This content was created by Tim Draper. This content was uploaded by Tim Draper. This is a YouTube video titled "Should you Incorporate Outside of the US | Lawyer Jared Brubaker" (uploaded 2015-04-08) containing a single-speaker explanation—likely by lawyer Jared Brubaker—about whether businesses should incorporate outside the U.S. The speaker discusses U.S. corporate tax rates, taxation of foreign-sourced income, complex compliance and legal costs, management-location tests, implications for raising capital from U.S. venture funds, limited exceptions, and typical timing when offshore structures might be considered.
Chapters
One of the major questions that I get, especially from people that are outside the U.S., is whether it makes sense to incorporate outside of the U.S. The motivation is very clear. There are high corporate taxes in the U.S., some of the highest in the world. And then second, U.S. corporations are taxed on income derived from sources outside the U.S., which is also not typical with other countries. other countries. If you do this, it requires complying with very complex tax rules. It can be very expensive for the tax attorneys and other advisors involved. It's usually not worth it if the company is managed in the U.S. because the IRS will say, well, that the income from the company is basically derived from this activity that's happening in the U.S. and so we're going to treat it as like basically as if it's a domestic company, at least for certain purposes. It may also be more difficult to raise money from U.S.-based venture capital funds. So some funds don't have a problem with this, but a lot of them say, well, we only invest in this particular type of company and if it's incorporated at a state in the U.S., that may be one of their qualifications. There's a limited exception where if it's managed outside of the U.S. and there's significant revenue from non-U.S. sources, it may be worthwhile. It's very complex. I'm actually working on one of these things right now, but it is fairly rare. So there are all kinds of structures that companies can set up. Setting it up tends to be pretty expensive and so it's typically not something that's done at this stage in the company's existence. And so there are complex ways that U.S.-based companies incorporated in the U.S. can reduce their taxes through using companies that they establish elsewhere, but that happens much, much later. Thank you.
