An Introduction to the Global Start-Up By: Jeanne Goulet, CPA
---A Worldwide Endeavor---Today, thanks to the Internet’s global reach, entrepreneurs have the ability to tap networks and establish Start-Up operations all across the world. Decisions made by Start-Ups at their earliest stages are likely to be among the most critical as these decisions affect the value of the Start-Up.
---Early Stage Questions for Every Start-Up---It is at the beginning “formation stage” that Start-Ups need to begin working with legal, accounting (domestic and international tax specialists) who can ask the right questions and guide them through the labyrinth of tax rules and regulations.
---What---Initially, the first question that Start-Ups need to ask themselves is what should I be, a corporation or a transparent entity?
---Where---The second question that a Start-Up needs to ask is where should I base my operation? Do I have sales or a development team outside the US? In a global tax environment, a start-up may or may not want to play “offense” by positioning itself in a lower tax jurisdiction outside the US. But it must play “defense” by protecting itself against double taxation by multiple tax authorities and frittering away hard earned profits. This effort to minimize the effective tax rate is an endeavor that will span the life of a venture.
---Good Planning Is Key---We will explore in future MP&S articles, the myriad of domestic and international issues that if not understood and planned for appropriately, could impact the ultimate value of a Start-Up.
---Critical Issues--- Tax jurisdiction-Foreign tax credit--Efficient tax management of intangibles--The concept of “Arm’s Length Standard”--Revenue characterization--Unexpected taxable presence--Foreign withholding taxes--US federal and state withholding obligation--Company and owner/investor issues.
For more information please contact Jeanne P. Goulet, CPA, Senior Tax Consultant at MP&S at email@example.com
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