A presentation on why and how to incorporate, including a discussion on the global subsidiary model.

1. Company Formation
This presentation is made possible by the support of the American People through the United States
Agency for International Development (USAID). The contents of this presentation are the sole responsibility
of Rick Rasmussen and do not necessarily reflect the views of USAID or the United States Government.

2. Starting a growth company
• Incorporation
– Protects you
– Defines investor and shareholder rights
• Going global?
– Important to structure both HQ and subsidiary rights
• Get a great attorney

3. Legal benefits of Incorporating
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Protection of personal assets
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Safeguarding personal assets against claims for loans, accounts payable and
legal judgments
Transferable ownership
– Ownership in a corporation or LLC is easily transferable to
others, either in whole or in part
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Taxation.
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Raising funds through sale of stock.
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In the US, corporations are taxed at a lower rate than individuals.
A corporation can easily raise capital from investors through the sale of stock.
Credit rating.
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Regardless of an owner's personal credit scores, a corporation can acquire its
own credit rating, and build a separate credit history by applying for and using
corporate credit.

4. Legal items of incorporation
• A Corporate Name
• Articles of Incorporation
– Purpose of the corporation
– Principal place of business
– Number and type of shares of stock.
• Corporate Bylaws
– When annual shareholder meetings will be held
– Who can vote
– Manner in which shareholders will be notified if there is need for
an additional "special" meeting
• All filed with the state with a registration fee

5. US – Delaware Corporations
•
Delaware corporations account for
– Over 60% of Fortune 500 companies
– More than 50% of the corporations listed on
the NYSE, NASDAQ
•
A pro-business state
– familiar with business matters
– a highly specialized and efficient court
system
•
Does not require a principal place of
business in Delaware
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Allows one person to be the sole director,
officer and stockholder

6. Reporting requirements
• Assuming a corporation has not sold stock to the
public, conducting corporate business is
straightforward
• Basically, recording key corporate decisions
– Borrowing money or buying real estate
– Holding an annual meeting
– Corporate minutes and minute book
• Can be done written without a face-to-face meeting

7. Essentials for Crafting a Certificate of Incorporation
and Bylaws
• Non-conflicting name
• Registered agent name
and address within the
state of Delaware
• Purpose for which
corporation is organized
• Number and par value of
initial shares of stock
• Name and street address
of organizing incorporator
• Signature of incorporator
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Location of Office
Meeting of Shareholders
Board of Directors
Officers
Shares of Stock
Dividends
Amendments
Waiver of Notice
Interested Directors
Indemnification and Advance
of Expenses
Miscellaneous

8. Corporate Obligations Regarding Annual
Shareholder Meetings
• Fixed date for annual meeting
• DE law allows for virtual annual meetings
• Shareholders not permitted to call a meeting unless
authorized by the articles
• State the quorum for meetings in the articles of
incorporation
• Shareholders can vote via proxy, by mail ballot,
telephone, or online

9. Options for Legal Entity
Options for Legal Entity
in the US
in Armenia
•
Sole proprietorship
•
Limited Liability Corporation
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A partnership
S-corporation
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Used only for small companies with under
50 investors
•
C-Corporation
–
Nearly all funded entities are
C-Corps
–
Nearly all are incorporated in Delaware
due to Shareholder rights issues
• CJSC
– Limited number of
shareholders
– A company which has some
features of a corporation and
some features of a
partnership.
– The company sells fully
transferable stock, but all
shareholders have unlimited
liability.

10. Foreign Subsidiaries
• Grow to the point where you’re
doing business overseas
– Incorporate in every territory where
you have employees
– Treat these as subsidiaries
• If you’re raising money overseas
– VC will want local control
– “Flip” corporate HQ to source of
funding
– Local HQ becomes subsidiary
– No change in stock ownership for
employees.
$$$$$

11. International options
• Where to incorporate?
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Taxation consideration
IP and patent laws
Labor laws
Legal system and ability to enforce judgments
Speed and cost of incorporation
Ability to declare bankruptcy
• Normal choices:
– Home Country
– Country where investment occurred (or desired investment)
– Stay away from Tax havens (Cayman Islands, etc.)