Couple of key points that emerged during recent acquisition of startups have been issues related to structuring of the company. Anil Advani of Inventus Law walked us through these issues in a roundtable organized by iSPIRT M & A connect program at the Microsoft Accelerator venue.
Many key aspects such as taxation (especially in the context of Singapore), seed funding, liabilities, ease of the process, ESOP and stock plans need to be considered, while deciding the location of incorporation .
Some key conclusions:
- If you are a fresh company starting out and your scope is global, it is a no-brainer. Just go ahead create a US entity (Delaware C-Corp) with a fully owned Indian subsidiary.
- The only companies who shld consider Singapore are those looking only at the India / South-East Asia market.
- If there is an existing company with venture funding which needs to be flipped, there is more work involved since the cap table needs to be mirrored in the US Company. The earlier you decide to flip, the better
- If there is formal IP ownership in India, it gets more complex and several factors need to be considered before deciding to flip.
Some basic Q&A
1) How many people are needed to register a company.
2) Do you need a US citizen to register in the US ?
Answer: No. A Social Security Number and bank account is needed and that can be obtained very easily in short time.
3) How much does it cost?
Answer: Under 500 dollars from a US bank account with the money earned in US. There are legal processes to make this happen.
4) How long does the process take
Answer: Incorporating a Delaware C-Corp is pretty simple, especially for an early stage company. Paperwork can be completed in less than 1 day
This blog is too small to cover details and I would encourage folks to contact Sanat Rao, Partner (M&A) from iSPIRT for further details of company structuring.
(Refer to the Freshdesk blog for more insights )