Most used structures

The proper choice of a business or investment structure is very important so that the capital invested — as well as its return — are maximized and, at the same time, the legal and economic risks for the investor are minimized.

It is essential to consider the advantages and disadvantages of each type of corporate structure before making any decision, considering that, if there is a need for structural change, the process may generate additional costs with taxes, government agencies and discomfort among the partners. Therefore, corporate and tax planning at the beginning of the process is important in order to avoid the need for a change in structure at a later stage. The way in which the entrepreneur structures its operations, capital structure, profit expectation, among other factors can have an impact on the corporate and tax model to be followed. When talking about the incorporation of a company in the USA, it is necessary to pay close attention to the choice of location for the establishment of your company, since this can have a significant impact on the company’s profitability, since in addition to federal income tax, companies operating in the country may also be subject to state income taxes, depending on where they operate.

With the thought of serving the global market, today many startups choose to establish themselves in the international market, especially the American one, even with the operational team in other countries. This is due to the brand’s positioning strategy, proximity to the end customer, access to technological innovations and the largest capital market in the world. When this movement does not occur at birth, it becomes a matter of time the process known as “Offshore Flip ” or the “Delaware Flip”, in which founding partners of startups execute the exchange of their respective shares in companies originally incorporated in their countries by offshore or American holding companies, which in turn become partners of these operating companies.

Regarding the different entities available to the founder, the options vary between pass-through entities , limited liability companies, corporations, joint ventures, simple companies and those whose production and distribution are outsourced. The corporate structures generate an impact on the financial and tax scope, on the liability of the partners and on the flexibility of business growth. Below we explore some of the legal frameworks available in the US as examples.

Along with defining the type of legal entity, the investor must also define the corporate structure of the company. This definition varies according to the investor’s interest, the number of partners, the risks to be assumed and the tax structure. These factors must be considered before defining the corporate structure. The correct choice of corporate structure is essential for the transaction to be taxed fairly and correctly and for the partners to maximize their results. In addition to the importance of protecting the interests of partners in general, the correct structuring of a startup can generate significant savings in a liquidity event.

Important aspects to be observed at this stage are related to governance and compliance of the company in the jurisdiction of incorporation, remembering local registration obligations, the need for the company to have a local agent for the purposes of representation before regulatory bodies in the state of incorporation, compliance with economic censuses, transfer pricing rules, among others.