In “Visa Basics for Foreign Entrepreneurs Coming to the U.S.”, I discussed certain immigration statuses (visa waiver, B-1 and H-1B visas) that permit a non-resident alien to take a passive role in a business (such as forming it) but not to work for it. This post discusses the boundary between permissible passive activities and prohibited work.
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Flag of England (Yes, fellow Americans, there is an English flag separate from the UK flag - do you see the relationship?)
This post reproduces, almost verbatim, a Quora question and my answer. Q. How effective and enforceable are contracts between parties located in the United States and England?
A. Such agreements can be effective and enforced – agreements between parties in different countries are entered into routinely.
The stickiest issue during negotiations may be selection of venue and jurisdiction and choice of law. These, in turn, will have a bearing on how certain provisions should be drafted.
Depending on the subject matter of the agreement, you may need to think about whether the United Nations Convention on Contracts for the International Sale of Goods will be applicable and, if so, whether it should be disclaimed.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
This post is based on an OnStartups.com question (edited here) that I answered a few minutes ago. Q. I am drafting a website-development agreement with a firm in India. I am in Australia. I prefer that the agreement be governed by Australian law, but the developer prefers Indian law. What is normally done in similar circumstances?
A. Several thoughts based on my experience in similar matters:
- While governing law is important, venue – i.e., where a lawsuit must be filed – is even more important tactically if a dispute arises.
- If there is a great disparity in negotiating power between the parties, the one with the greater power is likely to prevail on this issue (and many others).
- If a compromise is desired, choose a neutral country (with an appropriate legal system) for governing law and venue. In your part of the world, Singapore could be a good choice.
- An approach that will reduce the likelihood of a lawsuit being filed: If one party initiates a legal action, it must be filed in the other party’s country, and that country’s law will govern.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
September 14th, 2010
Dana
I have seen a recent increase in the number of foreign companies inquiring about doing business in the U.S. Their most frequent question: Should they just open a branch office here, or should they form a separate legal entity, such as a corporation? They almost always form a new corporation – here’s why:
- Many customers here prefer to do business with a U.S., rather than overseas, entity. The U.S. entity provides a level of comfort, and shows a level of commitment, that is not present with the overseas entity.
- The U.S. legal system is well-known for a high incidence of litigation. Foreign companies like to have a legal firewall between their U.S. operations and the foreign parent company.
- Although both corporations and limited liability companies (LLCs) can provide legal protection, there is a widespread marketplace perception that a corporation is more substantial and more “real” than an LLC.
- The cost to form and maintain a corporation here is quite low, especially in comparison to the formation costs and minimum-capital requirements in many other countries.
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Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
I have helped dozens of foreign companies establish subsidiaries here. Sometimes, the foreign company asks, “Do we really need to form a separate company in the U.S.? Can’t we just hire some people in the U.S. to work for our existing overseas entity?”
In responding, I make the following points:
- There is no requirement that a separate U.S. entity be formed.
- However, starting a new U.S. business is risky. There certainly will be financial obligations, and unexpected legal liabilities can arise. (Regrettably, anyone can sue anyone else for any reason at any time – and even if you win, there is a substantial likelihood you will have to pay your own legal fees.) So long as the U.S. entity complies with applicable formalities (please see Beware Your Alter Ego), it will act as a legal firewall to separate those obligations and liabilities from the foreign parent.
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Photo credit: Sharon Austin via stock.xchng
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Non-immigrant foreign entrepreneurs who want to start businesses in the U.S. often – and rightly – have visa-related concerns. A typical question: “What kind of visa do I need to start my business?”
This post provides a brief answer to that question.
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When a foreign company wants to start up in the U.S., it usually creates a separate corporation here so U.S. obligations and liabilities will not flow back to the overseas parent.
The U.S. corporation needs a federal Employer Identification Number (EIN) – at the very least, to open a bank account, even if the corporation will have no employees in the U.S. In a recent post on its website (Use of Nominees in the EIN Application Process), the Internal Revenue Service recently made it more difficult for foreign companies to obtain an EIN.
To obtain an EIN, the corporation typically provides the social security number (SSN) of a “principal officer”. In the past, the IRS was rather vague as to what this term meant, stating that it referred to a “president, vice president, or other principal officer”. So, for example, if the corporation’s overseas president did not have an SSN because s/he never worked in the U.S., the corporation could temporarily appoint as vice president an individual who has an SSN, which the corporation then would use to apply for an EIN.
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A couple of months ago, I posted International Business and Agreements: Learning about Legal Culture. This is a follow-up that discusses certain common problems when foreign suppliers bring their standard-form agreements to the U.S.
During the past several years, I have helped quite a few foreign technology suppliers adapt their standard-form agreements for use in the U.S. The agreements that they use back home (translated to English, as required) are quaint by U.S. standards. There is a lot of white space, fonts tend to be large, and while business terms are specified in detail, many legal provisions are addressed in a cursory fashion or not at all.
This last point is critical. In other countries, applicable law fills in many gaps adequately, and the parties assume that problems will be worked out satisfactorily; litigation is a last resort reserved for extreme situations, such as fraud or a complete failure to perform. In the U.S., in contrast, we include many provisions expressly in anticipation of a suit that may be brought by either party at any time for any reason.
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September 30th, 2009
Dana
Having helped more than a dozen foreign companies set up operations here during the past few years, I am pleased to offer “Ten Tips for Success in the U.S.” on the Downloads page – just Sign Up for Free Downloads using the drop-down list in the sidebar.
Here are the titles of the ten tips, which are discussed in greater detail in the document:
- Work with complementary businesses that are already established here
- Manage overseas personnel on the principle “trust but verify”
- Form your corporation or limited liability company properly
- Be ready for a legal system that is different from the one back home
- Identify and protect intellectual property (IP) that is used here
- Develop detailed employee and independent contractor agreements
- Choose an accountant with international tax experience
- Be prepared to obtain a federal employer identification number
- Conduct due diligence on potential investors
- Agree on business terms before you prepare a written agreement
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
September 11th, 2009
Dana
Twice within the past 24 hours, a client has contacted me with concerns about trademark protection. In each instance, the concerns were caused by an e-mail that offered specified domain names in Asia. I will describe the e-mails in detail so you will know to be on guard if you receive anything similar:
- The subject line includes terms such as “copyright” or “intellectual property.”
- The text indicates that the sending company, an Internet domain registrar located in Asia, has received a request to register domain names with country codes in Asia that are similar to a “trademark” (more precisely, a domain name) that you own. For example, if you own <universalwidgets.com>, the e-mail might state that there are requests to register <universalwidgets.cn> and <universalwidgets.asia>.
- The e-mail then offers you an opportunity to protect your trademark by buying the Asian domain names yourself, rather than letting them be purchased by the third party. However, to take advantage of this opportunity, you must act quickly.
- The individual ostensibly sending the e-mail has an Americanized name, such as “John Zhou” or “Adam Hao”.
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Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.