Who is a good Canadian start-up lawyer

Establishing a company in the USA - startups should pay attention to this!

Even if the German or European market is initially of interest for most start-ups in Germany, and therefore a simple GmbH formation is the right way to go, there are also good reasons for German startups to start with a foundation in the USA to deal with in your mind. The following example shows why.

Investor entry fails due to the notarization requirement

A promising startup was founded as a German GmbH, also because the market was initially assumed to be in the European Union. The product, an app, can theoretically be used worldwide, but it should first be placed in the home market.

Initial market experience shows something astonishing: While there is little interest in the app in Europe, it is met with great enthusiasm in the USA. And not only that - while German investors are giving the startup the cold shoulder, in the USA all doors are opening instead of closing. The company's managing directors are increasingly traveling across the Atlantic to meet multipliers and investors. The first investor is ready quickly - he wants to get into the company immediately, with a thoroughly pleasant rating.

But then the German notarization law slows down.

Because the investor has organized his assets in the form of a company under the law of a Canadian province, it is difficult to prove that the investor is authorized to represent. The notary must first find out how this will be dealt with at all. A mere inspection of the register by the notary is not enough. In addition, the money laundering regulations require a breakdown of the other owners of the investor's company.

As the negotiation has progressed a bit, the investor slowly realizes that he has to either fly to Germany himself to appear before a German notary or to go to a German representation in a complex procedure. At this point the investor ends the talks. The idea that an investment in a company can only be carried out with the help of an extremely bureaucratic procedure before a foreign notary is completely alien to the investor from the Anglo-Saxon sector.

German company law puts a brake on venture capital

Just as the startup has fared in this (real) example case, it is basically every German startup that is looking for US or Canadian investors. There is no knowledge and certainly no understanding of the extremely complicated rules of the German authentication (un) system, and of course no willingness to get involved. Conversely, there is no legally viable option for startups to circumvent the notarization.

It would be different if the company had been set up as a stock corporation from the start. However, this would have required a share capital of € 50,000. In addition, the stock corporation is structured in a complex manner and thus triggers an increased administrative burden - the last thing a lawyer recommends to a young startup.

Against this background, it is definitely worth considering for some startups to set up their company as a US company. Typically, an "Inc." (Incorporated) is chosen under the law of the US state of Delaware.

US foundation only for the daring - and never without advice

It should be understood, however, that establishing a company in the United States is not a bureaucratic walk. On the contrary, the initial establishment of the company, if you consider the necessary tax registration with the US tax authority IRS, is even much more complex and nerve-wracking than the comparable processes in Germany. It is of course always problematic to maintain a company in a foreign legal system - the effort for legal and tax support increases dramatically.

However, if it is clear from the outset that the business area and / or investors will be more likely to be found in North America than in Europe, the advantages can definitely offset the disadvantages.

For daring founders, KEYTERSBERG, in cooperation with a German-speaking US law firm, offers ready-made start-up packages for setting up a company in the USA. Thanks to the pre-formulated foundation process, the processes are comparatively quick and easy to understand.