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Setting Up Business Operations in Silicon Valley

January, 2013

Richard Allan Horning

SNR Denton US LLP

T +1.650.798.0370M +1.415.412.4479Skype: Richard_Allan_HorningEmail: Richard.Horning@snrdenton.comWeb: www.snrdenton.com

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Our Locations

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WE HELP THE TECHNOLOGY STARTUP GROW FROM THIS

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TO THIS

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MONEY MOVES WEST (1972)Sand Hill Road, Menlo Park

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Sili

con

Val

ley

Cal

ifo

rnia

To

tal U

.S.

Silicon Valley Total California Total U.S.

VC INVESTMENTS BY REGION (1995 – 2006)

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SETTING UP SHOP IN THE VALLEY

Agency

Joint Venture

Branch Office

Subsidiary

– C corporation

– Limited Liability Corporation

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MANAGEMENT AND OVERSIGHT

No Nationality Requirement for Officers and Directors

Directors are Not Necessarily Employees of the Local Company

The Board Can Meet Anywhere, Including CyberSpace

All Corporate But Elections Can Be By Written Consent [Maybe Even Elections]

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INVESTMENT COSTS

Creation of a DE Company Can Be Overnight

No Minimum Capital Required

Annual Franchise Fee in DE as Low as $75

Qualification in California

Tax ID and Employer ID

Bank Account

General Liability Insurance

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TAXATION

Tax Treaty

US Tax System Based on Taxation of Profits / Earnings

Transfer Pricing and International Tax Planning

Federal Corporate Tax Rate on Profits (15%, 25%, 34%, 39%, 35%)

Federal Tax on Dividends to Parent (15%)

Federal “Partnership” Tax (35%)

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EMPLOYMENT

Non-Residents Need a Work Visa to be Employed in the US

Employment is Generally “At Will”

Non-Compete Clauses Generally Unenforceable

Employees Generally Expect Equity Participation Plans a/k/a Stock Options

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ACCESS TO LOCAL CAPITAL

The Credit Rating System

The “Flip” as a Precondition for Local Equity Capital

– Usually Has Tax Consequences for Foreign Shareholders Acquiring the DE Stock, But Careful Planning May Minimize the Hit

– Local Equity Capital Will Generally be in the Form of Preferred Stock

– Local Capital Usually Implies Board Seats and Restrictions on Complete Freedom to Operate Without the Consent of the Investors

– The “Term Sheet”

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VC CONSIDERATIONS

Team

Opportunity

Scalability

Protectibility

“Monopoly”

Exit Plan