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Legal Structures for Latin American Startups (2021)

35 points by walterbell 9mo ago

dlcarrier 9mo ago
It's my understanding that Delaware has started becoming hostile to LLCs formed there and that Nevada is a better option.
- walterbell 9mo ago
  > hostile to LLCs This editorial on Delaware corporations? https://a16z.com/were-leaving-delaware-and-we-think-you-should-consider-leaving-too/ https://a16z.com/were-leaving-delaware-and-we-think-you-shou... Another view, https://handbooks.clerky.com/startup-incorporation/where https://handbooks.clerky.com/startup-incorporation/where Delaware is widely regarded as having strong protections against personal liability for corporations. Some advisors say Nevada has better protection against personal liability. This is arguably true, but the differences are very unlikely to be relevant to founders trying to build a legitimate business. Some people have also observed that Nevada has an adverse selection problem in that their unusually strong protections attract bad actors. As a result, it's possible that if you incorporate in Nevada, you'll be inviting closer scrutiny.
  - dzink 9mo ago
    Nevada protects founders from shareholder lawsuits. So if someone defrauds or intends to defraud shareholders - they are more likely to prefer Nevada. To be fair, a lot of things can turn into a shareholder lawsuit in Delaware.
dfajgljsldkjag 9mo ago
The example about the founder losing a hundred million dollars to taxes is painful to read. It makes sense why Cayman is becoming the standard now that big investors are accepting it. The old default of opening a Delaware C Corp seems like a huge trap for Latin American companies.
- LunaSea 9mo ago
  How could the founder manage to live his life with merely tens of millions of dollars. What a tragedy.
  - cpursley 9mo ago
    Did you miss the part where they paid millions to a jurisdiction where they didn’t actually conduct business? Or are you of the wealth envy “taxes as punishment” mindset that believes every dollar eared is one immorally coerced from others - because thats how your comment reads. Personally, I’d rather see that money redeployed either as local taxes or even just capital to be spent in the founders own jurisdiction.
    - LunaSea 9mo ago
      > Did you miss the part where they paid millions to a jurisdiction where they didn’t actually conduct business? You mean besides opening a company in said jurisdiction? They took advantage of said jurisdiction by incorporating there and then had to pay taxes for it. Seems pretty straight forward.
- robocat 9mo ago
  The founder would only lose $100M if they both (A) had no personal tax liability in their own jurisdiction and (B) their jurisdiction lacks a double-taxation agreement with the US (such that tax paid in US defrays tax liability at home). It is quite possible that it was tax neutral for them personally. Cayman Islands has other costs and risks - depending upon your context.
laurencerowe 9mo ago
> You [UK companies] need to pay around $2,000 to file your accounts each year. In Cayman you do not. What's the evidence for this? I've run a UK company, albeit a decade or more ago. Fees are negligible. There's a £34 annual filing fee. You might choose to pay accountants to prepare and file your accounts for you, but presumably if you were to do so you would do the same in the Caymans.
- robocat 9mo ago
  > In Cayman you do not AFAIK getting accounts completed and filed is expensive in Caymans. Professional costs in the Cayman Islands are hideously expensive (from my extremely limited experience). Additionally, FYI, a Cayman Islands company needs a local Cayman Island director which costs thousands per annum.

35 points by walterbell 9mo ago

It's my understanding that Delaware has started becoming hostile to LLCs formed there and that Nevada is a better option.

walterbell 9mo ago
> hostile to LLCs This editorial on Delaware corporations? https://a16z.com/were-leaving-delaware-and-we-think-you-should-consider-leaving-too/ https://a16z.com/were-leaving-delaware-and-we-think-you-shou... Another view, https://handbooks.clerky.com/startup-incorporation/where https://handbooks.clerky.com/startup-incorporation/where Delaware is widely regarded as having strong protections against personal liability for corporations. Some advisors say Nevada has better protection against personal liability. This is arguably true, but the differences are very unlikely to be relevant to founders trying to build a legitimate business. Some people have also observed that Nevada has an adverse selection problem in that their unusually strong protections attract bad actors. As a result, it's possible that if you incorporate in Nevada, you'll be inviting closer scrutiny.
- dzink 9mo ago
  Nevada protects founders from shareholder lawsuits. So if someone defrauds or intends to defraud shareholders - they are more likely to prefer Nevada. To be fair, a lot of things can turn into a shareholder lawsuit in Delaware.

dfajgljsldkjag 9mo ago

The example about the founder losing a hundred million dollars to taxes is painful to read. It makes sense why Cayman is becoming the standard now that big investors are accepting it. The old default of opening a Delaware C Corp seems like a huge trap for Latin American companies.

LunaSea 9mo ago
How could the founder manage to live his life with merely tens of millions of dollars. What a tragedy.
- cpursley 9mo ago
  Did you miss the part where they paid millions to a jurisdiction where they didn’t actually conduct business? Or are you of the wealth envy “taxes as punishment” mindset that believes every dollar eared is one immorally coerced from others - because thats how your comment reads. Personally, I’d rather see that money redeployed either as local taxes or even just capital to be spent in the founders own jurisdiction.
  - LunaSea 9mo ago
    > Did you miss the part where they paid millions to a jurisdiction where they didn’t actually conduct business? You mean besides opening a company in said jurisdiction? They took advantage of said jurisdiction by incorporating there and then had to pay taxes for it. Seems pretty straight forward.
robocat 9mo ago
The founder would only lose $100M if they both (A) had no personal tax liability in their own jurisdiction and (B) their jurisdiction lacks a double-taxation agreement with the US (such that tax paid in US defrays tax liability at home). It is quite possible that it was tax neutral for them personally. Cayman Islands has other costs and risks - depending upon your context.

laurencerowe 9mo ago

> You [UK companies] need to pay around $2,000 to file your accounts each year. In Cayman you do not. What's the evidence for this? I've run a UK company, albeit a decade or more ago. Fees are negligible. There's a £34 annual filing fee. You might choose to pay accountants to prepare and file your accounts for you, but presumably if you were to do so you would do the same in the Caymans.

robocat 9mo ago
> In Cayman you do not AFAIK getting accounts completed and filed is expensive in Caymans. Professional costs in the Cayman Islands are hideously expensive (from my extremely limited experience). Additionally, FYI, a Cayman Islands company needs a local Cayman Island director which costs thousands per annum.