How to incorporate your company in the US

Anthony Rose: Hello, everyone, and welcome to our session on expanding to the US. Before I introduce Pashua from Doula, let me give the background. So you’re a growing UK company and you want to expand to the US It’s increasingly popular. In fact, I’ve seen in founder groups it’s gone from almost no one talking about it to a lot of people talking about it. Maybe it’s just me noticing it because SeedLegals is expanding to the US or maybe it’s just become the latest thing to do.

Expanding to the US goes in one of 2 forms. One, you’re a UK company, and you want to start selling your goods services in the US and thing number 2, you want to pivot to become a Delaware Top Co. And principally to raise investment in the US into a US company. Now expanding in the US to grow your market is natural, and what we want to do is make that way easier.
As we’ve been looking to expand SeedLegals in the US for months, we’ve been navigating a minefield, of which state you should be in, and what type of corporation endless things, and it cost fortunes. Lawyers charge tens of thousands for all of this. So I was delighted when we came across Doula. And as we’re going to learn in the next 45 min, actually, there’s a super simple answer to almost all the things we are there. So us is not currently our area of expertise, particularly about incorporation. So we’re going to partner. And we’re going to make the whole process SeedLegals simple when it comes to flipping to be a Delaware top company.

That’s a whole separate subject. We’re going to cover some of that on this call, but I think mostly it’s the question when someone says, I want to flip to be a Delaware top company. The reasons for doing. It might be the wrong reasons. It’s often I couldn’t find investment in the UK. So I’ll look in the US. But you may find you have difficulty raising from US investors as a US company for the same reason you couldn’t in the UK.

You’re not ready yet. Investors didn’t understand the pitch deck and so on. So we’ll cover that separately. But without further ado. let me hand over to the expert on everything about us incorporation, and you’re going to learn a ton of us nomenclature, and hopefully see all the steps and be able to do them afterwards. So, Pashua, do you want to intro yourself? Take it away.

Parshwa Mehta: Thank you, Anthony. Thank you so much. It’s super excited to be here, and you know, to have this chance to host this webinar for y’all along with seed seed. Legal? So yeah, we are a do a doula, you know, we we, basically, you know, have expertise in the US market just like SeedLegals have in the UK market. So we help you with everything that you need in the US right from registration. Compliance is like setting up your company, keeping it compliant, growing in the US. So you know, you can basically scale your, you can scale your business along with us. And yeah, these are very common questions that Anthony has mentioned. And you know we will address this in the call. So I think. Anthony, do we wanna wait for a couple of more minutes for folks to trickle in.

Anthony Rose: Can, we can crack right on with the presentation.

Parshwa Mehta: Awesome, not a problem. Let me quickly share my screen and we can get started. Then you all confirm the real thing, seamless.

Anthony Rose: So you can where you can see the screen.

Parshwa Mehta: Let’s just say awesome. So yeah, I will. I will run through everything that you’ll need to know. When launching in America and explain the process, the taxation pretty much everything that you know in this quick webinar. And you know we can then take questions if you’ll have any right? So let’s get started.

Yeah. So basically in the Us, whenever you’re moving to a new country, whenever you’re starting a, you know, a company in a new country. You have a lot of different questions like, you know, what’s the process like? How much time will it take? What’s the cost like? You know, what do I need to do? Compliant? What are the tax rates, you know? Even if I make money, am I going to pay most of it in taxes? Or am I going to not pay in taxes? And I’m gonna like, keep a lot of it. Are there any tax benefits, credits, advantages, loopholes that I can like, you know, legal tax loophole loopholes that I can use?

How can I move money? Are there any banking restrictions? All of that, you know. Tons of questions. So, as you see. you know, starting a business, staying, compliant, educating yourself, scaling the business. These are all different things when you’re moving to a separate country that you have no knowledge about. But that’s where we come in where we kind of put together everything for you. We have this business in a box solution where you come to us, and we give you everything that you need from scratch to, you know, like the end game when which you need to run your company.

So the 1st most important question is, what type of structure you should be choosing to incorporate your company right? So there are 3 major entity structures in the US I would say. One is the Llc. S. Corporation and the C. Corporation. Llcs are more for small businesses that are, you know, looking to like not looking to raise money. They want to own the business. They want to make it the cash cow. They want to grow the business organically sometimes, or they just want to, like, you know. Keep the full ownership to themselves.

So those are Llcs. Where again Llcs don’t have shares. They have a profit sharing ratio or a membership interest. So if you and I start an Llc. It’s going to be 50 50 each, but we don’t have shares like I don’t. We don’t know. There is no share the number of shares or stock defined. So you know, I don’t know whether I have 5,000 shares, 50,000 shares, 5 million shares. It’s just a 50% each. So basically, if you’re an Llc. You can’t raise money from investors because you don’t have shares. Investors will always want equity and you can’t issue equity as an Llc. Which is why Llc. Is not a good fit for you. If you’re looking to raise money in the US,if you, if you’re looking to expand your UK operations to the US and you’re looking to like, you know, kind of not raise money in the US and just have an operating entity in the us where the operate from which the operations will be conducted. And you know, you’re not. Yeah. So then, in that case, analysis is a good fit. But yeah, if if you’re looking to raise money from us investors right? So then you will need a delivery corporation. So C, corporation is what I mean again, I’ll come to why deliver etc. in the next slide.

But a C corporation is what you need, because C. Corporations have shareholding and equity, the Prof. The profits are taxed at the corporate level and the dividend are taxed at the shareholder level. We’ll deep dive into that bit more. But yeah, C, corporations basically have shares.

So C corporations have shares. So yeah. So if if you’re looking to raise money from investors, then you can. you should be incorporating a C corporation only like that is that. That’s the 1st step that is required right now.

Anthony Rose: So let me hop in quickly, because what I love to do at SeedLegals is lawyers will tell you 12 things you could do with the risks attached to each, and at see legals. Our goal is to tell you the one thing that you probably are going to do, based on the fact that you’re a standard startup. And so the short answer is, there are many different types of companies. But in the UK, you know, it’s an LCD company. Unless you’re a charity. It’s an LCD. Company in the US. If you’re an Etsy jeweller or a sole trader or something should knock yourself out an Llc. Is the way to go. If you’re a growth startup. Delaware, C. Corp. Is the way to go easy.

Parshwa Mehta: That’s right.

Anthony Rose: All right.

Parshwa Mehta: Awesome. Thank you so much, Anthony, for summarizing that also a quick brief on S. Corporations S. Corporation is actually not an entity type. It’s more like a tax election. This is only for you, you, the residents of the US. So only if you’re a US. Resident, US citizen. Only then you can incorporate an S. Corporation election. So if you ever get confused between C. Corp. And S. Corp. S. Corp. Is not like non residents don’t have the option to choose an S. Corporation, so the only option for you is Llc. Or C. Corporation, and then between them, if you’re raising money. C. Corporation is the way to grow. S. Corporation is only for us citizens and residents. Right? So yeah, if you’re looking to raise money, C. Corporation is an ideal fit.

you know, the best state for incorporation. There are 50 states in the US. Firstly, it’s important to understand that in the US. The registrations happen at the state level. So there are 50 states. You have 50 options to choose from, in which state you want to incorporate. Your company and investors prefer the state of derive to invest money in why deliver? That’s the most important question, why not the other States? So these are. These are the top reasons that I’ve put down here as to why deliver
let’s quickly run over them. So limited liability protection they have the most they have. It’s called the incorporation Capital of the World, because it has got the most established corporate laws most up to date corporate laws, which is why, you know, investors and founders. It’s it’s friendly for both of them. And that’s why this this state is preferred 68% of fortune. 500 companies are registered in Delaware. It’s got no state income tax, no inheritance tax and no sales tax sorry. The income generated from IP is tax free. This is a super important point.

So let’s say, you know. So companies like that Google, Apple Amazon are all registered and deliver to benefit from IP profits. So while let’s say, for example, Google, Apple, Amazon, they’ll have operating entities in different states of the US. They will always have one Delaware entity where their IP is housed under that Delaware Company. The reason is that any profits that you generate from your any intellectual property that you develop, that that is tax free at the State level in the State of Delaware, the other States will tax you, but in Delaware there are no taxes on that. So I mean, you know, if Amazon, for example, develops an IP and then, you know, houses it under the delivery corporation. Each operating entity of Amazon can basically pay royalty to the Delaware see Corporation to use that IP and all of them money is tax free at the State level in the US. So IP profits are tax free again. Delaware is globally recognized and reputable. A lot of folks across the world know a Delaware C corporation. Delaware has got a Court of Chancery. The Court of Chancery is one of the oldest courts in Delaware, in the US. In fact, also, and they’ve got judges instead of juries in the US. So the whole decision making process is fast tracked, and it’s more founder, friendly investor, friendly like I mentioned earlier. Also, they’ve got the most advanced and up to date case laws. So yeah, basically, these are the so IP protection. I would say, lower taxes, fortune. 500 companies are there. So you can. You can have you can, you know. You can call yourself a delivery corporation. You can like, you know. It’s a prestigious I would say it was a. It can be a prestigious status status for you.

So yeah, this is the reasons why, you know, investors also prefer Delaware and you know, founders also prefer Delaware, also a lot of times in the US. If you’re looking to raise money. An important point is that you should be incorporating a delicacy corporation. We know that the feedback that we get from a lot of clients is that if you know that you know the investors are not ready to take meetings if you don’t have a delivery corporation in you know, Incorporated. That’s a bit harsh, I I believe, but you know that’s how they are that you know. If you’re coming from outside of the US. And you don’t have a delivery corporation, you won’t get an investor meeting, but if you have one, then maybe you’ll be like, you know, prioritized and get a meeting much faster. So this is just some feedback that we’ve collected from folks we worked with in the past.

Anthony Rose: After the presentation we’ll deal with creating your top code, moving your top code to Delaware, because that’s, you know, creating a subsidiary is easy. We created one. It took like 2 days, but moving the entire top company, and with all the investors and everything is a big thing. So we’ll talk about that at the end.

Parshwa Mehta: Right? So now that we know that we should be incorporating a delivery corporation, let’s understand the process and the timeline for it. Okay, so step one is registration of the company which takes one week on average the US. Is a very easy place to do business. So registration just requires the company name of your choice, your email, id, you have US, or non US, physical address and your contact number. So no documents required for step one only information required. Then we have to apply for an ein ein is like, I mentioned the employer identification number. It’s basically that a unique tax number for your delivery corporation.

This again, if you have a US. Social security number, if you’ve been in the past in the US, then it’s just one to 2 days to get the ein because it’s generated online. If you don’t have a US. Social security number, you can have it expedited with US, and you can get it in 3 to 4 weeks if you choose not to expedite it, then it’s 5 to 7 weeks, but either ways you will get the ein once you register the company.

Okay? So yeah, so this is, step 2 and step 3 is then applying for a US online business bank account. Now, the for applying for the bank account step one and step 2 need to be completed. That’s how they’ve been mentioned without the Ei and other company formation documents, you will not be able to open a bank account. It takes another 3 to 5 business days, and the additional services required to keep your company compliant, or to set it up correctly, are also included, such as the registered agent, the virtual business address with a mailbox and a mail scanning service. So this is the overall process. 3 step process with the timelines.

And yeah, so probably. If you so you can add up the timeline that decide. You know. You can backward calculate when you want to get started in the US. And accordingly start your incorporation process, they’re coming to the ongoing compliances for the delivery corporation. So let’s say you register your company. You set it up with US. You have your bank account opening. You’re ready to transact in the . Now, while your business scales what you need to do to keep your company compliant in the US. There are 4 important compliances. The 1st is the Boi reporting. The Boi stands for beneficial owner information reporting where the owner’s information the the delivery corporations owners information, or anybody who has 25% or more shareholding in the company basically has to report their information with the Fincen.

And this has to be filed within 90 days of incorporation. If you incorporate today on the 10th of October, then within 90 days from 10th of October, you have to file this report the next is your State compliance. So you’ve registered your company in Delaware, and you have to do a State compliance which is due on or before 1st of March every year, and the fees is 2 25 to 4 $50. We can help you optimize this tax fee as well. So sorry.

Right? So this is at the State level. You have to do compliances. Next, is your Federal or your Company’s corporate tax return, which is due on or before 15th of April every year. and then it’s bookkeeping again. Bookkeeping is super important, because the numbers that go into these State reports Federal reports will come from accurate bookkeeping records. So you should have your books updated periodically.

So these are the 4 compliances for the US. Company. One important thing to note here is that? Let’s say you shop it at the C Corporation, and you don’t use it for 6 months, or you don’t use it for one year. Basically, there are no transactions. You have no activity in the company. It’s just like a dead company, for example, even in that case these compliances are mandatory. These are company level compliances, not business level compliances. So the moment you register a company, these 4 compliances become applicable to you, and then, as your business grows and skills, there could be additional business level compliances. But yeah, these are the bare minimum that you need to do to keep your company compliance. You should account for these and the costs for these before you start the in company as well.

Reduction of startup costs. So there are certain startup costs that you can, that you can deduct in the 1st year of operations. So 5,000 in startup costs and 5,000 in organizational costs is something that you can deduct in the 1st year of your operations. This is only available in the 1st year. If you miss this benefit, then in the future years, you will not get this benefit.

And this benefit is for cost incurred prior to registration or beginning of operations per entity, basically pre registration or pre incorporation expenses. This benefit is for those and yeah, for these for you to get the benefit of this $10,000. Your total setup costs have to be under $50,000. With Doula. You can incorporate a company for like less than $500. So I’m I’m guessing you won’t cross this $50,000 if you add up the other pre incorporation expenses as well. So most of us, most of you all can take the benefit of this as well.

Now. If your cost exceeds this, it’s not like the benefit goes away. You can amortize the amount over 15 years. Now, just to give you a quick brief on what the startup costs and organizational costs look like startup costs like I, your market research advertising done before the business travel cost for business development, etc. Organizational cost include the legal fees, state fees and fees for creating the entity. So basically, the doula fees that you pay, for example. or similarly, you know any fees that you pay to incorporate the company will go under organizational costs.

Right? so a total of $10,000 in deduction that you can guess and get in the 1st year of operations. As long as your total cost is less than 50,000.

Let’s move on to the next coming to the taxation, we’ll spend a bit time here. So how are C corporations taxed? Basically, let’s say, so now now we’ve covered, I would say, we’ve covered the setup. The ongoing compliance is what benefit you can get in the 1st year of operations. Let’s say, now you make you started making money. You’re getting revenue expenses have also started to increase. What’s the what’s the what’s the taxation look like? So a C corporation is a separate legal entity from its owners or the shareholders, and is subject to double taxation. Double taxation means the corporation will pay tax on its income, and then, when the corporation issues dividend to the shareholders, the shareholders will also pay taxes on the dividend that they have personally received. That’s why it’s called a double taxation structure.

C. Corporations are taxed on their profits at the Federal level, and the corporate tax is 21. So let’s say your your revenue is $100,000. Your expenses are $80,000 on the $20,000 of net taxable income. There could be some more tax adjustments that may need to need to be done. But let’s say roughly, 2025,000 is your net taxable income on that you have to pay a 21% flat corporate tax in the US. Now. let’s say your taxes are paid in the US. Okay, and you want to. As long as you keep the money in the US. Or you want to. You want to reinvest the money into the US. And you keep it in the US. Bank account or in the US. There is no problem. But if you want to, after payment of taxes, whatever profits is left, if you want to distribute, if you want to like, you know, repatriate it back to the UK. Or to your home country. Then you will have to declare it as a dividend. You can’t just withdraw it. Like that. You have to declare it as a dividend and you have to pay a dividend tax as well. So normally, the US. Imposes a 30% withholding tax on dividends. So let’s say, you know, when you’ve got like $15,000 of profits left. And now you want to bring that money $15,000 back to UK. In that case, the General, you’ll have to pay a dividend tax as well.

Now, the general withholding tax that you have to pay is a 30% withholding. But under the US. And the UK. Have a double taxation avoidance agreement. So under the US. And UK. Tax treaty, the dividend withholding tax rate has been reduced from 30% to 15%.

And if you and in certain conditions, when you’re holding 10% or more, the tax could be further reduced to 5%. So you only have to pay 15%. I mean, the minimum is 15 5%. And the maximum is 15% that you will pay to the US. Government to bring your money back after you’ve paid to 21% tax on your profits right and all the taxes that you pay the 21% tax that you pay in the US. Even for that. Also because the US. And the UK have a double taxation avoidance agreement.

You get a foreign tax credit for that. So you report the same income or the same US. Income in the UK. Whatever taxes you paid in the US. You take a foreign tax credit of that in the UK, and then only the balance taxes. If any have to be paid in the UK. If there is no tax liability, or if there is an excess, then you probably get a refund.

So this is how the C Corp. C. Corps taxation works some of y’all may have questions on this. You can drop it in the chat box, and you know. We’ll take it later on as well.

But there is something there is a special exemption that I want to cover, which is called the Qsps exemption, which is very popular among tech startups in the US. Or any startups in the US.

Qsbs is basically an exemption that allows you to avoid taxes up to 10 million dollars in capital gains, or 10 x the investment that you made in an eligible company this limit is per individual per asset. So if you have 20 different startup investments, or if you run, let’s say 2 different startups, you will get this benefit per startup. So 20 million. So yeah, 10 million into 2 or 10 x into 2. So yeah, this is per asset per individual. So let’s say, you sell your company, your US. Company for 10 million dollars. Without usbs you might have to pay up to 3.5 million dollars in taxes. But with usps you pay nothing 0. Because you can you? You’re awaiting the benefit of the exemption.

Anthony Rose: So, Pashwar, let me hop in here because UK founders are all familiar with SEIS and EIS tax savings for their investors and Qsbs is the US version. And amazingly, in the UK. 100% of founders. And hopefully, a decent number of investors know about SEIS and EIS. But in the US. It turns out quite a few people don’t know about it.

So there are a couple of quick things to know with Qsbs. There’s no initial tax deduction that the investor can make. So it’s not as good as the one in the UK. But if they keep their shares for 5 years and sell off to that. They pay no Federal capital gains tax, and in some States no State capital gains tax. But here’s the interesting thing in the UK. Only investors, not founders can get these tax benefits in the US. Both founders and investors can get these tax benefits.

But it only applies if you’re a USc. Corporation. So if you are a UK. Company raising from US investors. you can’t give them these tax benefits. You can give your UK investors SEIS benefits. But if you flipped your company to become a US. Company.
then you could depending, if it’s not, if you still comply, and it’s not too late, and so on. Then, as a founder holding those shares, you may benefit from no Federal capital gains tax after. If you keep the shares for 5 years and your investors, you can offer Qsbs to them as well. So if you have a US. Company being able to tell investors that you can give them these Qsbs tax breaks can make you more investable, just like SEIS than the companies that don’t know about this, however, for most of us on the call we’ve got a UK company, and this is only going to be relevant if we flip to being a Delaware company which we will talk about shortly.

Parshwa Mehta: Yeah. thanks for adding that Anthony. Yeah. So we just quickly go through the eligibility, though Anthony’s mentioned rate, most of it like you have to be a US. Space Corporation.

You have to receive the shares from the company, and old investors selling shares to you will not qualify for Qsps. It has to come directly from the company. There is a 5 year lock in period at a holding period, I would say, before you sell the shares. So it’s from the exercise date from, not from the Grant date active business requirement is something like which for which all tax text, some tech startups qualify for. So if you’re running like, let’s say, a law practice or a Cpa practice, or you know, some kind of a personal practice in the US. Then you then you don’t qualify for Qsps. But yeah, usually all startups will qualify investors.
investors, founders getting, you know, startup equity grant investing all of that will also qualify. And yeah, your assets cannot exceed 50 million before or after you receive this receive the shares. So that is another. So these are the 5 conditions. As long as you. As long as you flip to a Delaware C corporation you can make this exemption available for yourself as well as well for your investors.

Okay, so yeah, we’ll we’ll talk more on this when we speak about flipping the delivery top. Co, just yeah. Coming to the business deductions as a delivery corporation. You can take business deductions as well.

So any ordinary and necessary expense for your business. You can take that as a business deduction, such as rent utilities, office supplies and business travel.

What do you mean by ordinary and necessary? Because the definition is very broad, so ordinary, and the general rule regarding the deductability of any particular expense is ordinary and necessary, and what it means is that it has to be common for your industry. necessary could be explained as helpful and appropriate for your business to operate.

Okay. 2 2 more important deductions that a lot of people either oversee or they get them wrong. Is the Home Office deduction and the vehicle expense deductions have covered that separately. Here. If you’re using your home for your business, you can deduct a portion of your mortgage, interest, rate utilities, expenses. on your business, as you can claim that as a business expense. Similarly, if you’re using your vehicle for business related expenses, then you can claim your some portion of the vehicle expenses as well for your business expenses. So these are 2 overlooked deductions. So that’s why I specifically covered the other expenses, such as rent, utility, office supplies all of that which is very, you know, uncommon understood. Those are anyways available to you. I, I presume the same will be for the UK as well. So yeah, you should be aware of this. But this is just a quick, brief touch up on that.

There are certain tax credits also available in the US. Essentially important for those developing Ips, or those you know working in newer industries, raising money for upcoming industries or trends.

So this is again R&D tax credit is applicable to any US based company who has who’s performing activities related to development design improvement of product processes, formula software we can get into the definition more specifically like, if you want to get into this specifically like, you know what counts as improvement or what counts as changes in development design, you can reach out to us, and we can let you know. But basically, if your money, if your business is spending money on innovation, then you can. You can, you could get eligible for the R&D tax credit. And it’s typically between 6 to 8% of the annual R&D expense that you can claim as a credit, so you can’t claim the whole thing, just a portion of it.

Another one that a lot of people miss is the work, opportunity, tax credit. Where, if you hire employees from a circuit, certain certain target group, like veterans or long term unemployed folks, you can claim a credit for the percentage of their wages, and that that goes up to $2,400 of deduction.

And yeah, the the more number of hours they work. The higher your the higher credit you can receive for them. Again, the working, etc. You can reach out to us if you’re, you know, kind of kind of keen for this.

But yeah, these are the 2 super important credits that you know. You should be aware of. As a startup operating in the US.
Now, this is just a basic some tips to avoid noncompliances in the US. Pay your taxes on time, file your returns on time use a reliable or a robust accounting software to maintain accurate details, because if your if your records are messed up, you will not be able to fill out any reports, any returns, anything like any paperwork you know, accurately, keep your business and personal. The records divided. So you know your personal bank account should be different from your business bank account, and the bookkeeping should also be separate. And yeah, use a tax professional, such as a Cpa, if your business is growing, you have some complicated transactions, or if you just need to have make a you know, control full knowledge about you know where you can save money, and you know how your business is progressing forward.

So, yeah, this is, I think this covers the pretty much the end of what I wanted to cover. Anthony. We can move on. Okay, yeah. We can take this a little later. We can discuss the delivery tops. Delivery flip. So do you wanna like still get started on that? And then, you know, I can continue. I can add on to that.

Anthony Rose: Yes, so thank you. That was an amazing presentation. Let me go to some questions about bank accounts, and so on. So when you open. So, firstly, the company’s address. Does that need to be in Delaware? I think there are 2 concepts of address in the US. There’s a registered address, and then there’s the office address, kind of like the UK, maybe. and I’ve heard that the Delaware, the the registered address, has to be with the registered agent in Delaware. So tell us a bit about that, and and I’m guessing Doula can act as the registered address, or something.

Parshwa Mehta: That’s correct. So in the US. Whichever state you decide out of the 50 States, whichever state you decide to incorporate your company, and you need to have a address there. and that is the address where which is, go, which should go on your legal papers, so the State will have that address on file.

You can use that same address. So it’s and you can always start with a virtual business address in the US. You don’t need to have a physical office. The US. Allows a virtual address, and they also need a mailing address. Most of the States need a mailing address as well where they can mail you their letters, documents, notices, reminders. So you can have the same business virtual business address for your company registration on your papers, and you can use it as a mailing address as long as it has a mailbox service as well and every US. Company also needs a registered agent in the state of incorporation. So if you’re looking to incorporate in Delaware, Doula provides you with the registered agent as well as the the business address with the mailbox service as well.

Coming to the banking part that Anthony mentioned. So there are online banks in the US. Through which you can open a bank account for which you don’t need to be physically present at the US. You don’t need to have a US. Social security number. You don’t need a US resident partner, director, nothing. You can 100% own your own company and remotely open yours. Do the entire process with Doula, including the bank account opening. Now we assist you with online banks in the US. And online banks usually need 2 addresses. One is your company’s legal address that Doula will provide to you will be mentioned on your documents, etc.

This because that’s your company’s address, your legal address. The second address that Banks want is your physical address. From where you’re actually conducting operations where you are physically present. So that can be a non US. Address as well. So you can provide your UK address on the bank account application and the bank would also need an address proof. So the so the most, the 3 most accepted and easy, easily accepted physical address. Proofs could be a UK addresses. either a lease agreement with the same address mentioned. It could be a utility bill in the last 3 months, or it could be your bank statement. And then, like your latest bank statement, where your address is mentioned. So as long as your physical, you provide your physical address outside of the US. Correctly, and it matches with any of these 3 documents. You’ll be able to open an online bank account in the US as well, and we assist you with that process as well.

Anthony Rose: Okay. Great. Now for the US. Banks, which banks do you support? And and would a wise bank account for most purposes, be sufficient as well, because you know, for many companies that are already on wise, it takes about 3 min to make a US. Wise account. Great.

Parshwa Mehta: So we’ve partnered with Mercury. Mercury is an online bank in the US. So you almost some of y’all may have heard about Mercury. Some of you all have may not. It’s MERC. URY. Our wife. So, Mercury, we’ve partnered with Mercury to get you an online US bank account.

And they definitely, they’re regulated by the US. Financial regulations. They provide Fdic insurance. And it’s a great bank to bank with. But yes, there are some times where, you know, because of strict Kyc. Regulations. You may not be able to open a bank account with Mercury. In that case, other solutions like pay, only advice. Air. Wallx. These kind of solutions work work well as well.

Coming to wise. So yeah, wise opens multi currency accounts. It’s cheaper than pay or need, and it gives you like. It’s easier to open the account as well. So heard great things about wise, but off late from the last 15 days, so I would say one month. I’ve heard a lot of clients coming back to us saying that Wise is not opening USD balance accounts.

So I have to yet establish that claim, if it’s true, or if they’ve made an error. But at the moment looks like wise may not open USD balance accounts, but if they are, then you can definitely open a wise account. Wise business account as well, and you can use that for your banking requirements too.

Anthony Rose: Okay, alright. So why don’t you? Continue in the next couple of slides? Let’s talk about how people can use Doula, and then we’ll stop screen sharing, and talk about Delaware flips and any other questions. Sure.

Parshwa Mehta: So we’ve got a special offer for you guys. where you know, we’re offering a discount on the US. Company incorporation and compliances so exceed legals. Community members get a special 10% discount on USc cops with Duna. And you can use this discount on incorporation compliances, bookkeeping taxes wherever you need.

There is a dedicated partner link a partner code, and if you ever have more questions, you want to deep dive into something. You can schedule. A free consultation also with US.

The links will be dropped in the chat very soon, so you can access the you know you can access the you can schedule a free consultation plus you can. You know, you can save the code to apply to when you’re checking out on our website.

Now coming. Just a quick comparison on why, we have the startup plan. We have 2 plans, the starter and the total compliance. But startup plan, if you compare it with. You know the other companies like Stripe Atlas 1st base, or even these listed companies and business legal zoom we offer the most we offer a very competitive pricing overall with no hidden costs.

Firstly, that is super important, because you may see 0 year, and then the cost is increasing. But we don’t do that. So yeah, very competitive pricing value for money and no hidden fees, plus, we’ve got a great trust pilot score as well. So yeah, you can. You can definitely compare this for yourself. But this is just an overall comparison where we get you everything that you need at a cheaper cost, and if you want compliance is also covered, then we also have that. And again, it’s cheaper than most of the other providers as well.

So yeah, so. And we cover everything like, you know, we cover all the compliances that I mentioned, and we gave you some extra extra tax support as well.

So yeah, that covers our startup plan, our total compliance plan.

If you have, yeah, okay? So if you’ve got any questions, you can always live chat with us. We have a 24, 7 live chat on our [email protected]. You can email us at Hello, at the rate Com, or you can also schedule a free consultation with us, and we’ll help you with all your questions.

Anthony Rose: Lorra.

Parshwa Mehta: Think.

Anthony Rose: Amazing. That was like a complete brain dump. That was amazing. All right. Now, let’s go through the questions. If you’ve got any questions, pop them in the chat. The 1st question is, I made an Llc. And I now realize I wanted to make a C. Corp. Can I change it?

Parshwa Mehta: Yes, you can. So in the Delaware is one of those again, you know easy states to do business in, so you can convert your Nlc. To a C. Corporation in Delaware.

The entire process takes about one and a half to 2 months, I would say, and it does cost a little bit of additional money. But yeah, you can definitely convert from an Llc. To a C. Corporation and then raise money, etc. So if you need that, you know. Just to give you a quick overview of the process. We file. We just check your compliances, we file your certificate of conversion, and we get you a new ein, and you start. The entire process takes close to 2 months.

Anthony Rose: Okay? All right. So for those I mean, I think most people know. You know, Texas has got oil. Delaware has got nothing. So there’s nobody lives there, there’s nothing. So they’ve invented this new company structure hacked the tax structure to make it better to incorporate there. No one ever lives there, or actually has a real office there.

But it’s where everyone incorporates. And so yeah, so you’re likely to want to incorporate. Other states are trying to vie for their business. So Wyoming. I think, is a popular choice, if you’re, you know, an Sme, and so on, and you might create an Llc. In Wyoming, but with an Llc. The taxes get paid through to all the participants in the company as opposed to a C. Corporation which is like a UK limited company. The company is an entity, it makes profit, it pays tax on profit if it makes profits, and then it gives dividends to shareholders. All right. So now let’s talk about. Should you flip your company to the US. So and usually my goal is to show people why they shouldn’t flip.

So let’s take a moment for that. So you’ve got your company in the UK. You’ve raised investment. You’ve got it. Well, let’s take it into 2 steps. A couple of founders created a company on Company’s house, and you’re thinking of making it a US. Company. Well, good news. You can just go on, Doula, and do that in a few minutes. Stitch the UK. Company, and you’ve now got a US. Company because there was no assets in it. There was nothing to solve. You’re just going to make a new US company.
Where it gets tricky is if you’ve raised investment, particularly SEIS or EIS investment in the UK. Company. If you make a new company, and you give people shares in the new company. They would by default lose their sei s, and that will make them very unhappy.

However, you can write to Hmrc. Saying, we plan to move to the US. To create a new topco. We’re going to be giving one for one mirrored shares in the top company. Will you pre-approve this flip? And if Hmrc. Write back and say it’s pre-approved.
then you can go and do it. But I’m not an expert on this. But the sequencing is super important. I think you may need to get approval before you create the company, because when you create the company, it’s going to have initial shareholders. and if it includes the SEIS investors before you got approval they will lose it. And if it didn’t include them then they couldn’t have been there at incorporation. So getting the sequencing right. But we’ll have more info on exactly that. And I’m guessing, Pashua. You’re not an expert on Sei’s Delaware flips.

Okay, great. Hopefully, I will be soon. So now the more important question is, should you do this? And here. The common wisdom is for flipping. Your company is, go early or go late, but don’t go in between. So this means, if you’re a couple of founders. You got an idea. Knock yourself out, get on a plane, go to Silicon Valley, rent a garage work in the garage, make a Delaware company or if you’re doing 10 million a year in revenue, and you now want to expand to the US. Now is the time to expand. But the time that doesn’t work. That well is, you’re still trying to find product market fit. You’ve raised a few 100 K. You don’t not yet making enough money to support a US. Operation, and what you’ll find is as soon as you start talking to your investors about having a US. Operation.

They start wanting to only come back and invest once you show traction in the US. Otherwise you’ve increased your risk. So you kind of have to fund your US. Expansion yourself. If it’s about expanding in the US. Because often investors will like to see the traction before they’ll invest and you end up in a catch 22 as soon as you tell investors that you plan to the other one is that you think I’m going to raise from US investors. I need to flip to Delaware to do that, and the answer is, 10 years ago that used to be the case. Investors would go. I only invest in Delaware, C. Corp. Not foreign companies that’s very much changed. And if you listen to Daniel Glazer from Wilson Sansini, who specializes in that area, his take is, you know, if it’s 2 2 founders with pretty much nothing. And you’re getting into yc. they’re going to say you have to create a Delaware C. Corp. But if you’ve got a later stage seed series, a company, and you’re raising from US investors. It’s quite rare that they would require that you flip and quite rare. That would make much difference, and of course you might be seduced by techcrunch and US. Valuations and crazy investment amounts.

But think about it. Just spending $297 on a Delaware C. Corp. To tell your investors I’ve got a US. Company doesn’t really change anything. If your team’s still in the UK. And you’re still selling in the UK. Market. Then it’s still the same entity. You just got a Delaware company. It doesn’t change anything fundamental. So it’s all about. Really, US investors will invest at higher amounts and big valuations because of the enormous size of the US. Market and when you can demonstrate that you have traction there, that’s the time, I think, to raise. And the other thing to note is that salaries in the US. Are much higher. Certainly, if you’ve got anyone in Silicon Valley or New York, you might pay 2 or even 3 times what you’re having to pay in the UK for developers. So you’re going to have to raise a lot more as well. So maybe that answers some of the questions on US investment. Now for somebody wanting listening to this to thinking, okay, great. I’d like to create a Delaware subsidiary.
What’s the total time and cost to do kind of all the things that you mentioned.

Parshwa Mehta: Yeah. So I would say about one and a half to 2 months would be sufficient to, you know, like, set up your like just for registration of the companies one month. But by the time you have a bank account to be about close to one and a half, 2 months to get the subsidiary up and running.

Anthony Rose: Okay? All right. So the next question is, thank you. How easy it is to get Qsbs exemption. And let me take the 1st pass of that answer. So in the UK you can go to Hmrc. And get your advance assurance to tell you investors, hey? We can give you SEIS and EIS, but in the US there’s no such equivalent. You don’t write to the Irs to get permission, and instead, you just tell investors. Yes, we qualify, and you can, you know, if you’re on Carter or something, they’ll give you a letter, and in due course on SeedLegals will give you a letter saying, we’ve checked that you qualify.

But in general, so long as you meet the requirements, you have less than 50 million in assets, isn’t it great in the US. In the UK. If you’ve got more than 350 k. In assets, you don’t qualify for SEIS in the US. You have to have like less than 50 million dollars in assets. So but as long as you’ve done a few things, you basically qualify. And then you can tell your investors that you, the company qualifies and you need to keep records like a cap table, and so on, to make sure that when you go over the 50 million. And of course, everyone watching this going 50 million like that’s an insanely far away. It’s not the valuation. It’s the company’s assets, right? Which includes the amount that you are raising and have raised. So that’s 1 thing to watch out for anything else on Qsbs.

Parshwa Mehta: Yeah. So, Anthony, I think you’ve given the most you’ve given a quick great explanation to that. Just one thing is that yeah, that there is no pre approval.

You check your qualifications and you file a form called 8, 9, 4, 9. You file it with the Irs, and I mean, you file that form submit your personal tax return, and as long as you qualify you get the reduction you don’t pay the taxes. So it’s quite simple, but you have to keep making sure that you meet the eligibility conditions. You don’t breach anywhere out there.

Anthony Rose: Okay, all right, cool. So now, a question for me, which is, you know, the US. As you quickly discover, isn’t 1 country. It’s 50 States. So you’re always broadly going to be incorporating Delaware. You’re never going to have your office or people in Delaware. So you now need to file, and you covered that in the presentation in each State that you employ people in, you need to register in that state, and and you can help with that on Doula, as well.

Parshwa Mehta: That’s right. So wherever you let’s say so, you’re starting off with the virtual business address in in Delaware. So you’re essentially an online business at the moment. But once you start having physical offices, you start having employees or independent agents. Those are the States. Then you you need to get registered in those States as well. So example, you’re registered in Delaware. Let’s say you have an office in California. You have a couple of employees in Texas. You need to register your company in California and Texas. You’re not registering new companies. The existing Delaware C Corporation is getting registered in those States. This whole concept is called a foreign filing or a foreign qualification in the US. Where you’re foreign to the different, to the new State. But you’re yet filing your company there. You’re filing a foreign company. You’re finding a Delaware company in Texas. So it’s called a foreign filing or a foreign qualification.

Anthony Rose: Okay? All right. Now, question if you’ve got a US subsidiary, you’re earning revenue in the US. Subsidiary. You’ve got a UK top company. Where do taxes get paid? And I’m cognizant. That’s a big question and transfer pricing, and so on as well. And then I’m guessing as a company you have some flexibility in setting your pricing or you know the cost of business, so that all the money goes back to the UK. Or most of it stays in the US. What are your thoughts? And do you have expertise on that?

Parshwa Mehta: Yes. So again, we don’t handle the transit pricing. But we can do we? We do provide recommendations on this. Essentially, I would say that it depends on like. Firstly, if your if your top Co. Is going to be the UK company, you have to decide whether you want to go for an Llc. Or C. Corporation.

If you are looking to Re, if you’re not looking to bring the money back to the UK. Or you’re looking to reinvest the money in the US. And grow the business, then se corporation is a benefit. But if you are just, it’s an operating entity. That is that is just, you know, invoicing clients making money, sending the money back to the UK. Then an Llc. Is a benefit. In that case, as a subsidiary of the UK. Top Company.

Right now the taxation changes as an Llc. The profits will pass through back to you. Usually the profits will pass through back to the UK. Company in. In very few circumstances. The UK. Company, the UK. Company, because it’s an owner of the US. Company will have to file a tax tax return in the US. But ultimately so either that’s the situation. Or if you’re a C corporation, you definitely have to file the return and pay a tax, 21% tax in the US. In both cases, whatever taxes you pay in the US. You get a foreign tax credit of that in the UK. So the same income is not gonna get taxed in 2 countries ultimately.

And yeah, if there is business happening between the UK company and the US. Company you know, very frequently. And the price. So yeah, the transfer pricing will come into picture again. Transfer pricing is more relevant from the home country, from where the operations are being conducted. That’s where it’s more relevant to the transfer pricing rules and regulations, and every country has different rules and regulations. So I’m not fully well versed with UK transfer pricing regulations. But yeah, the ultimate goal is that of transfer pricing is to make sure that the transactions are carried out at a fair arm’s length value, or a fair value, so that the UK is not losing, and the U. US. Is not winning, and the US. Is not losing, and the UK is not winning.

Anthony Rose: All right. Countries. All right. Thank you. So this has been for me amazing. I’m basically just going to take everything that I’ve seen on your slides. And now I know exactly what to do as we look to expand. You don’t sort New York apartment rentals as well, do you? Well, that’s a much harder problem. All right, everyone. Thank you so much. We’ll have the recording available. Any questions, Pashua. Where can they reach you for Doula? For questions.

Parshwa Mehta: Yeah. So I’m gonna just drop my personal consultation link as well. So if you guys want to book a meeting with me, you can directly book a meeting with me one second. I’ll just plus there is a free. You could always go to the web, do the website. You can chat with us. You can email us. You can book a free consultation from our website. But if you wanna like chat with me directly as well.

I’ll just drop my meeting, Link. and you can schedule a call with me, you know, in the upcoming weeks, and you know we can. I can help you with all your questions, and you know SeedLegals is always there on the UK. Side to, you know. Keep you intact.

Anthony Rose: Right amazing. So I’m going to take one more question, which is a really fascinating one, which is, you know, you do business in many states at what points you know, you’ve just got a website, and people buy stuff, and they live everywhere. At what point do you need to register in a state, is it only when you employ people, or when you have a certain amount of revenue from transactions.

Parshwa Mehta: Okay? So that’s 1 like having a physical office, a physical presence, any trade house warehouse, if you’re doing exhibitions, or if you have employees. The other thing is the other most important thing is sales tax. So if you’re if you’re selling physical products into the into the US. You have to. The US. Does not have. Gst, that does not have that. It has something called sales tax, and there are 2 conditions for sales tax to become applicable to you. What is a physical nexus so physical nexus means that if you have inventories in the US. If you have an office warehouse, physical brick and mortar store, then you automatically qualify for physical nexus where you have something physical, tangible in that particular state. So then, you need to register for sales tax in that state and do compliances.

If you don’t need the physical, let’s say you’re doing it on like, let’s say all your inventory is shipped from outside of the US. And you know, you just have a shopify website and stuff like that. In that case there is something called an economic nexus economic nexus. So every State in the US. So all the 50 states in the US have an economic tax economic threshold. It starts from $100,000 goes up to $500,000 in some States like California, Texas.

What that means basically, is that if you don’t cross $100,000 of sale in one particular state for one financial year of 12 months. Then you don’t need to register for sales tax. So let’s say you say you sell goods worth $99,000 in a particular state where the economic nexus is $100,000. You don’t need to register, because then the year changes. The limit resets.
If. But if you if you breach the limit, then you definitely need to register for sales tax and do compliances. We have an in-house sales tax team that can help you with the registration reseller certificates as well as compliances. And one more important common question that comes up. So I’ll just, you know, say proactively, once you cross $100,000 of sale, you only need to charge sales tax on the call on the sales that after crossing $100,000 it’s not applied to retrospectively so on the sales that you’ve done so. $100,000 is going to be like your tax free limit, I would say, and only on the sales on the sale after that, and above that number is where you start collecting sales tax.

Anthony Rose: Okay. So you don’t charge sales tax initially, either. It’s only once you’ve crossed the threshold, then you charge it, and then you have to pay it back to the Government.

Parshwa Mehta: That’s correct. But yeah, that’s right, absolutely. But that also does not entail registering in a state you can just you can. You can be registered in Delaware and have sales, tax registrations in, let’s say, California, Texas, Washington.

Anthony Rose: Right.

Parshwa Mehta: New York, New Jersey. So it’s not necessary for your company to be registered in the States where you have. whether you have a like, you know, the sales tax nexus, a physical or an economic nexus met.

Anthony Rose: Okay, all right. Super interesting. Thank you. Everyone. Please reach out to Pasha Andula for any questions on that. And, of course, on any other things that we can help with on SeedLegals, and hopefully, soon in November we’ll have SeedLegals in the US. So you’ll hopefully have a fairly easy way to see your Us. And UK companies, whether it’s a Topco or subsidiary in one interface, and have the cap table on both, and create agreements on both so hopefully to make this whole minefield dramatically easier. Thanks. Everyone have a great day. Thanks.

Parshwa Mehta: Thank you, everybody. See you. Bye-bye.