U.S. Business and Trade Law
When establishing, expanding, or managing a U.S. business, an attorney can help with:
• the drafting and negotiating of contracts, e.g. with B2B customers, sales representatives or distributors,
• the registration of a U.S. branch office, including filings with relevant tax and regulatory authorities,
- the formation of U.S. companies, including
- choice of corporate structure
- choice of place of incorporation
- and tax optimization
• transfer pricing
• M&A transactions.
Legal Planning for U.S. Operations
The legal structure you should select for your U.S. business depends on your goals and the stage of your U.S. operations. Early on, cooperating with commercial agents or sales companies can suffice. However, don’t just rely on your instincts when selecting local support. Carefully evaluating the contractual terms and the overall framework of your cooperation with local agents or representatives is essential to the short- and long-term success of your U.S. operations.
If you need greater control over your U.S. operations or want to make extensive investments (e.g. acquire real estate and employ and supervise local employees), the registration of a U.S. branch office or the establishment of a U.S. company may be necessary.
In a branch structure, the parent company and the branch are legally identical. Thus, there is no legal shielding of the parent company from claims for damages in the U.S. Furthermore, a U.S. branch office can lead to unwanted U.S. tax liabilities.
The establishment of a U.S. company, on the other hand, provides protection for the parent company from claims for damages in the U.S. by giving the U.S. company a separate legal personality. Establishing a U.S. company can also open the door to additional tax optimization measures.
Contract Drafting and Negotiations
Proper contract drafting and negotiation can minimize the risk of litigation and associated costs. However, one should not simply select a template and fill in the blanks. Instead, it is essential that any template you select is thoroughly adapted and reviewed. Similarly, it is not wise to accept terms from another party without careful review. If, for example, one chooses U.S. law at the insistence of other party, but uses a contract template based on German law, you may end up with a contract that merely increases the complexity and cost of any litigation.
These dangers can be avoided by having contracts with U.S. partners, customers and suppliers thoroughly reviewed by an attorney to ensure it meets your needs and is legally compliant and consistent.
Internal Revenue Service (IRS) regulations require that transfer pricing documentation be prepared concurrently with the filing of U.S. tax returns. If the IRS requires transfer pricing documentation as part of an audit and it is missing or incorrect, penalties of up to 40% of the back taxes may be imposed.
Transfer pricing documentation required by the IRS must meet two criteria. First, the documentation must include methods for pricing intercompany transactions (e.g., royalties from a U.S. subsidiary to a German parent) that result in prices that reflect the prices of similar, arm’s-length transactions between two independent companies. Second, the documentation must meet the exact legal requirements of the IRS. By working with an attorney, you can ensure that the necessary transfer pricing documentation is not only prepared, but also complies with the detailed legal IRS requirements. This will help you avoid any penalties and achieve greater certainty for your U.S. business.
One way to establish a U.S. presence is to purchase an existing U.S. company. Purchasing a U.S. company may also pave the way for obtaining an EB-5 Green Card or an E-1 or E-2 nonimmigrant visa as an investor. But any purchase of an existing business should be carefully planned and executed to adequately address important issues ranging from tax and liability implications to employment and residency consequences.
The loss or change of a corporate relationship, for example, can prematurely terminate the U.S. residency permits of existing employees or preclude or complicate international assignments in the future. Because of this interplay between legal, organizational, and strategic factors, choosing the right advisors is a crucial success factor in any M&A transaction.
Find Out More
Do you have questions about U.S. business and trade law? Or perhaps you have related questions regarding U.S. residency law, U.S. visas or U.S. tax law? Make an appointment or contact me. I’ll help you navigate the relevant legal issues and find the right solutions for your U.S. project.