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Setting Up Business
Operations in Silicon Valley
January, 2013


Richard Allan Horning
SNR Denton US LLP
T +1.650.798.0370
M +1.415.412.4479
Skype: Richard_Allan_Horning
Email: Richard.Horning@snrdenton.com
Web: www.snrdenton.com




                                       1
Our Locations




                2
WE HELP THE TECHNOLOGY STARTUP GROW FROM THIS




                                                3
TO THIS




          4
MONEY MOVES WEST (1972)
 Sand Hill Road, Menlo Park




                              5
Silico n Valley   C alifo rn ia   T o tal U .S.

                               Q tr 1
                               Q tr 2




                        1995
                               Q tr 3
                               Q tr 4
                               Q tr 1
                               Q tr 2




                        1996
                               Q tr 3
                               Q tr 4
                               Q tr 1
                               Q tr 2




                        1997
                               Q tr 3
                               Q tr 4
                               Q tr 1
                               Q tr 2




                        1998
                               Q tr 3
                               Q tr 4
                               Q tr 1
                               Q tr 2




                        1999
                               Q tr 3
                               Q tr 4




    S ilic on V alley
                               Q tr 1
                               Q tr 2




                        2000
                               Q tr 3
                               Q tr 4
                               Q tr 1
                               Q tr 2
                        2001
                               Q tr 3
                               Q tr 4
    Total C alifornia
                               Q tr 1
                               Q tr 2
                        2002




                               Q tr 3
                               Q tr 4
                               Q tr 1
    Total U .S .




                               Q tr 2
                        2003




                               Q tr 3
                               Q tr 4
                               Q tr 1
                               Q tr 2
                        2004




                               Q tr 3
                               Q tr 4
                                                                                          VC INVESTMENTS BY REGION (1995 – 2006)




                               Q tr 1
                               Q tr 2
                        2005




                               Q tr 3
                               Q tr 4
                               Q tr 1
                        2006




6
SETTING UP SHOP IN THE VALLEY


   Agency
   Joint Venture
   Branch Office
   Subsidiary
     – C corporation
     – Limited Liability Corporation




                                             7
MANAGEMENT AND OVERSIGHT


   No Nationality Requirement for Officers and Directors
   Directors are Not Necessarily Employees of the Local Company
   The Board Can Meet Anywhere, Including CyberSpace
   All Corporate But Elections Can Be By Written Consent [Maybe
    Even Elections]




                                                                   8
INVESTMENT COSTS


   Creation of a DE Company Can Be Overnight
   No Minimum Capital Required
   Annual Franchise Fee in DE as Low as $75
   Qualification in California
   Tax ID and Employer ID
   Bank Account
   General Liability Insurance




                                                9
TAXATION


   Tax Treaty
   US Tax System Based on Taxation of Profits / Earnings
   Transfer Pricing and International Tax Planning
   Federal Corporate Tax Rate on Profits (15%, 25%, 34%, 39%, 35%)
   Federal Tax on Dividends to Parent (15%)
   Federal “Partnership” Tax (35%)




                                                                      10
EMPLOYMENT


   Non-Residents Need a Work Visa to be Employed in the US
   Employment is Generally “At Will”
   Non-Compete Clauses Generally Unenforceable
   Employees Generally Expect Equity Participation Plans a/k/a
    Stock Options




                                                                  11
ACCESS TO LOCAL CAPITAL


   The Credit Rating System
   The “Flip” as a Precondition for Local Equity Capital
     – Usually Has Tax Consequences for Foreign Shareholders
       Acquiring the DE Stock, But Careful Planning May Minimize
       the Hit
     – Local Equity Capital Will Generally be in the Form of Preferred
       Stock
     – Local Capital Usually Implies Board Seats and Restrictions on
       Complete Freedom to Operate Without the Consent of the
       Investors
     – The “Term Sheet”




                                                                         12
VC CONSIDERATIONS


   Team
   Opportunity
   Scalability
   Protectibility
   “Monopoly”
   Exit Plan




                                         13

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Brussels presentation

  • 1. Setting Up Business Operations in Silicon Valley January, 2013 Richard Allan Horning SNR Denton US LLP T +1.650.798.0370 M +1.415.412.4479 Skype: Richard_Allan_Horning Email: Richard.Horning@snrdenton.com Web: www.snrdenton.com 1
  • 3. WE HELP THE TECHNOLOGY STARTUP GROW FROM THIS 3
  • 5. MONEY MOVES WEST (1972) Sand Hill Road, Menlo Park 5
  • 6. Silico n Valley C alifo rn ia T o tal U .S. Q tr 1 Q tr 2 1995 Q tr 3 Q tr 4 Q tr 1 Q tr 2 1996 Q tr 3 Q tr 4 Q tr 1 Q tr 2 1997 Q tr 3 Q tr 4 Q tr 1 Q tr 2 1998 Q tr 3 Q tr 4 Q tr 1 Q tr 2 1999 Q tr 3 Q tr 4 S ilic on V alley Q tr 1 Q tr 2 2000 Q tr 3 Q tr 4 Q tr 1 Q tr 2 2001 Q tr 3 Q tr 4 Total C alifornia Q tr 1 Q tr 2 2002 Q tr 3 Q tr 4 Q tr 1 Total U .S . Q tr 2 2003 Q tr 3 Q tr 4 Q tr 1 Q tr 2 2004 Q tr 3 Q tr 4 VC INVESTMENTS BY REGION (1995 – 2006) Q tr 1 Q tr 2 2005 Q tr 3 Q tr 4 Q tr 1 2006 6
  • 7. SETTING UP SHOP IN THE VALLEY  Agency  Joint Venture  Branch Office  Subsidiary – C corporation – Limited Liability Corporation 7
  • 8. MANAGEMENT AND OVERSIGHT  No Nationality Requirement for Officers and Directors  Directors are Not Necessarily Employees of the Local Company  The Board Can Meet Anywhere, Including CyberSpace  All Corporate But Elections Can Be By Written Consent [Maybe Even Elections] 8
  • 9. INVESTMENT COSTS  Creation of a DE Company Can Be Overnight  No Minimum Capital Required  Annual Franchise Fee in DE as Low as $75  Qualification in California  Tax ID and Employer ID  Bank Account  General Liability Insurance 9
  • 10. TAXATION  Tax Treaty  US Tax System Based on Taxation of Profits / Earnings  Transfer Pricing and International Tax Planning  Federal Corporate Tax Rate on Profits (15%, 25%, 34%, 39%, 35%)  Federal Tax on Dividends to Parent (15%)  Federal “Partnership” Tax (35%) 10
  • 11. EMPLOYMENT  Non-Residents Need a Work Visa to be Employed in the US  Employment is Generally “At Will”  Non-Compete Clauses Generally Unenforceable  Employees Generally Expect Equity Participation Plans a/k/a Stock Options 11
  • 12. ACCESS TO LOCAL CAPITAL  The Credit Rating System  The “Flip” as a Precondition for Local Equity Capital – Usually Has Tax Consequences for Foreign Shareholders Acquiring the DE Stock, But Careful Planning May Minimize the Hit – Local Equity Capital Will Generally be in the Form of Preferred Stock – Local Capital Usually Implies Board Seats and Restrictions on Complete Freedom to Operate Without the Consent of the Investors – The “Term Sheet” 12
  • 13. VC CONSIDERATIONS  Team  Opportunity  Scalability  Protectibility  “Monopoly”  Exit Plan 13