Startup Ltd.: Tax Planning and Initial Incorporation Location

Do startup firms consider taxes when they decide where to organize? This Article analyzes the incorporation decisions of relatively new, US-based private business enterprises with global ambitions. Such generally organize as US corporations. theorizes this dominant structure and its exceptions, drawing from prior literature illustrating informal interview results. It identifies explanatory factors including limited tax benefits non-US incorporation, legal startups’ liquidity other resource constraints, investor preferences.Part II explains different treatment US- non-US-parented multinational corporations (MNCs) under federal income law. Some MNC structures have advantages compared US-parented structures. prompts hypothesis that may incorporate outside United States, for example in a haven jurisdiction, if non-tax costs decision are sufficiently low.Part III reports available empirical work shows few examples headquartered States incorporated jurisdictions. Prior interviews reported here support conclusion venture-backed Silicon Valley startups form rather than partnerships or LLCs, prefer state Delaware an jurisdiction. Available examples, drawn large part initial public offering (IPO) evidence, corroborate is norm. The evidence also reveals exceptions general rule concentrated particular industries, such insurance marine transportation. Part several additional US-based, non-US-incorporated firms, scattered among industries.Part IV explores possible reasons firms. One reason relative incorporation. For example, MNCs can often obtain low rates on income, sometimes access offshore cash without onerous results, erode their taxable base some extent. Another provide corporate governance