreign nationals who will be my partners. Would you go the LLC, C - S Corp or Inc. route?

Mill Valley, CA |

We are starting up a company and our technology partners are overseas. We are looking for advice on what type of company we should create. There will be 4 equal partners - 2 US Citizen and 2 Foreign Nationals.

Attorney Answers 4


  1. Let me give you three quick comments to narrow your thinking down: (1) non-resident aliens may not be SubS shareholders, so that option seems eliminated; (2) a basic difference between a C Corp and an LLC is that the latter is a "pass through" entity, in which the profits/losses of the company pass through to the individual shareholders' reportable income; and (3) it's enormously easier to later convert from an LLC to a C Corp, rather than the other way around.

    Beyond these general comments, deciding between a C Corp and an LLC can involve a lot of legal, tax and business considerations. Other structures also might be possible (e.g., joint venture). You'll need some help from a good busness attorney and your tax advisor.
    Contact me if you'd like to discuss further.

    This response to your question is general in nature, and is not intended (and is not authorized to be received) as reliable legal advice upon which any action or decision can be based. Other facts and considerations not known may substantially affect the answer as it applies to your particular circumstances.


  2. I am not licensed in California. However, depending on the capital your are putting down and the kind of business you intend to run, it may be wise to become with an LLC. However, at the very outset, I would be more concerned to define the relationship (and find an agreement) with your foreign partners. The company structure and all the members involved may have certain legal and tax consequences (negative or positive, still to be determined) when the company is going to distribute dividends or report (or carry over) losses. The setting up and the distribution moment are very connected and acquire sense when it comes to planning. My recommendation is to work with a business attorney with international vision. Best.

    This reply is offered for educational purpose only. You should seek the advice of an attorney. The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than an educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the undisclosed individual asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of New York. Responses are based solely on New York Law unless stated otherwise. Pursuant to Internal Revenue Service guidance, be advised that any federal tax advice contained in this written or electronic communication is not intended or written to be used and it cannot be used by any person or entity for the purpose of (i) avoiding any tax penalties that may be imposed by the Internal Revenue Service or any other U.S. Federal taxing authority or agency or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


  3. No one can provide a definitive answer based on such limited information. Here are a few thoughts:

    1. Find a tax advisor who is familiar with both domestic and international tax issues. And keep in mind that it is likely that there is no decision that will be optimal for both US founders, both foreign founders, and the new entity, itself.

    2. Will you be seeking outside investors? If so, then - especially if they are institutional investors, such as VCs - you will need to form a corporation rather than LLC.

    3. Are there any marketing-related considerations? For example, corporations generally are perceived as more substantial and serious than LLCs. This could be important for certain classes of customers and business partners.

    This information does not constitute legal advice and does not establish an attorney-client relationship.


  4. You would likely benefit from fact-specific, free consultations from international lawyers.

    Most entrepreneurs involved in cross-border business ask: "Should I open an LLC or a corporation?"

    Most entrepreneurs involved in cross-border business should ask:

    - How should I structure business income to reduce tax liability?
    - How should we structure ourselves to reduce employment law risk in several countries?
    - How can we limit our exposure to foreign lawsuits?
    - What immigration issues should we be aware of?
    - What laws will apply to our business dealings?

    You could get a pretty good idea of what issues you'll face by calling several cross-border lawyers who will walk you through your issues. Feel free to get in touch at 425 351 9455.

    Todd
    totalmobilitylaw.com

    Total Mobility Law is an international law firm that lets companies do global business with the knowledge and confidence they need to comply in any country. Our answers on this site do not constitute legal advice, nor do they establish an attorney-client relationship. The only thing that can do that is a signed Engagement Letter and Fee Agreement, which you can get by contacting us through www.totalmobilitylaw.com.

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