Planning For Success In Texas
Wednesday, Apr 03, 2013
Aberdeen-based oilfield service companies have been branching out to the oil capitals of the world in significant numbers write Gus Bourgeois and Gary Miller of Houston-based law firm, BoyarMiller.
With extensive activity in the Gulf of Mexico, Texas has long been a natural place for Aberdeen-based businesses to establish offices. But regardless of whether that takes the form of dipping a toe in the water by having a virtual office or a small office in Scottish Development International’s Houston facility, or jumping in with both feet by buying or leasing a facility in Texas, good planning and knowledge can improve the process of opening in Texas.
Most foreign companies arriving in Texas choose not to do business through their UK entity because it subjects them to filing tax returns and paying taxes in the US, as well as exposing them to the potential liabilities of doing business in the US. Instead, foreign companies will typically form a new entity in either the state in which business is to be conducted, or in one of the traditionally popular states of incorporation such as Delaware. If the business is formed in a jurisdiction like Delaware, it will need to be qualified in the state or states in which it is actually conducting business.
In addition to picking a state of formation, the type of entity must be chosen. This is primarily a question involving tax issues but most UK-based companies opt to do business in Texas through a corporation that is treated as a US taxpayer. These decisions require co-operation between UK and US accounting advisors as well as the company’s Texas attorney in order that profits can be repatriated to the UK in the most tax efficient manner. Once these decisions are made, formation of the Texas entity can be accomplished in less than a week.
The formation of a US entity will also involve questions of management – identifying who will have day-to-day control over the affairs of that entity (typically officers such a president, vice president, treasurer and secretary), and who will have oversight responsibilities (typically the board of directors in the case of a corporation). These roles can often be combined and can be subsequently modified as needed.
Companies formed in the UK usually have executive and non-executive directors with day-to-day management conducted by the executive directors. In the US, the board of directors is appointed by the shareholders and manages the business from a global perspective; however day-to-day management is delegated to its officers.
In addition to formation documents, new companies need to obtain a tax identification number with the Internal Revenue Service. When the new corporation has an executive with a US social security number this is a simple task but, when that is not the case, it is necessary for the UK parent organisation to obtain an employee identification number before the US entity can obtain one.
Once the entity is formed, there are a variety of other details to complete. Opening a bank account is easily achieved once the entity is formed and an employer identification number is obtained. Often there is lease space to locate, permits to obtain (including sales tax permits, depending upon the business of the company), leases to negotiate, employees to hire and employment agreements to prepare, agreements to be entered into between the UK parent organisation and its offshore subsidiary with respect to the business to be conducted in the US, insurance to be obtained, a payroll service to be hired and employee benefits to be sourced.
However, successful completion of all these aspects of creating a subsidiary in Texas is manageable when trusted professionals in Texas work in co-operation with their UK counterparts and the UK-based parent.
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