Flip Transaction 101

Many foreign founders and investors that are coming to the US are full of anxiety about moving their startup there. One of the main fears is the complexity of the flip transaction. Undeniably it is complicated process and no flip is the same, but there are some basic transaction issues and standards that you should keep in mind when planning a flip transaction. In this and the next series of posts, we wanted to share our experience and shed some light on the various flip “pain points” and “myths”. As you can imagine, this arcane area of the law requires an understanding of US and foreign venture capital/startup standards, US and foreign tax implications, and cross-border planning. At the end…

Read more

Watch out for venture capital syndicate SPV. Devil is in the details.

Problem Due to exploding valuations of tech companies, many venture capital investors are priced out of venture deals and cannot exercise their pro rata rights to participate in hot financing rounds. A recent solution to this problem has been syndication, among existing VC fund limited partners and new investors, via special purpose vehicle (SPV) structures. The SPV is created for just one purpose: pooling capital and taking a direct stake in a company by participating in a specified financing at a specific point of time. Pooling the VC’s resources with funds from other investors, both from inside and outside of the fund, allows VCs to maintain control and expand its financial interest. However, SPVs also pose certain business and legal…

Read more

US startup with International Subsidairies – Tax

It is becoming more and common for US startups to estalish international subsidiaries or international startups flipping their company into the US. When this happens people ask if they will pay taxes on money earned by the non-US subsidiary in the US as well. The answer whether you are “double taxed” is it depends. Most founders assume that their startups would be taxed only on income generated by the US corporation (parent company) and that foreign income generated by non-US subsidiaries would be excluded from US taxes, until is is distributed to the US. This is a very common misconception. Unfortunately, even if the US corporation doesn’t earn a single dollar in its own name and doesn’t get a single…

Read more

Intellectual Property in the US or abroad?

We are frequently asked if IP in foreign startups should be held in the US or abroad. Our general response is that it depends and each situation requires substantive analysis. However, taking that in consideration, we are generally not in favor of situating IP in the United States if the technology company is started outside of the US. In fact, most US-based companies (including technology companies) work very hard to migrate their IP outbound from a tax-efficiency standpoint.  Such technology companies as Google, Apple and Facebook employ this structure. The reasoning is quite simple. The United States taxes its corporate and individuals subjects on worldwide income, regardless of where that income is derived. So, if the IP were owned in…

Read more

Foreign Founders and US Taxes

International Founders and US Taxes. International founders and foreign angel (lead) investors wishing to establish a US start up need to understand and plan for US personal taxes. In most instances foreign founders start to think about US personal taxes when they become CEO of their startup or post funding, however, it should be pointed out that a foreign founder may become personally taxable in the United States even earlier. Pursunat to Internal Revenue Code („Code”) tax residency for foreign indivuduals is established either by immigration status or by a substantial presence test. Immigration Status: Lawful Permanent Residence A founder that holds non-immigrant visa would be considered a tax resident for US tax purposes (Code Section 7701(b)(A)(i)). This would include…

Read more

OVDP Liability and FATCA Compliance for Polish Financial Institutions

Tomasz Snazyk managing partner of the Warsaw Office was a keynote speaker at “IGA/FATCA Effective Implementation for Polish Financial Institutions”, in Warsaw on November 26-27, 2013. The conference addressed international and Polish domestic legal problems with implementing the Financial Account Tax Compliance Act (FATCA). Mr. Snazyk spoke on the Offshore Voluntary Disclosure Program (OVDP) and the information obligations of financial institutions with respect to FATCA under Polish law. More information

Read more

Tytus Cytowski and Tomasz Snazyk Publish an Article on FATCA’s Implementation in Poland

Tytus Cytowski and Tomasz Snazyk, partners with the firm, published an op-ed article in Rzeczpospolita on August 28, 2013 on the implementation of the Foreign Account Tax Compliance Act (FATCA) in Poland, titled, “According to the Law. American”. Tytus Cytowski and Tomasz Snazyk addressed the conflict between Polish bank secrecy law and FATCA and the consequences of FATCA for US/Polish dual citizens. Polish version of the article here.

Read more

Tax Obligations of US Persons with Foreign Income

Tytus Cytowski managing partner of the New York office of Cytowski LLC will speak on, "Tax Obligations of US Persons with Foreign Income" at the Consulate General of the Republic of Poland, in New York City on June 10, 2013. More information

Read more

Legal Aspects of FATCA Implementation

Tytus Cytowski managing partner of the firm was a keynote speaker at conference organized by Związek Banków Polskich (Polish Banking Association) “On the legal aspects of FATCA Implementation”, in Warsaw on March 19, 2013. The conference addressed international and Polish domestic legal problems with implementing the Financial Account Tax Compliance Act.  Mr. Cytowski spoke on current US tax enforcement initiatives and mechanisms against non-compliant foreign financial institutions and US persons. More information  

Read more

CYTOWSKI LLC

Contact us!