2019
Why US and foreign emerging companies should fear US sales tax
US and foreign startups are now likely to have an obligation to register for, and collect, sales tax from a much broader group of US customers than previously.
Failure to comply may subject the companies andtheir officers/directors to liability for the unpaid tax, plus penalties and interest.
As a knock-on effect, this may delay capital raises and negatively affect exit transactions.
2018
Are There Tax Clouds on the Horizon for “Cloud Computing”? 2/11/18
The tax rules defining how revenue from “Cloud Computing is characterized, has significant implications on how and where the revenue is taxed. The competition among governmental authorities to redesign the rules to get a bigger piece of the “tax pie” is heating up! more …
Archives:
(BLOGS WRITTEN PRIOR TO THE TAX CUTS AND JOBS ACT BILL OF December 2017)
A. U.S. StartUps
Pillar 1 — What’s the Right Structure for Your New Entity?
This is a guest blog by Mark Oblad who is the founder and principal developer of Valcu, which provides startups with do-it-yourself tools for incorporating in Delaware, post-incorporation setup, cap tables, financing terms sheets & documents, and private company valuations. This blog originally appeared in the Traklight Blog: (http://bit.ly/2fJlB1a) more…
Pillar 2 — How to Employ a Sound Defense Against Tax Liability Risks.
As an entrepreneur it is never too soon to employ smart tax planning strategies to minimize tax risks and cash outflows. more…
2. (a) – Tax Considerations for Start-Ups (Part 1)
After the excitement of launching a new start-up business and raising money, founders often focus on refining their product service offering, acquiring customers, making sales and moving the business to becoming cash positive. But founders should also be mindful and vigilant about meeting their tax liabilities, so they don’t face extremely unpleasant consequences, including stiff fines from federal, state and local tax authorities down the road. more…
2. (b) – Avoiding the US Sales Tax Trap
UK and European companies that do business in the US or set up US operations are frequently puzzled by US sales and use taxes.
Sales and use taxes are transactions taxes that are imposed on ultimate customers at a state and local level. The amounts and rules vary from state to state and locality to locality. more…
2. (c) – Tax Considerations for Start-Ups (Part 2)
In the excitement of raising money from investors then launching, a new start-up business ,many founders and stakeholders are focused on refining the product / service offering, acquiring customers, making sales and making the business profitable.
But founders should be both mindful and vigilant about meeting all their tax liabilities. Not doing so could result in extremely unpleasant consequences, including stiff fines from federal, state and local tax authorities. more…
2.(d) – Shareholders Liable for Unpaid Compensation in New York
The top ten shareholders of private New York corporations and members of private NY limited liability companies (LLCs) face personal liability for unpaid compensation of employees, which includes wages as well as benefits (see Sections 630 of the New York Business Corporations Law and Section 609 of the New York Limited Liability Company Law). more…
Pillar 3 — Play Smart Offense to take full advantage of tax benefits and increase current or future cash inflow.
Smart tax planning is not always about safeguarding against risks and avoiding penalties. If done the right way, you will hear “the crack of the bat” in terms of improving your cash inflows now, and into the future. more…
3. (a) – The Often Complicated Tax Implications of Stock Options.
Employee Stock Options are fast becoming a standard component of compensation for many emerging growth sector companies. Stock option plans are a very popular way of attracting and retaining high performing employees for startups, who often lack the cash to offer big salaries and bonuses. more…
3. (b) – Can Your Company Cash In on the Modified R&D Tax Credit?
The IRS section 41 tax credit for research and development (R&D) is now permanent. With this change there are big potential benefits to start-ups and small businesses that could not previously take advantage of this credit. more…
Pillar 4 — Raising Funds? Be Sure to Scrub Down the Term Sheet.
When preparing for any equity or debt fund raise — have your CPA evaluate the financial implications of the terms & conditions. In essence, scrub down your term sheet to help get the best fund raising outcomes. more…
Pillar 5 — Prepare Before the Big Exit to Maximize your Outcome
Be sure to focus your financial picture before an audit, exit talks or IPO, because you get one chance to make a great first impression with your financial statements, and you can improve your outcomes as a result. more…
Pillar 6 — Take Advantage of Tax Incentives to Enhance Your ROI.
The exemption for Qualified Small Business Stock (QSBS) is an often overlooked, but potentially big tax break for both founders and those investing in small businesses. more…
6. (a) – NY State QETC: Tax Savings Opportunity for Emerging Tech Sector Investors.
For investors looking at emerging tech sector companies based / doing business in New York State there are four letters that can spell potential tax savings: QETC. This stands for Qualified Emerging Technology Companies. more…
Non-U.S. TopCo’s (Parent companies) Coming to the U.S. to Expand their Business
1. To Flip or not to Flip: Should I Put a US Company Over My UK Company?
One of the major differences between the approaches of UK and US venture capital investors is in their choice of holding company in which to invest. more…
1.(a) – To Flip or Not to Flip? Further Reflections on the “Delaware Flip”
This is a guest blog created by Robert Mollen from Fried Frank – a NYC based international law firm. It is reprinted with his permission.
1.(b) – End of the Delaware Flip: US Investors and UK/Irish Startups
Pfizer’s record-breaking $160bn deal to take over the Irish pharmaceutical company Allergan, which will result in the former becoming an Irish company, has been attacked in the US as “unpatriotic”. However, it also highlights the increasingly compelling advantages to basing high-growth technology and life sciences businesses in the UK and Ireland. more…
1.(c) – Stripe Atlas: Learning to Drive the US Ferrari
Many emerging companies considering US expansion have asked us about Stripe Atlas, Stripe’s new offering that cost-effectively combines Delaware incorporation, a taxpayer identification number (EIN), a Silicon Valley Bank account, and integration with the Stripe payments network. more …
1.(d) – Tax Compliance — Top 10 Challenges for Tech Companies After US Expansion
Because the US is a federal jurisdiction, it is particularly complex from a tax standpoint. Companies face corporate income tax at the federal and state level, may be required to collect sales tax at the state and local level, and can be subject to a variety of other taxes, such as employment-related taxes, real property tax and personal property tax. more …
2. FUND RAISING: What US VCs Require to Invest in Non-US Companies.
We are frequently asked by UK and other non-US companies what they need to do to attract US venture capital (VC) investment. This post is the first of a four-part series addressing how a non-US start-up can best prepare to pursue funding from US investors, starting with a discussion of the general requirements of US VCs considering non-US investments. more…
3. PERMANENT ESTABLISHMENT: Businesses Coming to the US. What you don’t know can cost your company plenty!
Start-ups coming to the US from abroad, even if just to “test the waters” of doing business in the US, need to be wary of the complex US tax landscape – on a Federal and State level. Poor planning or lack of understanding of the laws, may cause an unsuspecting Start-up to cross the line and actually “start to do business” in the US. Then, failure to take simple actions like filing tax returns (even without profits) or collecting sales tax can result in huge tax liabilities! more…
4. RESIDENCY VS NON RESIDENCY: Entrepreneurs Coming to the US. What you don’t know about taxes can really hurt you!
Business opportunities in the US marketplace have never been better for non-US based entrepreneurs and startups. The US economy continues to show strong growth and economic resilience, even in the face of volatile capital markets in early 2016.
But both foreign individuals and start-ups need to be wary of the complex US tax landscape, as poor planning and even inadvertent behavior or actions can result in huge tax liabilities. more…
5. TRANSFER PRICING: How to Divide the Global Tax Pie Among Countries Where your Business is Operating
You are a non-US based firm and you’ve taken the plunge by deciding to set up your business in the US. Now you are designing your business model and your budget for the next few years.
High on your “to do” list is estimating sales revenue, marketing, wages and office space and other expenses so that you can determine the potential profitability or loss of your business globally.
The difficult task is then to determine how much of this profit or loss is taxed in each country where you are operating. Since tax rates vary (http://stats.oecd.org//Index.aspx?QueryId=58204) from 12.5% in Ireland to 39% in the US, the tax rate will makes a big difference to your profits after taxes and therefore your cash flow. more…
6. COMPENSATION: Making UK Equity Plans Work for US Employees.
When UK emerging companies venture outside the UK, they quickly need to address whether – and how – to extend equity-based compensation to non-UK employees. more…