Post by account_disabled on Feb 25, 2024 0:19:04 GMT -5
Venture capital investment in the United States, that operates and has its shareholders in the United States would choose to structure itself as a C-Corp. US mutual funds and institutional investors generally resist investing in an LLC in order to avoid “ pass-through” income . However, before incorporating a C-Corp as a holding company, a Brazilian or Latin American entrepreneur should keep in mind that many Latin American technology companies will not initially be involved in business in the United States, will not have a significant percentage of shareholders North Americans and will probably not receive initial venture capital financing in that country. These entrepreneurs will face: double taxation in the U.S. — that is, global earnings will be subject to U.S. corporate income tax and U.S. dividend withholding tax; in many cases, U.S. taxation if the shareholders wish to relocate such a holding company outside the United States, and the payment of U.S. taxes on the income of its non-U.S. subsidiaries.
In this sense, the formation of an LLC is usually the best initial option for B2B Email List which even allows for future conversion into a C-Corp, if there is a change in circumstances. Otherwise, however, in the case of a conversion from a C-Corp to an LLC, it would be treated as a de facto sale of the company and, therefore, taxable in the US — which could create certain setbacks for the entrepreneur by incurring costs in US dollars.
The flip structure, as previously described, is often referred to in the market as the “toasted” Delaware (or “toasted”), in comparison to the flip that aims to structure a “Cayman/Delaware Sandwich”. In this model, we include a holding company above the Delaware LLC, in a third jurisdiction, typically the Cayman Islands. Here we will have three layers of societies:
Entity in the Cayman Islands owned by all the original partners, where the entrepreneurs (ie the company) would receive international investments;
LLC in Delaware owned by Cayman Islands entity, without any operations or employees; It is
National company, owned by the Delaware entity.
The use of the Cayman/Delaware Sandwich will be chosen basically for tax planning reasons — as may surprise you, reader —, keeping the Delaware LLC as a “ pass through” entity for tax purposes in the United States, and will target a niche of investors attracted by the absence of corporate tax and taxation of income earned outside the Cayman Islands. As in Brazil, the Cayman Islands also do not charge taxes on the distribution of dividends — highlighting that it is essential to analyze possible tax obligations imposed on national shareholders in Brazil.
The share flip can provide a series of advantages for national companies, such as legal security, access to attracting international investments, greater agility in corporate operations and tax efficiency. However, as usual, such an operation must be studied and in-depth based on the individual situations of each entrepreneur, with the help of Brazilian and international lawyers, so that, in fact, such a strategy triggers the expected growth and success on a global scenario.
In this sense, the formation of an LLC is usually the best initial option for B2B Email List which even allows for future conversion into a C-Corp, if there is a change in circumstances. Otherwise, however, in the case of a conversion from a C-Corp to an LLC, it would be treated as a de facto sale of the company and, therefore, taxable in the US — which could create certain setbacks for the entrepreneur by incurring costs in US dollars.
The flip structure, as previously described, is often referred to in the market as the “toasted” Delaware (or “toasted”), in comparison to the flip that aims to structure a “Cayman/Delaware Sandwich”. In this model, we include a holding company above the Delaware LLC, in a third jurisdiction, typically the Cayman Islands. Here we will have three layers of societies:
Entity in the Cayman Islands owned by all the original partners, where the entrepreneurs (ie the company) would receive international investments;
LLC in Delaware owned by Cayman Islands entity, without any operations or employees; It is
National company, owned by the Delaware entity.
The use of the Cayman/Delaware Sandwich will be chosen basically for tax planning reasons — as may surprise you, reader —, keeping the Delaware LLC as a “ pass through” entity for tax purposes in the United States, and will target a niche of investors attracted by the absence of corporate tax and taxation of income earned outside the Cayman Islands. As in Brazil, the Cayman Islands also do not charge taxes on the distribution of dividends — highlighting that it is essential to analyze possible tax obligations imposed on national shareholders in Brazil.
The share flip can provide a series of advantages for national companies, such as legal security, access to attracting international investments, greater agility in corporate operations and tax efficiency. However, as usual, such an operation must be studied and in-depth based on the individual situations of each entrepreneur, with the help of Brazilian and international lawyers, so that, in fact, such a strategy triggers the expected growth and success on a global scenario.