[ESTABLISHING A BUSINESS ENTITY IN THE UNITED STATES] 529
2.6 The Limited Liability Partnership (“LLP”) A general partnership may file a statement of qualification with the Secretary of State to become an LLP. The statement includes the name of the partnership, the name and address of the registered agent and office, the number of partners, and a statement that the partnership elects to be an LLP. Like the general partnership and LP, the LLP partners should set up their governance framework in a partnership agreement that is not required to be filed. 2.7 Conversion or Redomestication Merger Sometimes an entity that already exists in a foreign (meaning a non-Delaware) jurisdiction may wish to become a Delaware entity. If permitted under the laws of the jurisdiction in which it currently exists, it can usually convert directly into a Delaware entity by filing of a certificate of conversion and its new certificate of incorporation / formation / etc. in Delaware. It can even change type of entity in the process, for instance by converting from a foreign corporation into a Delaware limited liability company. For purposes of Delaware law, the Delaware entity into which the foreign entity converts is the same entity as the foreign entity. In cases where the applicable foreign law does not allow for a conversion, such law may allow for mergers. In such instances, a new entity can be formed in Delaware and the foreign entity can merge into that entity. One disadvantage of such a “redomestication merger” process as opposed to a conversion is that the Delaware entity is considered a new entity for purposes of Delaware law. This distinction may have tax effects, may necessitate the receipt of additional regulatory approvals or third-party consents, and may have other ramifications that should be carefully considered.
3. Foreign Investment and Operational Considerations; Residency and Material Visa
Restrictions for Employees a. Investing in Your Entity
Generally, transferring funds into a newly formed United States business entity is not difficult. Funds generally flow freely between the United States and most other countries with very limited restrictions or capital controls. There are restrictions with respect to certain countries that are under sanctions from the United States (such as Iran and North Korea) and for companies or persons who are on “watch lists” of potential terrorists or security risks maintained by the government. There is also a reporting requirement on movements of cash (or physical checks which are being carried rather than mailed) in excess of US$10,000 across the U.S. border, but wire transfers generally occur without the need for any reporting by the transferee or recipient. In addition, banks have “know your customer” rules that will require them to have copies of passports or other identifying and background information on one or more of your executives; usually that information is gathered when opening the account. Generally, opening an account will require a resolution of the Board of Directors (or other governing body if the entity is formed as a partnership or LLC) setting forth the individuals who will have authority over the bank account as well as copies of the account holder’s organizational documents, copies of the passports of the authorized signatories, and the entity’s taxpayer identification number. Non-United States investors forming a United States company will want to consider the extent to which they will invest funds as debt or as equity. Like many countries, the U.S. imposes limits on excessive deductions for interest on debt. However, these rules generally only apply for tax purposes; there is
ILN Corporate Group – Establishing a Business Entity Series
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