International corporate structures: an option for startups

International corporate structures: an option for startups

In today’s globalized economy, more and more entrepreneurs who approach our firm are considering the possibility of establishing an international structure for their companies. This decision can be a determining factor in the success and growth of their businesses.

In many cases, entrepreneurs simply wish to establish a company in another country, generally in the United States, to take advantage of the benefits this country offers. In these cases, thanks to our network of international partners, we can assist them in set up their company in the desired state and, with the help of our tax experts, advise them on all matters related to international taxation.

However, it is increasingly common for our clients to present us with parent-subsidiary structures, where the parent company, often a holding company that is 100% owner of the subsidiary and the intellectual and industrial property of the project, is in a third country, while the subsidiary with the means of production is in Spain.

This structure is used because, from the parent company, generally in the U.S., they seek to access the Anglo-Saxon market, establish a higher valuation for the company, and attract local investors. Meanwhile, part of the workforce and project development is maintained in Spain, often through a service provision contract (intra-group operation). In this model, the resulting product, whether it is a development protected by intellectual and/or industrial property, will be owned by the parent company, which will pay a consideration to the subsidiary, always at market terms. Occasionally, the parent company grants the subsidiary an exclusive license to market the product or service in the national or European market.

Determining the appropriate structure for a company or the ideal time to consider expansion is not simple and depends on multiple factors, such as the characteristics of the company itself, its product, and the market in which it operates. For example, some clients ask us to establish a company in a third country because their own clients require them to have a corporate structure in that specific country for billing purposes, especially when contracts are made with public administrations.

Although the market can be segmented, it is essential to understand that it is global or at least divisible into blocks such as the Anglo-Saxon, European, Chinese, or Indian markets. Ultimately, the decision will depend on the specific needs of the company.

It is advisable to plan ahead if our startup can or should have an international structure. Sometimes, it is neither necessary nor desirable, depending on the nature of the company. Proper planning will allow for correct decision-making not only by the board of directors but also, for example, in negotiating future agreements with investor partners. Recently, we were negotiating with an investment fund that wanted to limit the establishment of companies abroad or the transfer of the company’s intellectual property outside Spain. In the medium and long term, this was one of the client’s possible business strategies, so we sat down to negotiate with the fund. They reasonably expressed their concern that the company might establish itself in a tax haven or similar. Finally, the clause was modified to provide reassurance to the fund, allowing the board of directors to decide to move the headquarters to a third country outside these conditions.

In summary, entrepreneurs should carefully plan their corporate structure, evaluating the advantages and disadvantages of each option, but above all, adjusting to what they consider the best interests of the company. With this in mind, they should take the necessary steps to ensure this possibility, which may involve corporate aspects, intellectual property, personal data protection, and client relationships. Strategic and well-founded planning will be key to the success and sustainability of the startup in the competitive global market.