DINSMORE & SHOHL LLP

Offices: Ohio, Kentucky, Pennsylvania and West Virginia

280 Lawyers (40 in Intellectual Property, 160 in Litigation, 100 in Business/Tax/Real Estate/Banking, etc.)

Clients: 60 Foreign (including Indian) clients with offices in the USA

Clients: 60 Non-U.S. (including Indian) clients who do business in the USA without official offices

National and Regional Law Firm

Large Automotive and Manufacturing Practice

Harvey Jay Cohen, Esq.

harvey.cohen@dinslaw.com

Telephone 1-513-977-8144Facsimile 1-513-977-8423

At Dinsmore & Shohl for more than 19 years

Georgetown University A.B. Cum Laude 1982

Columbia University, Masters International Affairs, Magna Cum Laude 1984

University of Cincinnati, Juris Doctor, Order of the Coif 1987

Please do not hesitate to ask questions during our presentation and afterward by e-mail or telephone

Automotive

• Close working Relationship with State Governments

• Corporate/Real Estate/ Tax

• Unions and Employment

• Intellectual Property and Franchising/Distribution/Sales

• Retirement Plans

• Immigration

• Litigation

FUNDAMENTALS OF BUILDING YOUR BUSINESS:

Principal Questions for Indian/Non U.S. companies doing business in the USA

• Many services provided are faster, easier and cheaper in the USA ...

Lawyers

Accountants

Banks• Registrations with the Government; No Approvals• Regulation of products is less stringent in many areas. This laxity

varies greatly depending on the type of products and whether they are for sale to consumers or businesses

• Distribution of products, even across and into a vast market• Taxes, unemployment insurance

Principal Questions for Indian/Non U.S. companies doing business in the USA (continued)

Competition is less regulated

Use of Distributors and Sales Agents as an entry strategy

Termination of Distribution and Sales Agent contracts without fear of large damages.

This can vary depending on the state

Labor less organized into strong unions, less regulated

Discharge/Termination of employees is less complex and costly

Private ownership of real estate with no government regulation.Private buying and selling of companies (manufacturing or services), and private equity investment in companies, all with no government

regulation. A proven entry strategy

Entry into the US, Initial Advice

Always use a top-notch local lawyer, not just a Los Angeles or New York lawyer, etc. (2-3 times expense)

A Delaware Corporation is not necessary

For example, Procter & Gamble, large oil companies and other U.S. large companies are Ohio corporations. The vast majority of

public corporations are not Delaware corporations

Do not double your expenses and administrative burden

First steps

Hire an Accountant/Tax advisor, register patents and trademarks and fulfill immigration formalities

Create an Indian or offshore subsidiary to make U.S. sales or to own the U.S. entities, isolate the mother

company from liability from the USA

State vs. Federal (Washington, D.C.) Law

Uniform Commercial Code (state law on sales)

Each state has its own Corporation/Business Code

Each state is different in some ways, some important and some insignificant

Competition

Competition/Anti-Trust rules are liberal/lax

No agreement between competitors on price

Credit

It is difficult to recover lent money or accounts receivable, as federal and state laws favor the debtor,

especially in bankruptcy

Protect Yourself

Retain Security Interests/Collateral in inventory, equipment, etc.

Credit Insurance

Use a well-drafted contract with tight payment terms

You can demand interest up to typically 18%/year, depending on state law

Product Liability

It is often said that this is a problem in the USA, and it is true

Lawyers for victims are not paid by the hour, but take 33% of all awards

Product liability insurance is essential

Again, it is key to operate in an affiliated structure, reducing risk to the parent

Sales Laws

The UN convention on the International Sales of Goods (CISG) applies in the USA. Pay attention. If a governing law clause in a

contract designates a State (UCC) or Indian law, without specifically opting out of the CISG, the CISG will control and apply as the CISG automatically substitutes for state or Indian law. Pay attention to these clauses and opt out of the CISG if

you wish.

Jurisdiction/Courts

In contracts, it is possible:

To be silent on venue

Or to designate an Indian tribunal; but arbitration is best

Or to choose a State/County court in the U.S.

Or to choose mediation

Or to choose arbitration

Or to require business executives escalation between theparties before commencing litigation

Form of Contracts

Insist that all contracts be complete and signed. Avoid verbal contracts or those on “scrap paper”/“cocktail napkins”

In the USA you can choose the law to apply

Conclusion: Freedom of contract is the rule in the U.S. You should use this freedom to your advantage

Contract Clauses

You can limit damages to the value of the products or services sold

You can limit warranties, e.g., the only warranty is performance to specifications for 90 days

You can limit types of damages, e.g., eliminate consequential, indirect and punitive damages

You can have an internal statute of limitations, e.g., after one year an aggrieved party cannot sue the other party

It is possible to exclude all other guarantees/warranties, sometimes it is even possible to sell “as is” without a warranty

Distributors/Re-Sellers and Sales Representatives

Use a carefully written-contract

Keep the term short

No automatic renewals

Register all marks, URLs, patents, etc.

Non-competition clauses are essential and may continue after expiration/termination

Minimum sales levels to retain exclusivity

Use a list of objective standards, which if breached, leads to termination

You can terminate a Distributor or Sales Representative Agreement more simply than in other countries with less fear of damages. This result,

depends on state law.

Entities

Corporation

Limited Liability Company (LLC)

General Partnership (Partnership)

Branch office of foreign entity (Branch)

Articles of a Company filed with State Government

All forms of entity are granted/governed on receipt by states. No application process, approvals, financial statements, feasibility

studies, etc. In Ohio, this happens on same day service.

No extra form(s), reporting or approvals for foreign ownership US state laws in general are more liberal, less regulatory and less

rigid, especially the LLC (you can almost do anything from a governance standpoint

Little or no required capitalization. No approval of dividends.

No requirement for an annual audit or filing of financial statements

The identity of officers and directors is secret

Financial results are secret

Conclusion

In general, it is more simple, fast, easy, less regulated and cheaper to do business in the USA

If you need assistance in the USA, please call us early in the process to use us to your maximum advantage.

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