20 year of experience shorted in a slideshow by french lawyer based in NYC

1. The Essentials of Expanding Your
Business in the United States
The Structural and Legal ‘Need-to-Knows’ for
French and European
Entrepreneurs and Companies
Philippe C.M. Manteau
© 2012 Schiff Hardin LLP. All rights reserved.

2. The Background
● Businessperson wants to expand into the United
States and ensure that activities there are
appropriately structured in a manner most
beneficial for his or her company and
shareholders
● Entry into the United States—3 typical ways:
– Direct sales into the United States
– Establishing a subsidiary in the United States
– Acquisitions in the United States
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3. Direct sales into the United States
Generally, direct sales are the first step to
approach the U.S. market.
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4. Consideration #1: distinguishing
between distributors and agents
Distributor – think “buy-sell”:
● Distributor obtains title to products from principal
● Principal invoices distributor for products
● Distributor sets resale prices for products and is subject to
risks and rewards associated with resale (e.g., loss/gain of
profit, risks of delivery)
Agent:
● Agent never obtains title to products
● Agent invoices principal for services rendered
● No “resale price maintenance” problem
But in both cases – set up objectives (easier to terminate)
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5. Consideration #2: protecting
intellectual property (IP)
● Common law rights to trademarks exist
● Additional layer of protection by registering IP at
the United States Patent and Trademark Office
● Many companies overlook the concept of
patenting their software
● Check your IP before you expand into the United
States
5 © 2012 Schiff Hardin LLP. All rights reserved.

6. From the Oregonian, July 9, 2009:
“Chinese startup based in Eugene wants to sell
inexpensive solar panels in U.S.
A Chinese startup vying for a piece of the U.S. solar
market has landed in Eugene, hoping to become a
national player in the state’s growing photovoltaic
industry. . . Centron Solar, whose Web site went
live Thursday morning, is moving fast to sell and
distribute bargain-priced solar panels made in
China to the U.S. market, expected to be the
world’s next big solar player. . .”
6 © 2012 Schiff Hardin LLP. All rights reserved.

7. From the Portland Business
Journal, October 8, 2009:
“Centron Solar changes name to Grape Solar
Centron Solar once said it wants to be the Wal-Mart of solar
energy. That may still be true. But now the company is
trying to sound a little more like Apple Computers. . . Despite
the fruit-themed logic, combined with the notion that grapes
grow with the help of solar energy, the real cause of the
name change is rooted in a lawsuit filed Sept. 28 in the U.S.
District Court in Arizona. CentroSolar Group AG, a $440
million German solar products manufacturer, filed the
trademark infringement lawsuit claiming Centron Solar was
intentionally trying to confuse customers.”
7 © 2012 Schiff Hardin LLP. All rights reserved.

8. Consideration #3: key provisions
in commercial contracts
● Keep it U.S. law governed – EU protections not helpful if there is a
litigation in the United States
● Think first of an “exit strategy” – one-year contracts automatically
renewable unless terminated by either party, with or without reason, upon
60- or 90-day notice are common
● Craft IP sections carefully to ensure that IP is not “assigned”
● Watch out for warranty, liability and indemnification provisions
– Warranty: software, products or services should be sold “as is” but
for the very limited warranty set forth in the contract (contracts should
carve-out implied warranty of merchantability or warranty of fitness
for a particular purpose)
– Liability: contract should exclude consequential or incidental
damages, and limit liability to only reimbursement of money received
under the contract
– Indemnification by product supplier, software publisher or
service provider: contract should restrict indemnification to a limited
IP infringement, while control over litigation should be retained
8 © 2012 Schiff Hardin LLP. All rights reserved.

9. Consideration #4: having a
“representative office” may be
problematic
● Beware that an agent or branch, in the United States,
of a foreign principal may subject such principal to
U.S. tax on its revenues generated in the United
States
● In reality, not frequently done but in some cases you
can have a limited agency agreement to perform
ministerial tasks for the parent
● When there is such a need, consider establishing a
subsidiary
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10. Establishing a subsidiary in the
United States
After initiating direct sales into the United States…
consider setting-up a foothold there
10 © 2012 Schiff Hardin LLP. All rights reserved.

11. Consideration #5: do you really
need an LLC?
● What is an LLC? Google will tell you
● What Google will not tell you: one generally should
not form an LLC when the majority shareholder (a
“member”) is a French corporation
– French parent subject to U.S. income tax
– Branch profit dividend tax: tax on “deemed distributed”
dividends
– Law not as developed - liability issues?
● LLC’s are more commonly used “downstream” in order
to bring in U.S. partners
11 © 2012 Schiff Hardin LLP. All rights reserved.

12. Consideration #6: try a
corporation first
● Easy to form
● Easy to maintain
● Capitalization easy to manage
– Remember to keep debt-to-equity ratio at a maximum of 1.5:1
– Augmentation of capital by way of “accrued paid in capital”
– Disconnect between number of shares and amount of capital
● If a shareholder is not a 100% owner, consider the need for a
shareholders agreement
● If a shareholder is a minority shareholder, remember to receive
“tag-along” rights
12 © 2012 Schiff Hardin LLP. All rights reserved.

13. Consideration #7: labor and
employment law
● The concept of “at-will”
● The concept of discrimination
● If you have an executive, you will want an
employment contract to avoid disputes over:
– compensation issues
– termination issues
– non-competition issues
● Beware of 401(k) and other benefit issues upon any
merger or acquisition in the United States
13 © 2012 Schiff Hardin LLP. All rights reserved.

14. Consideration #8: U.S. Stock as
incentives?
● Usually part of an “equity incentive plan” to encourage employees to
work to maximize a company’s profits and share in the future of a
company
● Companies with U.S. stock option plans must comply with federal tax
and securities rules
● Establishing a French stock option plan in the United States renders
the incentive package more complicated to manage due to the
requisite French vs. U.S. law analysis, but it avoids the inclusion of
minority shareholders in a company’s subsidiary
● A U.S. stock option plan with a U.S. subsidiary is feasible, and
potential workarounds exist, such as providing phantom rights (or
profit-only interest in an LLC formed as an indirect subsidiary)
● Beware of valuation issues and consider shareholders agreements
14 © 2012 Schiff Hardin LLP. All rights reserved.

15. Consideration #9: immigration
● “Do it yourself” is not usually sufficient
● Strongly advise hiring an immigration lawyer
● Understand the differences among visas: L1
(intracompany transferee), H1B (professional
worker) and E2 (foreign investor)
● Discuss future plans with an attorney to avoid
pitfalls (e.g., E2 is easy to obtain but conversion
to a green card is difficult)
15 © 2012 Schiff Hardin LLP. All rights reserved.

16. Consideration #10: managing IP
A software publisher/distributor may want to place the IP
value at the U.S. subsidiary level:
● In a software distribution system, the reseller is a “distributor” of
products or services but the publisher maintains a license agreement
directly with the end-user
● Granting IP rights to the U.S. subsidiary that acts as a re-publisher will
create value in the United States
● Avoids litigation in France/Europe
● U.S. subsidiary would be exempt from withholding tax on royalties
paid by the U.S. subsidiary to its French parent if the parent provides
proper forms from inception
● Transfer pricing issues are always present when a related U.S.
company and foreign company transact business
16 © 2012 Schiff Hardin LLP. All rights reserved.

17. Acquisitions in the United States
Managing your external growth in the United States…
Or using acquisitions as a first step to penetrate the
U.S. market (if you do so, think of creating a U.S.
subsidiary as an SPV for the U.S. acquisition)
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18. Consideration #11: M&A –
asset vs. stock acquisitions
● Stock Acquisition (or joint venture) – will you acquire all or a
control portion of the equity of target?
– Watch for “change of control” issues
– If buying at premium you do not get to reduce taxes
● Asset Acquisition:
– Select the specific assets and liabilities to purchase or not purchase
– “Cherry-pick” employees (no statutory obligation to transfer
employees)
● Asset and Stock Acquisitions:
– “Representations and Warranties” of seller are key
– Escrow accounts are frequently used
– Negotiate any earn-out payments
– Do not forget non-compete/non-solicit provisions
● Tax Trick: The 338(h)(10) election under federal and many state laws to
treat the stock deal as an asset deal - Step-up your tax basis and amortize
your goodwill over 15 years
18
18 © 2012 Schiff Hardin LLP. All rights reserved.

19. About Schiff Hardin LLP
Schiff Hardin LLP was founded in 1864. Since then we have
expanded with offices in Chicago and Lake Forest, Illinois; New York,
New York; Washington, D.C.; Atlanta, Georgia; San Francisco,
California; Boston, Massachusetts; Ann Arbor, Michigan; and
Charlotte, North Carolina. As a general practice firm with local,
regional, national, and international clients, Schiff Hardin has
significant experience in most areas of the law.
19 © 2012 Schiff Hardin LLP. All rights reserved.

20. About Our New York Office
In 1991, Schiff Hardin established an office in New York in response
to a client's request and needs. Since that time, we have developed
significant capabilities in complex general litigation, reinsurance,
intellectual property, corporate and securities, real estate
transactions and finance, estate planning and administration, labor
and employment, international transactions, restructuring and
bankruptcy, and an increasing array of other key legal services. Our
New York office also serves as a focal point for our representation of
overseas clients.
20 © 2012 Schiff Hardin LLP. All rights reserved.

21. Philippe C.M. Manteau
Partner – Avocat aux Barreaux de New York et de Paris
Philippe Manteau’s practice focuses on growth and mid-cap
companies, governmental organizations, and individuals in
the United States and abroad in the areas of corporate and
business law, as well as technology transactions. The core of
his practice consists of assisting French and other
international private companies in their U.S. investments and
pmanteau@schiffhardin.com cross-border transactions and litigation.
U.S. Direct: (212) 745-0856 Mr. Manteau’s training and international experience allow him
to identify, analyze, and resolve issues arising in cross-border
U.S. Cell: (646) 251-9204
transactions for European and U.S. clients.
PRACTICE AREAS
Mr. Manteau is fluent in English, French and German.
Corporate and Securities
International
● Fordham University School of Law (LL.M., Corporate
Intellectual Property
Law and Finance, cum laude, 2006)
Litigation
● Université Paris X - Nanterre (D.E.S.S., European
Business Law, with honors, 1996)
BAR ADMISSIONS
● Université Paris X - Nanterre (J.D., French, German
New York
and European Business Law, 1995)
Paris, France
● Institut d'Études Politiques de Paris (M.B.A.,
Economics and Finance Section, 1993)
21 © 2012 Schiff Hardin LLP. All rights reserved.

22. This publication has been prepared for general information of clients
and friends of the firm. It is not intended to provide legal advice with
respect to any specific matter. Under rules applicable to the
professional conduct of attorneys in various jurisdictions, it may be
considered advertising material.
Tax Matters: The advice contained in this memorandum is not
intended or written to be used, and cannot be used by a taxpayer,
for the purpose of avoiding penalties that may be imposed on the
taxpayer under law.
© 2012 Schiff Hardin LLP. All rights reserved.