International Toolkit

DOING BUSINESS

in Greater Phoenix, U.S.A.

GPEC SERVICES

OUR PARTNER NETWORK

« In-Depth Market Data and Analysis GPEC has extensive data on population, real estate, housing, labor market, shipping, transportation costs, etc.

GPEC frequently partners with several agencies and communities from around the state to promote the Greater Phoenix area and to draw businesses into the region:

« Economic Impact Analysis Economic impact analysis demonstrate a company’s expected impact to community leaders, which enables them to more effectively advocate for resources the company needs to make a site selection decision.

« Arizona Commerce Authority (ACA): The ACA is the state’s economic development agency uses a three-pronged approach: Recruit out-of-state companies to expand their operations in Arizona; work with existing companies to grow their business in Arizona and beyond; and partner with entrepreneurs and companies large and small to create new jobs and businesses in targeted industries.

« Comparative Market Analysis Gain a comprehensive understanding of the costs of running a business in Greater Phoenix versus other markets. The analysis includes taxes, labor costs, real estate costs, utilities, incentives, etc. « Site-Selection Assistance GPEC’s professionals are experts in commercial real estate and siting for a variety of unique needs. « Connectivity to Key Resources As a public-private partnership, GPEC is connected to key public and private assets and resources in the region, from state and local regulatory authorities, to universities and community colleges and local companies. « International Assistance Can aid the unique needs of international clients (identifying translators, working on immigration issues relevant to companies, etc.).

« Maricopa County: Maricopa County is one of the largest counties in the U.S. boasting a population of approximately 4 million. Within Maricopa County is Greater Phoenix, the cultural and economic hub of Arizona. The mission of Maricopa County government is to provide regional leadership and fiscally responsible, necessary public services so that residents can enjoy living in a healthy and safe community.

GPEC works closely with the County to implement economic development strategies and support companies looking to expand or locate in the region. « Greater Phoenix Municipalities: GPEC partners with 21 cities and towns working close with their mayors and economic development teams to promote and strengthen the region’s assets, encouraging others to expand business to Greater Phoenix. While close in proximity to one another, each community has their own set of attributes, attractions, restaurants, schools and events that bring their residents together.

« Chambers of Commerce: The Arizona Chamber of Commerce, Greater Phoenix Chamber of Commerce and several other local chambers serve cities throughout the region. Chambers work closely with existing companies on policies to foster their success, business and retention programs to ensure needs are met and ongoing education on a variety of business-related topics. Some chambers even coalesce to better promote and attract business to the region. « Privately Held Investors: Approximately 60 percent of GPEC’s funding comes from privately held companies throughout Arizona. These investors provide counsel to GPEC and prospective companies on topics including real estate, banking, law, construction, emerging industries and trends, education, technology, etc.

DISCLAIMER: The concepts, discussion and recommendations contained in this publication are for informational purposes only and do not purport to be (and are not) legal, accounting or other expert advice that may be relied upon by the reader. In addition, such information reflects the perspectives of the individuals preparing such discussion but does not purport to be a reflection of the opinions or advice of GPEC nor do they represent the unanimity of GPEC’s various stakeholders. In the preparation and dissemination of this information, GPEC has exerted reasonable effort to provide current and correct information to readers in a clear and concise manner to provide background materials on matters we feel are relevant to the persons and entities we consult with. In spite of these efforts, inadvertent errors in the text of this publication may occur. Ultimately, this information contained herein is intended to afford readers general information and users of the information contained herein accept full responsibility for the use of the content of such information. As always, we encourage you to consult experts and qualified advisors before making decisions material to your business.

ACKNOWLEDGEMENT: GPEC recognizes the contribution of those organizations whose data or information is cited herein and we express our gratitude for their efforts.

Sources available upon request.

260

GREATER PHOENIX, U.S.A. If you haven’t heard of it yet, you will. Anchoring the state of Arizona, Greater Phoenix is one of the largest and fastest-growing regions in the United States. A major metropolitan area, Greater Phoenix’s strategic Southwest location offers easy connectivity to almost anywhere in the world, with quick access to neighboring California, Texas and Mexico. With a current population of approximately 4.2 million, the region is expected to grow to approximately 6 million in the next 20 years. That means Greater Phoenix is outpacing the United States’ population growth rate more than three times over.

Greater Phoenix’s workforce is fueled by some of the best colleges and universities in the United States. Between the overflow of recent college graduates and more than 150,000 people moving into the region each year, Greater Phoenix is populated with a pool of young, diverse talent that is expected to increase by almost 50 percent over the next two decades.

Fortunately for international businesses, the market in Greater Phoenix is primed for growth and is very hospitable in helping companies considering foreign-direct investment into the United States select the best market to foster their success. Our organization, the Greater Phoenix Economic Council (GPEC), is a not-for-profit organization that represents the 4th largest county in North America, 21 cities and towns and more than 160 privately held companies. Since 1989, GPEC has been helping companies across the world with market and cost-comparison analysis, workforce data, connections to key political and business leaders throughout Arizona and choosing the right building to lease or purchase – all at absolutely no cost to these businesses.

Greater Phoenix is located in a state that has taken giant strides over the years to keep business taxes low and improve business tax credits and economic development programs. GPEC operates with the business executive in mind, which is also why we’ve created this international toolkit. Led by our International Leadership Council, this toolkit is a compilation of how-to advice from some of the best experts in their respective fields.

With information on how to access capital, form strategic partnerships with universities and purchase land in Arizona, all you need to expand your business into the United States – and specifically into Greater Phoenix – is right here.

Allow us to ensure that your expansion into the United States is a smooth and successful one.

Call us anytime at 001.800.421.GPEC (4732) or email us at info@gpec.org.

FOREWORD

3

TABLE OF CONTENTS Chapter 1: 1.1 1.2 1.3 1.4

United States at a Glance US Overview US Population US Government Economy

6 6 6 7 7

Chapter 2: 2.1 2.2

Introducing Arizona Brief History Location & Geography

9 9 9

Chapter 3: 3.1 3.2 3.3 3.4 3.5 3.6

3.7 3.8

Greater Phoenix Overview Location in Arizona Population Government Economy Technology and Innovation Education Primary and Secondary Education Community Colleges Universities Infrastructure Quality of Life

10 10 10 11 12 13 14 15 15 16 17 18

Chapter 4: 4.1

4.2

Investing in the United States Process Overview & Considerations Site-Selection Process Evaluating the Labor Market Assessing Infrastructure Measuring Accessibility Acquiring Real Estate Assesses Regulatory Environment Greater Phoenix Market Conditions Labor Market Real Estate Permitting/Regulations Utilities Local Taxation Incentive Programs Choose a Business Entity

18 18 19 20 21 21 21 22 22 22 22 24 24 25 26 26

Chapter 5: 5. 1 5.2

5.3 5.4

5.5

How to Start and Grow a Company in Greater Phoenix How To Set Up A New Business How to Access Capital How to Utilize Angel Investment How to Engage a Venture Capital Firm or Investor How to Prepare an Initial Public Offering (IPO) How to Sell & Market a Product How to Form Strategic Partnerships Partnerships with Universities Establish Distribution Partners Incubators/Accelerators Acquiring a Company How to Find Qualified Employees Staffing Agencies

Chapter 6:

Human Resource and Employment Law

37

Chapter 7:

Immigration Law for Employees and Investors Non-Immigrant Visas Immigrant Visas (Green Cards) B-1, B-2 Visas Student Visas

38 38 39 39 39

Chapter 8: 8.1

8.2

Taxation Business Taxation Type of Tax System Taxable Persons Taxes on Capital Incentives Foreign Tax Credit Tax Returns and Assessments State Corporate Income Taxes International Taxation

41 41 41 41 41 41 42 42 42 42

Chapter 9:

Banking

43

Chapter 10: 10.1 10.2

Importing To/Exporting From the United States Imports Exports Foreign Trade Zones Export-Import Bank Transportation

44 44 44 45 46 46

Chapter 11:

Legal Consideration

46

26 26 29 29 30 31 32 33 33 34 34 35 36 36

5

UNITED STATES AT A GLANCE 1.1: U.S. OVERVIEW The United States of America consists of 50 states and a federal district (Washington, D.C.). The country is 3.7 million square miles (9.6 million square kilometers) and is the third largest in the world in terms of land area and population. Due to its size, the U.S. has a diverse climate and geographic layout.

1.2: U.S. POPULATION Most recently, the population of the United States was about 314 million people, growing at approximately 1 percent per year. The U.S. has one of the most diverse populations in the world: 58 percent of residents are white, 16.1 percent are Hispanic, 12.5 percent black and 4.7 percent Asian. Approximately one out of every eight residents was born outside of the U.S. Fifty-three percent of the population born outside of the United States is from Latin America, 28 percent from Asia and 12 percent from Europe.

Most recently, the average age in the United States was 37 years old, with 63 percent of the population within the typical working age of 18 to 64.

6

01 UNITED STATES AT A GLANCE

1.3: U.S. GOVERNMENT The United States is a federal republic consisting of three levels of governments: federal, state and local. It is a representative democracy – meaning the citizens elect people to represent them rather than directly participating. The federal level has three branches: the Executive, the Judicial and the Legislative. The Legislative branch consists of the Senate and the House of Representatives, both of which influence federal law and the budget. Each state elects two senators, and the number of representatives for the House varies by state – always adding up to 435 House seats.

The Executive branch of the federal government administers and enforces federal law. The president is a part of the executive branch and has the power to veto bills before they become law and to appoint people to administer federal law. The president also appoints the federal court justices.

The president is elected to a four-year term and cannot serve more than two terms; the president is not elected by direct vote, but by an indirect system (called the Electoral College) that apportions votes to the states and District of Columbia (Washington, D.C.).

The Judicial branch interprets laws and overturns those it finds to be unconstitutional. The highest court in the U.S. is the Supreme Court, which consists of a chief justice and eight associates. The justices are nominated by the president and confirmed by the Senate; once confirmed, the justices can serve for life unless they retire or resign. The Supreme Court has ultimate jurisdiction to review court cases in all the other federal courts and all state courts on issues involving federal law.

1.4: ECONOMY The United States has the largest gross domestic product (GDP) worldwide.

The GDP in the U.S. was $15.6 trillion when recently measured.

The largest industries are government (federal, state and local, including public education), professional and business services and health services.

Together, these industries account for about 42 percent of the workforce.

Another 9 percent of the workforce is employed in the manufacturing industry.

The United States exported $1.5 billion worth of merchandise when last measured, with the largest volume of exports going to Canada, Mexico, China, Japan and the United Kingdom. Most recently, transportation equipment, computer and electronic products, chemicals, non-electrical machinery, petroleum and coal products were the top products exported.

Recently, the U.S. imported products valued at nearly $2.3 billion, primarily from China, Canada, Mexico, Japan and Germany; computer and electronic products, oil and gas, transportation equipment, chemicals and nonelectrical machinery were the top products imported to the U.S.

The total labor force in the U.S. was about 155 million people when last estimated. Total non-farm employment in the U.S. is about 135 million people.

01 UNITED STATES AT A GLANCE

7

Photo courtesy of AZ Office of Tourism 8

01 UNITED STATES AT A GLANCE

INTRODUCING ARIZONA 2.1: BRIEF HISTORY Arizona officially became the 48th state on February 14, 1912. The state was rural and its economy was primarily agricultural in nature from statehood until the end of the World War II. During that war, the federal government moved aerospace and defense assets to Arizona from California for national security reasons, and state policymakers acted to ensure this industry would remain in the state after the war had ended. A proactive state government, led by some of the state’s most historic leaders like Carl Hayden, Barry Goldwater, John Rhodes, Paul Fannin and others, worked to make Arizona a business-friendly state with a unique quality of life. Their efforts helped make Arizona an attractive place for businesses and residents. In 1950, the city of Phoenix had a little more than 100,000 residents; today, it is the capital city of Arizona and is the sixth largest city in the U.S., boasting more than 1.4 million people.

Legislators continued to make Arizona attractive for business throughout the 1950s and 1960s by lowering taxes, investing in education institutions and promoting opportunities for doing business in the state. The investments came to fruition as Arizona became a hub for aerospace and defense companies and their research and development activities. The same effort that helped foster the development of the aerospace industry was used to build Arizona’s strength in semiconductors, which still impacts the state today: Arizona is home to Intel, Freescale Semiconductor, ON Semiconductor, ST Microelectronics and hundreds more.

Over the last few decades, Arizona’s corporate base in semiconductor and the talent that came with it grew to include clusters in high-tech electronics, IT, renewable energy and personalized medicine among others. Today, Arizona continues to attract people from all over the globe who are looking to grow their business in a growing, thriving metropolitan market.

2.2 LOCATION & GEOGRAPHY Arizona is the sixth largest state by total land size in the United States and is located in the Southwest region. It is bordered by California to the west, Nevada to the northwest, Utah to the north, New Mexico to the east and Mexico to the south.

The state offers easy access to hundreds of major domestic and international markets. The Phoenix area boasts 14 airports, punctuated by the bustling Phoenix Sky Harbor International Airport, one of the country’s top ten hubs for air traffic. Its strategic location is within a day’s drive to tens of millions of people in the Southwest.

Arizona offers a low-risk environment for natural disasters. It is not susceptible to earthquakes, hurricanes, floods or tornadoes. Much of the southern part of

02 INTRODUCING ARIZONA

9

POPULATION PROJECTED TO DOUBLE OVER 30 YEARS

7m 6,041,100

6m 5m 4m

PHOENIX

4,273,900

3m 2m

2,854,246

1m 0 2000

2012

2030

Greater Phoenix Source: Azstats.gov

the state is covered by arid desert, including the Sonoran and Mojave Deserts. The state’s three largest cities – Phoenix, Tucson and Mesa – are located in the desert regions. The northern part of the state is higher in altitude and has a climate that is semi-arid and continental with cold, snowy winters. The state’s climatological diversity provides year-round opportunities for outdoor activities, such as visiting Grand Canyon National Park or one of the 21 other national parks located within Arizona’s borders; snow skiing at resorts near Tucson, Flagstaff, and in Northeastern Arizona; hiking, boating, rock climbing and more. Arizona’s mild winters and more than 300 days of sun annually are also a major draw to many visitors and part-time residents.

GREATER PHOENIX OVERVIEW 3.1: LOCATION IN ARIZONA Phoenix is the capital city of Arizona. Situated in the south-central region of Arizona, it is surrounded by 20 cities and towns that together, make up the Greater Phoenix region. This area is the most heavily populated in the state, and represents 70 percent of the state’s economy.

3.2 POPULATION With already 4.2 million people, Greater Phoenix’s population is expected to grow to a whopping 6.9 million in the next 20 years. That means we’re outpacing

10

03 GREATER PHOENIX OVERVIEW

ARIZONA

15 Counties « E ach governed by a board of supervisors « Five supervisors per county

Cities/towns « G overned by a mayor and city council members

Senate and House of Representatives « Two-year terms « Must live in district they represent « Total of 30 state senators « Total of 60 representatives « Create laws

the national rate more than three times over. In just the past year, more than 150,000 people moved to the region from around the world. The Greater Phoenix region is young too – with an average age of 35, we are two years lower than the national average.

3.3: GOVERNMENT The political system in Arizona mirrors that of the federal government – consisting of Legislative, Executive and Judicial branches. The Legislative branch has a 30-member Senate and a 60-member House of Representatives; each legislative district is served by one senator and two representatives. Legislators serve a two-year term and are limited to four consecutive terms in one chamber. The legislature sets state law and budget.

The Executive branch in Arizona consists of the governor, secretary of state, state treasurer, attorney general and superintendent of public instruction.

JUDICIAL

Governor « Four-year terms « Signs laws « Vetoes laws « Grants pardons « Appoints judges

LEGISLATIVE

EXECUTIVE

State Government

Arizona Supreme Court « Six-year terms « Must retire at age 70 « Total of 5 Supreme Court justices « Reviews cases « Oversees attorney admissions « Presides over impeachment proceedings

These individuals may serve for two consecutive terms. Arizona is one of seven states that does not have a position of a lieutenant governor. The governor is the top position in the state and may approve or disapprove of every bill passed by the state legislature. The secretary of state is the leader of the office that keeps official records for the state; the secretary of state is also the acting governor when the governor is absent from the state. The state treasurer is the chief financial officer for the state, managing the state’s finances. The attorney general submits and defends lawsuits on behalf of the state and issues formal legal opinions. The superintendent of public instruction oversees the public education system in Arizona.

In addition to those positions, the state also has a Corporation Commission.

Arizona is one of only 13 states with an elected commission. As in other states, the Corporation Commission oversees public utilities and grants or denies rate adjustments. However, in Arizona, the Commission oversees the

03 GREATER PHOENIX OVERVIEW

11

GREATER PHOENIX AT A GLANCE

of Supervisors, consisting of three to five members; Maricopa County, in which the majority of Greater Phoenix is located, has five supervisors. The Board of Supervisors guides the work of the county manager who oversees the operations of the county.

CATEGORY

DATA

Population - 2011

4,150,083

Median Age - 2011

34.5

Labor Force - 2011*

2,431,559

Employment - 2012*

1,757,100

Unemployment - 2012*

7.4%

Median Houshold Income - 2011

$44,950

Single-Family Permits - 2012

11,859

Gross Metro Product (in billions) - 2011

$194.8

U.S. Inflation Rate (CPI) - 2012**

2.1%

*Numbers are year-end averages **Over the 12-month period Sources: Amercian Community Survey, Azstats.gov, Real Estate Center at Texas A&M University, U.S. Bureau of Economic Analysis and U.S. Bureau of Labor Statistics

process of companies incorporating or registering to do business in the state; the Commission also registers and oversees security offerings.

The other branch is the Judicial branch, which is the court system in Arizona. The Superior Court of Arizona is a statewide trial court. The state Court of Appeals has the jurisdiction to review trials and decisions appealed to them. The state Supreme Court is the highest court in Arizona, often reviewing cases from the lower courts. This court has five justices: A chief justice, vice chief justice and three associate justices.

At the local governmental level, there are several counties and municipalities within each state. Each of the counties in Arizona is led by a county Board

12

03 GREATER PHOENIX OVERVIEW

Municipalities are the other, smaller component of local government that includes cities and towns. Cities and towns govern areas such as planning, economic development, public works, parks and recreation, and housing.

Each municipality elects a council and a mayor to influence direction of the city and to pass ordinances. Many cities and towns have a city manager that runs the day-to-day operations.

3.4: ECONOMY Seventy percent of the state’s gross product is concentrated in the Greater Phoenix region. The gross domestic product (GDP) of Greater Phoenix recently measured $173 billion, ranking it 16th among all metropolitan areas in the United States.

Employment in Greater Phoenix has nearly doubled over the past 20 years.

The latest total non-farm employment in the region was 1.8 million people.

While the recent U.S. recession impacted growth in the Greater Phoenix region, employment is expected to rebound in the coming years with an expected total non-farm employment of 2 million people by 2016.

The professional and business services industry is the largest industry sector in Greater Phoenix, boasting 16 percent of the total employment.

Government (including federal, state and local employees, as well as public education employees) is also a major industry in Greater Phoenix, with 13 percent of total employment. Health care and retail each employ 12 percent of the local workforce. Five other industries (hospitality, manufacturing, finance and insurance, construction and wholesale trade) each employ more than 5 percent of the workforce.

Within the manufacturing industry, Greater Phoenix has a strong

A BROAD & DIVERSE LABOR FORCE A BROAD & DIVERSE LABOR FORCE

EMPLOYMENT (in thousands)

Natural Resources & Mining

concentration in the high-tech sector: Major employers include Intel, Honeywell, Boeing, General Dynamics, Orbital Sciences and Freescale Semiconductor. Thousands of suppliers that support these companies are also located in the region.

Greater Phoenix is home to Fortune 500 companies such as Avnet, Freeport McMoRan, Republic Services, PetSmart and Insight Enterprises. High-profile companies such as GoDaddy, Apollo Group, Swift Transportation, Knight Transportation, Fender and U-Haul are also headquartered in the region.

Utilities Information Real Estate, Rental, & Leasing Educational Services

Other major employers in Greater Phoenix include Wells Fargo, Bank of America, JP Morgan Chase and American Express. Greater Phoenix is also home to international companies, including BMO Harris, Cemex, Henkel and SUMCO Corporation.

Transportation & Warehousing Other Services Wholesale Trade

3.5: TECHNOLOGY AND INNOVATION

Construction

Greater Phoenix has long been a center for technology and innovation.

The region’s modern economy, built on high-technology semiconductor and aerospace and defense industries, includes world-class companies like Intel, On Semiconductor, Freescale, Boeing, Honeywell and others to the region. Greater Phoenix’s educational assets have provided a talent pipeline and research capabilities that have sustained these industries for decades.

Finance & Insurance Manufacturing Leisure & Hospitality Healthcare & Social Assistance

In addition to being a high-technology center for mature industries, the region is home to one of the most entrepreneurial climates for emerging technologies in the country: The nationally renowned Kauffman Foundation ranked Arizona No. 1 in new business startups, Greater Phoenix is 3rd in the number of entrepreneurs per 1,000 per people, and Inc. magazine ranks Greater Phoenix among the top 20 cities in startups.

Retail Trade Government Professional & Business Services 0 Source: Azstats.gov, 2012 data

50

100

150

200

250

300 While industries like semiconductor and aerospace and defense remain important sectors of the regional and state economy, new nascent

03 GREATER PHOENIX OVERVIEW

13

industries, catalyzed by the region’s high-tech base, university-driven research, and entrepreneurial spirit are emerging. Some of the region’s burgeoning high-tech clusters include clean technology, information and communications technology (education technology, health IT), and personalized medicine.

The region’s universities play a major role in developing technology and driving innovation. Arizona State University, the region’s flagship public research institution, has research strengths through:

HIGHER EDUCATION OPTIONS IN GREATER PHOENIX STATE UNIVERSITIES

FALL 2011

Arizona State University Arizona State University - Tempe University of Arizona Northern Arizona University Arizona State University - West Arizona State University - Polytechnic Arizona State University - Downtown Phoenix

72,254 59,794 39,236 22,964 12,272 10,521 17,151

PRIVATE UNIVERSITIES IN GREATER PHOENIX

FALL 2011

Grand Canyon University University of Phoenix Western International University Midwestern University Embry Riddle University DeVry Institute Thunderbird School of Global Management University of Advancing Technology Ottawa University Argosy University Phoenix School of Law

39,525 6,262 3,239 2,787 1,723 2,311 1,267 1,052 975 868 969

Sources: Arizona Board of Regents and Institute of Education Sciences

14

03 GREATER PHOENIX OVERVIEW

HIGHEST DEGREE DOCTORATE DOCTORATE DOCTORATE DOCTORATE DOCTORATE DOCTORATE DOCTORATE HIGHEST DEGREE DOCTORATE MASTERS MASTERS DOCTORATE MASTERS MASTERS MBA MASTERS MASTERS DOCTORATE JD

• The Global Institute of Sustainability, the world’s first and largest solar testing and certification project • TUV Rheinland Photovoltaic Testing Laboratory, the National Science Foundation’s only engineering research center focused on photovoltaics • The Biodesign Institute, whose research centers around biomarkers and biosignatures • The Fulton School of Engineering Greater Phoenix is also home to a number of medical education and research centers, including the University of Arizona’s Medical School and Northern Arizona University’s allied health programs at the downtown biomedical campus, ASU-Mayo Clinic medical school, and medical education at Midwestern University and A.T. Still University. The market is anchored by top healthcare and treatment institutions such as Mayo Clinic, Banner MD Anderson, Cancer Treatment Centers of America as well as Dignity Health and its nationally renowned Barrow Neurological Institute.

3.6: EDUCATION Arizona’s talented workforce stems from a continuous pipeline of graduates, many of whom began kindergarten in Arizona and continued on to earn a post-graduate degree here. For the thousands of people who move here each month, Greater Phoenix offers a diverse school system with multiple options for elementary, secondary and post-secondary education.

Primary and Secondary Education Just in Greater Phoenix, there are more than 350 high schools, 200 middle schools and 700 elementary schools. Parents have options for either public or private primary (kindergarten through 8th grade) and secondary (grades 9 through 12) schools for their children. Generally, children attend the public school closest to where they live; however, Arizona’s policies tend to favor school choice, and this gives parents the option to send their kids to a different public school or enroll them in a charter or private school.

Greater Phoenix has recently experienced impressive growth in the amount of charter schools. A charter school is a publicly funded independent school established by teachers, parents, or community groups under the terms of a charter with a local or national authority. Arizona’s charter schools account for some of America’s top-ranked public schools.

Community Colleges Community colleges provide technical training and education to prepare students for entrance into careers or to complete bachelor’s degrees at universities. The Maricopa Community Colleges network is the largest network of community colleges in the U.S. It includes 10 colleges in the Greater Phoenix area, along with two skills centers and numerous education centers that are focused on meeting the needs of the business community and the citizens of Maricopa County.

Maricopa’s new corporate college was established to quickly develop and implement training solutions for new and existing Arizona businesses based on specifically identified needs.

Together, the community colleges in Maricopa County offer roughly 1,000 occupational programs (degrees and certificates), about 40 academic associate degrees and a more than 10,000 courses. These colleges are the largest provider of health care workers and job training in Arizona, making them a significant resource for the business and health care industries.

HIGHER EDUCATION OPTIONS IN GREATER PHOENIX COMMUNITY COLLEGES IN GREATER PHOENIX

FALL 2011

HIGHEST DEGREE

Mesa Rio Salado Glendale Phoenix College Chandler/Gilbert Scottsdale Paradise Valley GateWay Estrella Mountain South Mountain

25,695 25,109 21,376 12,565 14,030 11,548 9,874 6,801 8,243 4,738

ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE ASSOCIATE

OTHER INSTITUTIONS

FALL 2011

HIGHEST DEGREE

Universal Technical Institute Carrington College Collins College Le Cordon Bleu College of Culinary Arts - Scottsdale The Art Institute of Phoenix Pima Medical Institute ITT Technical Institute The Bryman School Kaplan College The Refrigeration School Arizona Christian University Arizona Automotive Institute Southwest College of Naturopathic Medicine Arizona College of Allied Health Everest College International Baptist College ***

3,136 2,238 892 1,560 1,190 2,050 1,346 757 487 782 598 1,321 383 691 2,551 75

ASSOCIATE ASSOCIATE BACHELORS BACHELORS BACHELORS ASSOCIATE BACHELORS ASSOCIATE ASSOCIATE ASSOCIATE BACHELORS ASSOCIATE DOCTORATE ASSOCIATE BACHELORS DOCTORATE

Sources: Arizona Board of Regents and Institute of Education Sciences

03 GREATER PHOENIX OVERVIEW

15

AT A GLANCE – INTERNATIONAL STUDENTS AT ASU Universities Greater Phoenix is home to several major colleges and universities including Arizona State University (ASU), University of Arizona’s (UA) Downtown Phoenix Campus, Thunderbird School of Global Management, Grand Canyon University, University of Phoenix (UOP), Maricopa Community Colleges (MCC) and more.

«A rizona State University: With four campuses across Greater Phoenix, ASU is the number one producer of bachelor’s degrees in the United States. It has more than 70,000 students enrolled and offers more than 250 undergraduate degree programs as well as programs for Master’s level and Ph.D. level work.

R anked in the top tier of national universities by U.S. News & World Report, ASU is home to some of the best business and engineering programs in the U.S. and produces top labor talent. The school is tied with Yale University and the University of California at Berkeley for the number of Fulbright scholars produced.

«U niversity of Arizona: With its main campus located south of Greater Phoenix in Tucson, UA also has a major presence on Downtown Phoenix’s biomedical campus, including the University of Arizona College of Medicine and College of Pharmacy. « T hunderbird School of Global Management: Thunderbird School of Global Management consistently ranks #1 in the world in international business education and among the top 10 worldwide in executive education.

It is the oldest and largest graduate school for international business in the United States. Thunderbird produces global managers who are distinguished by a global mindset that allows them to work successfully with individuals from diverse cultures and to manage effectively in different social, economic, and political environments. Thunderbird is sought out by individuals and companies worldwide.

16

03 GREATER PHOENIX OVERVIEW

COUNTRY OF ORIGIN

# OF STUDENTS

China

1,704*

India

1,224

Saudi Arabia

353

South Korea

310

Canada

170

Taiwan

125

Other countries

1,241

2012 TOTAL

5,127

*A 31% increase from the previous year’s number of students Source: Arizona State University Registrar, 2012 data

« A.T. Still University: Home to the world’s first osteopathic medical school, established in 1892, A.T. Still University (ATSU) is a multidisciplinary healthcare educator providing graduate and professional programs in osteopathic medicine, dental and health sciences. The unique educational model combines high-quality education and a commitment to community service by partnering with Community Health Centers, a cornerstone of the University’s clinical training initiative. « Midwestern University: Midwestern University offers programs in health sciences, osteopathic medicine, pharmacy, optometry, veterinary and dental. Its approach includes extensive hands-on experience in outstanding clinical rotations geared toward a compassionate perspective toward patients and a 21st century health care practice. « University of Phoenix: University of Phoenix (UOP) has 20 years of experience in online education and is the largest university for online education in the country. Headquartered in Greater Phoenix, its students

DRIVE TIME

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RAIL CONNECTIONS

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3 HOUR

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F R O M P H O E N I X NM TX

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4 HOUR

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YUMA

FLAGSTAFF

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PHOENIX TUCSON

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LUBBOCK FORT WORTH

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SANTA ANA

SAN ANTONIO

HOUSTON

CHIHUAHUA

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MEXICO

LAREDO

LOS MOCHE TORREON MAZATLAN CIUDAD VICTORIA

study in more than 200 locations, as well as through online programs available in countries around the world. « Grand Canyon University: Grand Canyon University (GCU) is a premier private, Christian university in Greater Phoenix that offers a variety of degree programs through the Ken Blanchard College of Business, College of Education, College of Nursing and Health Care Professions, College of Arts and Science, College of Theology, College of Fine Arts and Production, and College of Doctoral Studies.

3.7 INFRASTRUCTURE When evaluating Greater Phoenix, consider that the region is served by 14 airports, including Phoenix Sky Harbor International, the sixth-busiest airport in the country and serving more than 40 million passengers annually and with more than 1,200 daily flights. Also, the Phoenix-Mesa Gateway Airport, the second-largest commercial service airport in the region, with its 11-acre cargo apron and three extensive runways capable of accommodating any

cargo aircraft in the world, is ideally situated as an attractive and lowercost solution to other traditional air cargo ports for wide-body aircraft to fly nonstop to Asian and European destinations.

Modern infrastructure and continuous investment in transportation translate to a region that is easy to navigate. The region has a light-rail and bus rapid transit system, rail terminals with trailer and container capabilities, and a sophisticated highway system, including interstate routes that stretch to Los Angeles, the Midwest, Mexico and many other large markets. In fact, a company can reach about 30 million customers within a one-day drive.

Connectivity within the market through a continually expanding freeway system, local bus routes and light rail allow a company access to a large labor pool.

The region is also serviced by two rail systems, Union Pacific and Burlington Northern Santa Fe, allowing companies to transport goods efficiently.

03 GREATER PHOENIX OVERVIEW

17

AVERAGE HIGH AND LOW TEMPERATURES BY MONTH FOR 2012 IN GREATER PHOENIX

catch an Arizona Cardinals game in Glendale or go to one of the many museums and theatres after work. Hundreds of independently owned restaurants, bars and boutiques embody the heart of Greater Phoenix.

High Temp.

Low Temp.

110° 100° 90° 80° 70° 60° 50° 40° 30°

ry

ua

Jan

ry

ua

r Feb

rch

Ma

ril

Ap

y

Ma

e

Jun

y

Jul

er st er er er gu emb ctob emb emb t v c O No De Sep

Au

3.8: QUALITY OF LIFE In a state that’s just over 100 years old, Greater Phoenix is among the nation’s largest metropolitans and offers a chance to witness growth and change before your eyes. It’s a unique, special place that’s easy to live in and make your own.

More than 150,000 people from all over the globe moved to this region last year and are enjoying year-round sunshine, desert and mountain landscapes, educational assets (for their children or for higher education opportunities), four professional sports teams and a thriving arts and culture scene. When you expand business to the Phoenix area, you can hike Camelback Mountain before work, meet friends for lunch at the world’s top-ranked pizzeria and

18

04 INVESTING IN THE UNITED STATES

Arenas, museums, hiking trails, golf courses, spas, universities, shops, restaurants – even street performers – dot the lines of Greater Phoenix’s 21 bustling cities. Newcomers find awe in the region’s diverse terrain, getting a taste of the Wild West throughout. Greater Phoenix residents can also reach pine trees and snow skiing within a two-hour drive or go fishing in one of many amazing lakes in and around the region. Arizona hosts almost 40 million overnight visitors per year, and nearly 13 percent of those are from places outside of the United States.

INVESTING IN THE UNITED STATES 4.1: PROCESS OVERVIEW & CONSIDERATIONS Local businesses annually invest millions in the Greater Phoenix region. In this chapter, you will learn about the process of making investment decisions as well as the specifics of Greater Phoenix’s local market conditions.

Site-Selection Process The business investment decision or “site selection” process is complex.

The process begins by evaluating various geographic markets to determine the best location for a company to achieve its strategic goals. Companies sometimes work with site selection consultants to assist in this decision.

This “due diligence” process involves analyses of local labor and real estate markets; state and local tax policies; operating costs; the location within markets or to other markets; transportation costs; quality of life factors, etc.

After extensive research and comparisons have resulted in a list of viable regions, companies generally visit contending markets to view real estate

Engage Real Estate Broker

Contract Drafted

Define Purchasing Strategy

Attorney Review

Tour Properties

Financing Fully Obtained

Contract Signed

Closing Period

Due Diligence Period

ESCROW PERIOD Counters Obtain Prequalification

Property Search

Letter of Intent

Earnest Deposit

Close

options and meet with local leaders. At these meetings, it is important to discuss support available to your company and establish relationships with local firms, and meet with companies already doing business in the region. The process continues until a company selects a specific location among the few identified.

Important Site-Selection Criteria: • Access and cost of labor • Infrastructure • Education • Real estate/land availability • Economic incentives and tax structure • Business regulations • Supply chain • Transportation • Quality of Life • Miscellaneous – risk for natural disaster, time zones etc.

04 INVESTING IN THE UNITED STATES

19

Evaluating the Labor Market The primary driver in most U.S.-based site selection projects revolves around the supply, skill depth and cost of the labor force. The critical nature of the labor equation increases as the project’s skill requirements increase. While a manufacturing operation or distribution center’s location selection may primarily be driven by supply chain considerations, the second most important criterion is often the access to skilled, affordable labor. Office-related projects – such as headquarters, IT centers, shared services operations or call centers – are almost exclusively driven by the labor equation. For these employee-intensive operations, the labor costs typically make up between 70 and 80 percent of the facilities’ overall operating costs. For operations requiring highly specialized jobs, such as software engineers or unique health care skills, skill depth may take precedence over labor costs, but labor criteria, nonetheless, drives the location decision.

Examples of Primary Labor Criteria: • Labor force size • Growth rates • Unemployment rates (by sector, if available) • Industry density • Skill attributes and density • Educational attainment levels • Proficiency of non-English language capabilities • University programs and graduation rates • Prevailing wage rates for relevant positions • Employment competition and saturation rates

20

04 INVESTING IN THE UNITED STATES

• Recent market activity (such as expansion and downsizing activity) • Turnover rates • Applicant flow • Workforce longevity and scalability • Union vs. non-union presence

Assessing Infrastructure It is important to assess both the transportation infrastructure as well as the market’s physical infrastructure. Critical areas such as freeway access and airport access must be examined by the company in order to make sure the location meets their needs. Rail and port access can be important as well, depending on the operation of the company.

The physical infrastructure of a site must be considered when selecting a location. Important factors to consider are water, wastewater, electric power, natural gas and fiber optic availability. Sites should be evaluated based on infrastructure access to the site and the capability of the infrastructure.

Zoning must also be considered in choosing a site. Zoning sets the standards that apply to land and buildings within the city; cities follow a general plan that designates which sites are appropriate for each type of use and are compatible with surrounding uses. Companies need to consider if the site they have chosen is zoned appropriately for the facility’s use. If the preferred site does not have suitable zoning, the company must apply to have the site rezoned, which is generally a three-to-six month process to determine if the new zoning is compatible with the surrounding area.

Measuring Accessibility Today’s increasingly global, high-tech, time-sensitive economy requires highly efficient intermodal systems, with airports serving as a key transportation link. Air transport access for both products and people is crucial for growing export-oriented enterprises. Measure the availability of direct and one-stop flights, flight times and airport efficiency.

Acquiring Real Estate International investors find the United States to be an attractive place for investment, because of its strong private property rights, independent judiciary, growth oriented tax law and liquid capital markets. A recent survey conducted by the Association of Foreign Investors in Real Estate found the U.S. to be consistently the number one choice for foreign real estate investment, with

55 percent of survey respondents ranking the U.S. as providing the best opportunities for capital appreciation. « Foreign Ownership Legal Conditions: Foreign nationals face very few restrictions to acquiring, owning or transferring real property in the United States. In most respects, foreign owners of real estate are treated no differently from their American counterparts.

Although the United States government generally does not restrict foreign ownership of real estate, foreign investors should be aware of several federal statutes, including but not limited to the following statutes.

First, the Foreign Investment in Real Property Tax Act collects income tax from foreign investors that transfer real property in the United States.

Generally, a buyer who purchases real estate from a foreign investor must withhold a tax equal to 10 percent of the amount paid for the property.

The law applies whether or not the foreign investor holds title to the property individually or through a business entity.

Next, the International Investment and Trade in Services Survey Act creates reporting requirements for foreign investors who own or control 10 percent or more of a United States business enterprise. A business enterprise includes any business entity and any ownership of real estate, whether or not the foreign investor holds title to the property individually or through an entity. The law exempts any investment that is under $1 million, is less than 200 acres or is real estate intended for personal use. inally, American citizens are prohibited from transacting with any individual F or entity on the Specially Designated Nationals List (“SDN List”), which is published by the Office of Foreign Asset Control. The SDN List includes individuals and entities that are connected with certain foreign governments, as well as individuals or groups connected with terrorism and narcotics trafficking. Real estate purchase agreements typically require the foreign investor to represent that he or she is not on the SDN List.

04 INVESTING IN THE UNITED STATES

21

here are many potential tax issues that foreign investors should consider T when acquiring real property in the United States. For example, a foreign investor should consider any tax treaty in place between the United States and the investor’s country of domicile in deciding how to structure any real estate transaction.

during and after construction to ensure compliance with local, regional and national building codes. The inspections and permitting process can vary greatly between markets and should be evaluated if your project includes a construction period.

4.2 GREATER PHOENIX MARKET CONDITIONS «P urchasing Process: When purchasing a commercial property, a typical inspection or feasibility period in a commercial purchase contract will be 60 to 90 days. There can also be longer periods if the property’s use is to be changed requiring a zoning change or other regulatory approval by the appropriate governmental body. ypically, a commercial real estate representative will assist with the site T search, and an attorney will then assist with the commercial property purchase transaction by negotiating and preparing the purchase contract, reviewing the property and title documents, and assisting with the feasibility investigation and closing, including the review of final title insurance commitment and endorsements. Closings are most always done through an escrow agent. « F inancing: Commercial loan terms vary, depending upon the value of the property compared to the amount of the loan and the creditworthiness of the buyer. Unlike residential loans that have terms as long as 30 years, commercial loans frequently mature in five, seven or 10 years. Loans are available from a variety of sources depending upon the property and borrower. Some lenders may require a full or partial guarantee depending upon the particular facts.

Assessing Regulatory Environment All states issue federally mandated permits called operating permits, which are legally enforceable documents that generally apply to companies with significant air emissions or high levels of sensitive elements in the waste water.

Additionally, in counties and cities throughout the country, building permits are required for new construction, adding onto pre-existing structures and major renovations. This process generally includes an inspection process

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04 INVESTING IN THE UNITED STATES

Below are some details specific to the local market conditions in Greater Phoenix. Overall, it is a growing, thriving market that has prepared for and is open to new businesses and new ideas. The information below touches on some of the region’s offerings, but is by no means comprehensive.

GPEC can provide a more detailed analysis of the market and support your individual needs as you considering expanding into the U.S. Labor Market Greater Phoenix has a growing labor market that is equipped to meet the needs of companies locating their operations in the region. In the previous decade, the labor market in the region grew by a quarter million people, and this number is expected to continue growing. Approximately 28.5 percent of the population in the metro area has a bachelor’s degree or higher, and nearly 10 percent of the population has a graduate or professional degree. The cost of labor here is less expensive than in most other large, metropolitan markets with the media wage at just more than $35,000.

Arizona is a right-to-work state, so employees cannot be required to join or pay dues to a union. Workers compensation rates and unemployment insurance rates are among the best in the country.

Real Estate In Greater Phoenix, it is very feasible to purchase land, purchase an existing building, lease an existing building or build a new building.

We currently have an industrial inventory of more than 275 million square feet.

The region is also constantly adding new industrial space to keep up with market demand.

WORKFORCE PROJECTIONS FOR GREATER PHOENIX 10-YEAR CHANGE

EMPLOYMENT 2010 Nonfarm

2020

PERCENT

NUMBER

1,688,905

2,080,929

392,024

23.2

Natural Resources and Mining

3,033

3,595

562

18.5

Construction

82,441

124,250

41,809

50.7

Manufacturing

110,725

122,509

11,784

10.6

Trade, Transportation, and Utilities

345,900

417,381

71,481

20.7

Information

27,433

29,385

1,952

7.1

Financial Activities

137,375

161,340

23,965

17.4

Professional and Businesss Services

270,716

354,491

83,775

30.9

Education and Health Services

239,100

323,088

83,988

35.1

Leisure and Hospitality

173,416

218,395

44,979

25.9

Other Services

63,958

69,400

5,410

8.5

Government

234,808

257,127

22,319

9.5

SECTORS

Source: Azstats.gov

The region’s office inventory is about 80 million square feet. Office buildings are classified into three categories: A, B and C. Class A buildings are generally the newest buildings with the most amenities offered, however they are the most expensive. Class B properties are generally a little older but can provide a good value as the cost per square foot is less. Class C buildings are usually the oldest with the fewest amenities but provide a substantial cost savings. Generally the difference between the three categories is around $5 per square foot.

Land is available for development should your company want to design a facility to meet its specifications. Parcels of all sizes – up to hundreds of acres – are available in the Greater Phoenix area. For example, the region has more than 50 shovel-ready sites (sites that are zoned, with utilities available to the site and where construction can commence immediately) that are available to fit your needs. GPEC and/or site selection consultants can work with your company to find the right parcel in the right location for your business.

04 INVESTING IN THE UNITED STATES

23

« F oreign Ownership: We impose no restrictions on the foreign ownership of real estate. A foreign investor may take title to property in Arizona individually, through a trust or through a business entity. Investors that acquire real estate in Arizona often create a new business entity under Arizona law that takes ownership of the property, such as a corporation, a limited liability company or a limited partnership. The Arizona Corporation Commission provides the necessary forms for creating a corporation or limited liability company.

A foreign investor may also take title to Arizona property thorough an entity incorporated in another state or another country. To qualify to do business in Arizona, the entity must register with the Arizona Corporation Commission. The entity must appoint a statutory agent to receive service of process in Arizona and designate a known place of business within Arizona. An out-of-state entity that is not qualified to do business in Arizona cannot file a lawsuit in any Arizona court.

Permitting/Regulations All of GPEC’s 21 town and city members have agreed to a 90-day-or-less permitting process. Many of those even offer a quicker turnaround. In fact, the City of Phoenix offers both 24-hour inspections and 24-hour permitting through certified vendors.

Utilities Resource management authorities have been planning for the state’s water and energy future for decades. In fact, unique measures ensure we’ll have ample resources for years to come. For example, more than 4.7 million acre-feet of water has been stored underground for future use so that it can be recovered when needed. Furthermore, these business-minded utilities have provided Arizona with cost-competitive energy, water and gas. « Energy: Two utilities in the Greater Phoenix region provide electricity to businesses and residents: Arizona Public Service (APS) and Salt River Project (SRP). The cost of electricity will depend on the service territory

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04 INVESTING IN THE UNITED STATES

in which your company locates – whether it is a commercial or industrial operation – and the electricity use and demand the company will need.

When meeting, the utilities, they will establish your rate by assessing you net consumption and your load profile (load factor). Utilities disclose the cost of electricity in tariffs. The majority of electricity comes from a reliable base of nuclear, natural gas and coal resources.

GPEC can provide comparative analysis of the cost of utilities to companies that are considering moving into the market. Additionally, GPEC can facilitate meetings between the utility providers and your company. « Water: Water providers in Greater Phoenix have been planning for developing water suppliers for more than 100 years. SRP operates and

More than 4.7 million acre-feet of water has been stored underground for future use that can be recovered when needed. This represents enough water to meet municipal and industrial demands in the Phoenix area for nearly four years.

– Salt River Project

maintains seven dams and 250 high-capacity groundwater wells that deliver one million acre-feet of water annually to municipal and agricultural users. In addition, the Central Arizona Project (CAP) is a 335-mile long canal that moves more than 1.4 million acre-feet annually from the Colorado River and Lake Havasu to residents in the Phoenix and Tucson metropolitan areas.

There are two main forms of income tax in Arizona: Personal income tax and corporate income tax. Personal income tax is assessed on the employees of the company. Arizona has a relatively low personal income tax that ranges from 2.59 percent for incomes under $10,000 to 4.54 percent for those with income over $150,000. Income taxes are only assessed at the state and federal level, not at a city or county level.

ater costs in Arizona are relatively inexpensive and rank among the W lowest in the Western United States. SRP and the Central Arizona Project (CAP) are water wholesalers, and there are many private and municipal water retailers. When meeting the city, they will establish your rate by assessing your gallons-per-day usage, water pressure requirements, use of potable or grey water and piping-size requirement. As with energy, GPEC can provide a comparative analysis of water costs at varying usage rates to companies considering investing in Greater Phoenix and other markets.

Corporate income tax is charged on the taxable income of the business.

The percent of income that is taxable is determined based on a formula that factors in payroll, property and sales in Arizona compared to those factors company-wide. The rate is currently 6.9 percent, but Arizona’s policies call for a decline in the rate starting in 2014: It will decrease to 4.9 percent by 2017.

« Gas: Southwest Gas is the region’s sole provider of natural gas. The company provides natural gas service to nearly 1.9 million customers in Arizona, California and Nevada. « Telecom: Telecommunications options for the region are anchored by two major providers, CenturyLink and Cox Communications.

Local Taxation Your actual tax burden will depend on a number of factors. Taxes such as income tax, sales tax and property taxes should be considered when making a location decision.

Sales tax is assessed on purchases made by a company, usually at the point of sale. There are special exemptions on sales tax available, including the purchase of equipment for use in manufacturing. The current sales tax rate for the state is 5.6 percent, and in Maricopa County the rate is 0.7 percent.

Rates vary from city to city in Arizona, but are generally around 2 percent on your purchases.

Property taxes are levied on the value of the property and serve to support services in the cities, the county and local school districts. The state offers aggressive depreciation schedules on personal property (i.e., equipment, computers, furniture) to reduce property taxes. Currently, the average effective tax rate for commercial property is approximately 2 percent of the total value of the property. Greater Phoenix residents also pay property taxes, but the average effective tax rate is only 1 percent of the total value of the property.

04 INVESTING IN THE UNITED STATES

25

« Research and development credits: Companies that invest in research and development activities may qualify for credits to offset tax liability.

ARIZONA CONTINUES TO BECOME MORE BUSINESSFRIENDLY (TAXES TO DECREASE) CORPORATE INCOME TAX RATE EFFECTIVE CORPORATE INCOME (NON-EXPORTER) TAX RATE (100% EXPORTER)

SALES FACTOR

2013

6.97%

1.39%

80%

2017

4.90%

0.00%

100%

Incentive Programs Qualifying companies can benefit from incentives in Greater Phoenix. The total value of incentives depends on the number of jobs created here, the average wage of the job created, the total size of the facility and the capital that will be invested by your company (including purchase price and/or construction cost of the building, land costs and the value of equipment and personal property).

Companies locating in Greater Phoenix may qualify for a variety of programs, such as: « J ob training: These programs provide funding that reimburse a portion of the cost of training new and current employees in the skill sets needed to complete the job. « I ncome tax credits: These programs offset the company’s income tax liability.

Most programs allocate funding based on the number of jobs created or capital invested.

«P roperty tax reduction: Programs such as this allow a company to reduce its property tax liability for a specific amount of time if the company meets necessary import/export requirements.

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05 HOW TO START & GROW A COMPANY IN GREATER PHOENIX

« Discretionary, performance-based grants: The Arizona Competes Fund provides funding for corporations needing assistance with offsetting public infrastructure, job training or job relocation costs. The funds are highly competitive and awarded based upon the merits of the project.

HOW TO START & GROW A COMPANY IN GREATER PHOENIX 5.1 HOW TO SET UP A NEW BUSINESS Choose a Business Entity The U.S. has no federal company law and the rules regarding the formation, operation and dissolution of business entities since they are defined by the state where the business entity is formed. You have your choice of several different types of business entities that you may establish. « Corporation: A corporation is managed by a board of directors and owned by shareholders. The corporation is a separate legal outfit from its directors and shareholders, who generally may not be held liable for the debts and obligations of the corporation – if corporate formalities are observed. To achieve and maintain limited liability, a corporation should be adequately capitalized. However, the non-U.S. parent of the company may not be immune from product liability claims in the U.S. A corporation must have officers as well as directors, but the roles may overlap. In general, a president, chief financial officer and secretary must

be appointed by each corporation. There are no nationality requirements imposed on management. corporation and its shareholders are generally subject to double A taxation, at both corporate and shareholder levels, but certain corporations may make an “S” corporation election, which results in the corporation being treated similar to a partnership in that the corporation’s taxable profits and losses are passed on to shareholders. However, note that an “S” corporation may not be owned by non-U.S. persons. « Limited Liability Company: A limited liability company, or “LLC,” is a hybrid between a corporation and a partnership, in that its owners benefit from limited liability (i.e., the owners are not liable for the debts and obligations of the LLC). Unless it elects otherwise, an LLC is treated like a partnership for tax purposes and combines certain advantages of both entities. An LLC is managed by its managers and owned by its members, each of whom has limited liability. However, an LLC may elect to be taxed as a “flow through” or a corporation. In contrast to most corporations, all financial benefits accruing to shareholders need not do so in direct proportion to the share ownership. Instead, the LLC’s operating agreement may describe how profits, losses and distributions will be allocated, which may differ from strict ownership percentages. « General Partnership: A general partnership is owned and managed by its partners – who are personally liable for the debts of the partnership – and is “flow through” for income tax purposes. « Limited Partnership: A limited partnership is managed by certain partners – called general partners – and owned by all of the partners. The partners who do not participate in the control and management of the partnership are called limited partners, and their liability is limited to the amount of their investment in the partnership. Unless it elects otherwise, a limited partnership is “flow-through” for tax purposes.

« Limited Liability Partnership: In most states, a general partnership and a limited partnership may elect to be limited liability partnerships, or “LLPs” or “LLLPs.” An LLP essentially provides the same liability protection for its owners as an LLC. An LLP allows each partner to actively participate in management affairs. Unless it elects otherwise, an LLP is “flow-through” for tax purposes. « Joint Ventures: “Joint venture” is a general term used to indicate a relationship between parties participating in a common enterprise. It describes an arrangement in which two or more parties decide to form a new business together or contribute portions of an existing business or other assets to a joint enterprise; the term does not describe a form of legal entity. Joint ventures can be formed using a corporation, LLC, LP or general partnership. Issues to consider when forming a joint venture

05 HOW TO START & GROW A COMPANY IN GREATER PHOENIX

27

« “Branch” Only: A foreign business’s first steps into the U.S. market are often through sales, distribution or licensing arrangements. Some businesses choose to commence U.S.-based operations by opening a U.S. branch that is simply an extension of the non-U.S. company’s headquarters. A U.S. branch may be easily established; a non-U.S. company simply registers as a foreign corporation in the state or states where the business will be conducted, which typically involves filing a form and paying a modest fee. However, a significant disadvantage of establishing a U.S. branch is that the non-U.S. parent company may be exposed to all of the liabilities of the U.S. branch, including the possibility of a full audit by the U.S. Internal Revenue Service. Using a U.S. branch office potentially permits U.S. start-up losses to be applied against the home office’s income. However, U.S. tax laws generally impose a tax on U.S. branch profits in a similar manner to how a corporate subsidiary is taxed; distributions of profits from the branch to its home office are also taxed as dividend distributions.

Business Name Before you form your business entity, you should confirm the availability of the proposed business name. This is done at the state level, but you should note that the availability of a name does not mean that it is not infringing the intellectual property rights of third parties. An organization may conduct business using a name other than its registered name, provided that such “fictitious” name or trade name is registered with the applicable secretary of state or in the county where its principal place of business is located and in which business is carried out under that name. include the scope of the venture, required capital contributions (both initially and at later intervals), respective responsibilities of the entities involved, sharing of profits and losses, decision-making and the breaking of deadlocks, and mechanisms for dissolution and distribution of assets.

However, direct participation in a joint venture or “cooperation” agreement may expose any non-U.S. owner to liability for the venture’s obligations and liabilities.

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05 HOW TO START & GROW A COMPANY IN GREATER PHOENIX

* For information on Tax Elections and Governance, please visit www.gpec.org/toolkit.

5.2 HOW TO ACCESS CAPITAL When expanding to Greater Phoenix, you’ll want to establish a banking relationship with an Arizona bank that has international banking capabilities, especially those with service related to multi-currency loans and deposits,

international treasure management and account balance reporting. When access capital, here are three different ways to help grow your company: How to Utilize Angel Investment An angel investor is an individual who provides capital for a business startup usually in exchange for ownership equity. A small number of angel investors form angel networks to share research and pool their investment capital.

Foreign startup companies and early-stage growth ventures that are looking to enter the U.S. market through Arizona should use the following simple check list:

TOP 10 COUNTRIES WITH BUSINESS PRESENCE IN GREATER PHOENIX

# of companies*

40 35 30 25

• First, determine where your business is in the seven lifecycle stages of a startup or early-stage company: 1. Research 2. Ideation / Prototyping 3. Validation 4. Commercialization 5. Scale / Growth 6. Sustainability 7. Exit • Next, align your company’s lifecycle stage with your goals for U.S. market entry. Do you want to: « Determine the size of market available to your innovation in the U.S. market? « Understand the competitive head winds in the U.S. market for your innovation? « Identify a clearer understanding of how your product or service or solution will be used in the U.S. market by American consumers? « Access capital in the U.S. in order to go to market? « Tap into U.S. talent (management, workforce, etc.) to help your company enter the U.S. market?

20 15 10 5 a

ad

n Ca

an

Jap

y om ance rland ands exico tralia eden an l gd rm Fr M Aus n e i Sw K itze ether G w d S e N t i Un

*Values represent number of foreign-owned manufacturing, distribution and technology companies Source: City of Phoenix Economic Development Office (data current as of 8/30/2012)

• Then, align your lifecycle stage and goals with the resources available in the market: « Research, Ideation & Prototyping stage: • Work with the Arizona Commerce Authority; Arizona State University’s Venture Catalyst program; nonprofit Incubators like SeedSpot or CEI (Center of Entrepreneurial Innovation); or nonprofit co-work space providers like Co+Hoots.

05 HOW TO START & GROW A COMPANY IN GREATER PHOENIX

29

• Any of these resources can provide basic services, such as work space, mentoring and other free services to help you further shape your idea or concept before validating it and/or forming a business around it. « Validation stage: W ork with nonprofit accelerators like Mac6 or Gangplank; or for profit Commercializors like: Tallwave.

G roups like these can provide free, fee-based or equity-based concept- and business-validation services for entrepreneurs who need such validation in order to move into the market and begin securing seed funding. « Commercialization, Growth (Scale), Sustainability and Exit stages: W ork with for-profit commercializors like Tallwave; or venture capital firms like the Angel Capital Association, Canal Partners, Grayhawk, Diamond Ventures, etc.

roups like these provide either venture capital or a combination G of services and capital to help Arizona entrepreneurs successfully fund their seed, iterative and, sometimes, reiterative rounds T he Arizona-based startup Tallwave, founded in 2010, became the nation’s first “commercializor” for startups and early-stage growth ventures, including global companies that showed interest in exploring market opportunity in the U.S. Tallwave is the only known commercializor in the country of all the resources above. Unique among incubators, accelerators and venture capital firms, Tallwave provides all the services and capital resources that each of these groups provides separately, but under one roof.

Global entrepreneurs can find Arizona an appealing place to commercialize their ventures for scale and sustainability, and to maximize the value they’re building. Foreign investors work with firms like GPEC and Tallwave to get connected to entrepreneurs and to minimize their investment risk.

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05 HOW TO START & GROW A COMPANY IN GREATER PHOENIX

How to Engage a Venture Capital Firm or Investor Venture capital (“VC”) is best suited for early-stage companies in the technology space. Venture capitalists consistently seek opportunities to generate eight-to-ten times their investment from companies in which they invest. Technology companies usually provide such potential and do not qualify for traditional bank debt. Often times, these companies are funded by friends, family and personal capital to launch the business.

One of the most important considerations in seeking venture capital is synergy with your company. There are many VC funds in the market, but each venture capitalist will have different philosophies and investment parameters.

Understanding the capacity of the VC and its industry focus saves a lot of unnecessary effort. Seek out only those VCs that are within your industry vertical and that fit your capital needs; for example, an established VC is likely less interested in a $3 million round than a $15 million round.

A VC partner will see about 250 business plans per year and invest in one or two. As such, the best way to contact a VC is through a personal introduction. Unsolicited emails are often times dismissed. When submitting a summary of the investment opportunity, it is important to cover the following components: « Value proposition: Problem that is solved by your product/service « Defensibility: Barriers to entry, intellectual property « Business model: Unit economics or ability to make money « Market size: Should be $1 billion in annual revenue in the next 4-5 years « Management: Experience and cohesiveness « Business plan: Go-to-market strategy and financial projections The VC will conduct due diligence on your company after you submit a summary or do a presentation. Likewise, you should conduct your own due diligence on the VC. You should understand their domain expertise, their resources and the value they bring to the table. With the right fit, the VC partner can help create significant value at the end of your journey.

How to Prepare an Initial Public Offering (IPO) One method for a seasoned company to gain access to additional and robust capital is to engage in an initial public offering (“IPO”). For many emerging companies, an IPO is the preferred exit strategy for early-stage investors and founders to ultimately realize the return on their initial investment by selling all or part of their ownership into the public capital markets in the United States. For the most part, IPOs are limited to those companies that have a proven track record of healthy financial condition and results of operations. Following an IPO, the reporting company’s stock (equity) is considered “registered” under the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and trades freely in the public market (often on a national securities exchange such as the NYSE or NASDAQ).

Preparing for an IPO involves a thorough assessment of whether or not a company is prepared to operate as a public company subject to SEC reporting. The IPO process and the resulting compliance requirements involve substantial up-front and ongoing time and costs. Prior to the IPO process, the company must assemble a working group that includes the management team, the board of directors, legal counsel, auditors, a registrar and transfer agent and, in most instances, an investment bank. All such advisors and consultants should be carefully evaluated in advance to determine if they have substantial experience with the IPO process – since their role in underwriting the IPO is critical to its ultimate success. This working group must evaluate such key issues as the appropriate market in which to launch, the size of the market, the regulatory requirements of both the SEC and relevant securities exchange, whether regulations will require any structural changes to the company, the likelihood of success, any scaled disclosure requirements available to emerging growth companies and the impact of an IPO on existing shareholders.

IPOs require extensive cooperating and coordination among members of the working group to complete its public disclosure documents, which will generally include a long-form registration statement prescribed by (and to be filed with) the SEC (e.g., a Form S-1 and Prospectus), with a registration

statement including audited financial statements. The IPO process will also involve: Various agreements between the company, the underwriters, the registrar and transfer agent and the shareholders; various internal documents, such as charter amendments, board and shareholder consents, lock-up agreements and certificates of legal opinions; and intensive legal and financial due diligence, including preparation of various opinions from legal counsel and the auditors. Once the IPO is completed, the company will be a reporting entity that has ongoing periodic filing obligations and substantial compliance requirements related to, among other things, SEC (and possibly other securities exchange) rules and regulations.

5.3 HOW TO SELL & MARKET A PRODUCT In just a bit, you’ll read more about establishing distribution relationships to get your product or service into the market. Prior to establishing distribution or even strategic partnerships, there is a critical process a company must go through – structuring your Go-To-Market (GTM) plan. Before you can

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determine how to sell your product and service, you first have to understand how you’re positioning your company in the market: « Are your customers businesses or consumers? « Is your product something they can buy online, or only in stores or brick-and-mortar entities? « How are you competitively positioned? « Are you a premium brand targeting a high-end customer? « Or, are you a commodity brand targeting the mass market? « Are you providing a niche and specialized solution for a specific market? « Or, is your product or service geared toward meeting a broad market need at the lowest price possible?

Once you’ve determined those critical elements – commonly known as brand position and GTM strategy – you’ll be ready to take the next step, which is determining whether the most effective and economical way to reach your market is to sell to them directly, or to establish partnerships that already sell to your market. These partnerships create what are commonly referred to as “channels” to market. And the partners that help you get there are often called “channel partnerships”. This is an important consideration for your business because both can have an impact on your pricing strategy and, ultimately, your revenues and earnings potential.

For example, if you’re a widget manufacturer who sells your widgets online direct to customers, you may have more leverage in your pricing model for discounts and special incentives. Whereas, if you’re selling your widgets through a distributor, you will have a wholesale or distributor pricing structure that already discounts your product before it ever goes to market. The first scenario may produce higher revenues and profit margins, but slower growth because you’re blazing your own “direct sales” trail to your target customer. The second scenario may produce lower revenues and tighter profit margins, but could also provide

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a faster growth trajectory because you’re selling “through” someone else’s relationships into the marketplace you’re targeting.

The key in all of this is to be clear about positioning your company – messaging your products competitively and compellingly, understanding who your true target customer is (not just “I sell to consumers” or “I sell to businesses”), focusing on what type of consumer or business customer is your best fit, and then identifying the shortest and most cost effective path to that customer. Then, map your direct sales strategy and bake it into your GTM plan, or decide who your best partners might be to help you get there.

important term and conditions for each new project or task, including: publication, confidentiality, intellectual property, indemnification, publicity, rights and procedures to terminate the project; and insurance, warranties, liability, governing law, and other items necessary for contracts. Once a master research agreement is fully executed, all project-specific information is combined into an addendum often called a “project specification” or “task order.” The addendum is attached to the master research agreement and frequently contains the following specific items: scope of work to be conducted, budget, compensation; schedules, milestones, and deliverables; co-funding information (if any), and background intellectual property (if any).

5.4 HOW TO FORM STRATEGIC PARTNERSHIPS Partnerships with Universities Partnerships with universities are usually established through university economic development offices. For example, Arizona State University’s industry engagement efforts are housed within SkySong – the university’s innovation center located in the city of Scottsdale. These offices have a team of experts that connect companies to various resources within the university and guide companies through the partnership establishment process.

Public institutions, like Arizona State University, the University of Arizona, and the Maricopa Community Colleges, are subject to federal and state laws that govern certain types of relationships. For example, vendor relationships are subject to state procurement laws.

The region’s research institutions often partner with companies to develop or license intellectual property. The partnership could entail working on a basic research problem, commercializing a technology, or licensing existing university technologies.

• Industry-sponsored research partnerships, where more than one project is likely to be undertaken, are governed by “master research agreements.” These agreements govern all research activities supported the sponsor without the necessity of renegotiating

• In order to develop a technology for commercialization using university intellectual property, a license agreement, negotiated on a case-bycase basis, is used. Each negotiated agreements includes the following elements: « License fees – fee depends on the market value of technologies « Equity – institutions will likely expect to receive equity in start-up companies based on their technology « Patent reimbursement – fee reflects the cost incurred to patent technology « Development period – plans that outline development milestones are required; projects with long development horizons use development plans to reduce license fees on high-risk projects since milestones payments are contingent on development progress « Royalties – fees paid when products or services utilizing technology are sold; a minimum royalty is also likely Establish Distribution Partners Depending on your industry, there are a number of ways to “go to market” in the United States. For example, producers of fast-moving consumer goods will likely need to go to a large retailer such as Walmart or Target in order to gain significant market share and shelf space. For those two and similar retailers, as well as for major grocery chains, you should have a well thought

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out promotion plan, and be able to assure them of reliable, timely supply at a competitive price.

On the other hand, if your target market is major businesses such as Boeing, Honeywell or even Intel, you should understand that significant parts of their supply chain may be in the hands of distributors. In that case, it will be necessary to work with both the distributor and the ultimate customer to make certain the items you will supply will meet specifications and can be priced competitively. Many distributors carry entire lines of items, and it may be important for your offerings to fit in with the various items the distributors already have. Incidentally, companies such as Honeywell, in some cases, will look to resell items to its extensive customer base because there are clear advantages to that arrangement.

If you’re in the health care industry, distributors such as Cardinal, McKesson and Owens & Minor control major parts of that market. Similarly, companies wishing to address the food business – whether that is food service or grocery stores – are advised to think about food brokers and dedicated distributors as gateways to these markets. Contracts with appropriate terms and pricing, as well as promotional support, are critical to appeal to these firms.

Arizona has a long-established capability for handling goods to and from Mexico, especially fresh produce. There are large warehouses and exchanges – as well as very reputable customs brokers and freight forwarders – that specialize in moving goods and selling to both the Mexico and U.S. markets.

Greater Phoenix also has a number of large purchasing organizations based in the region: In particular, Avnet, the world’s leading electronics distributor, has its headquarters in Phoenix, as does mining giant Freeport–McMoRan. Also noteworthy are Intel, Honeywell, and Henkel USA, which all make purchasing decisions through groups located in this region.

Incubators/Accelerators When a startup or early-stage company is formed, it is often in need of leadership, strategic introductions, networking opportunities, access to capital and basic support services. Many of these needs, understandably,

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take a backseat to the actual efforts to make the business a viable, revenuegenerating operation. Incubators and accelerators often seek to assist an emerging company with some of these needs during this critical, early-stage time period.

Incubators often provide access to an external leadership team; incubators can take many forms and may be for-profit or nonprofit, private or public.

An accelerator typically seeks to find and select early-stage companies it believes it can assist by providing them training, strategic leadership and mentorship through targeted programs or competitions. Venture capitalist investors frequently provide these programs as they try to learn more about the founders of an early-stage business, their business model and the company’s potential. The most effective incubators and accelerators focus on a particular industry or niche market. Some incubators and accelerators charge a fee for their services, while most seek ownership in the earlystage company in exchange for the assistance they provide. The amount of equity that an incubator or accelerator might expect depends on a number of factors, including the stage of the company and the nature of the assistance being provided. Emerging companies should perform their own due diligence on a particular incubator or accelerator before they agree to involve the incubator or accelerator in their business plans and before they leverage equity in exchange for assistance.

Prior to using a particular incubator or accelerator, review the history of the place you’re considering and its past success in these areas: • Particular industry to which it caters/promotes • Capital raises for its clients • Reaching desired exit goals for its clients (e.g., IPOs, sale of business, etc.)

• Assembling effective boards and management teams for its clients • Some business incubators in Greater Phoenix include AZ TechCelerator in Surprise, ASU’s SkySong in Scottsdale, Innovations in Chandler, AZ Disruptors in Scottsdale Airpark and the West Mesa Business Incubator

Acquiring a Company You may find that the strengths your company is seeking to develop within its own business in the United States might be developed less expensively and more efficiently by simply acquiring that strength from another business and integrating it into your own structure. An acquisition may mean purchasing a majority or all of the outstanding stock of a target company, and this move would give you ownership control of the existing target company, or it may mean simply purchasing the assets necessary to develop a particular strength in the company without your assuming ownership of the target company.

When considering how you want to acquire a company, several factors should be considered related to the ability to effectively make use of the strengths that the target company has to offer your organization. For example, one advantage of a stock purchase is that the target company is essentially handing over the keys to a fully intact company, including its employees, facilities and intellectual property; whereas, in an asset purchase, your company will need to pick and choose which assets to bring into its operations and need to document such acquisitions to various IP assignments and employment agreements. An asset purchase may be more desirable in many instances because the acquiring company can limit the liabilities of the target company that it will be subject to and, in many ways, limit the risks associated with acquiring an existing company.

Merger and acquisition transactions can take many forms and structures; their form will be shaped by tax and accounting considerations. These transactions happen when participants believe that a new combination or acquisition of assets will create value, advance the synergy of the staff or accelerate an enterprise. Generally speaking, there is a distinction made between (1) a merger, in which one or more legal entities is combined or restructured into a new entity in connection with the purchase of the target business, and (2) an acquisition, in which one entity (A) purchases a majority or all of the outstanding stock of the target company (which would provide ownership control of the existing target company), or (B) purchases

identified assets (and assumes identified liabilities) of the target company.

As a practical matter, the traditional distinctions between the terms merger and acquisition are often not helpful without more detail as to the actual structure of the transaction.

Arizona law permits an entity to acquire another entity, whether by consolidation, stock acquisition or asset acquisition. Generally, when a

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merger takes effect, the existence, title to property, liabilities, court or administrative proceedings, and shares and other securities are merged into (or continue with) the surviving entity. Arizona requires board approval of a merger plan or share exchange, and in some cases requires the board to submit the plan to its shareholders for approval. In general, foreign entities may merge with or into an Arizona entity, provided the transaction complies with the law of both jurisdictions. The plan of merger or exchange must be filed with the Arizona Corporation Commission to become effective. Mergers and acquisitions are also subject to federal and state antitrust laws.

If a shareholder of a private entity disagrees with (or dissents from), among other things, a sale or disposition of all or mostly all of the corporation’s assets or a merger of the corporation with another corporation, subject to certain limitations, the shareholder may – by complying with certain notice and other statutory requirements – require the corporation to purchase his or her shares. If the corporation and the dissenting shareholder cannot agree on a value for the shares, the corporation must engage a court in determining the shares’ value.

5.5 HOW TO FIND QUALIFIED EMPLOYEES CNBC, a major national news outlet, recently ranked Arizona’s workforce higher than any other state in terms of training, quality and availability of workers – while maintaining one of the lowest costs for labor in the nation.

In Greater Phoenix, our colleges and universities produce some of the best talent in the nation. Additionally, because the population is growing, talent is always moving into the market and there are many avenues to finding the right employees. The universities and community college system are a great network to tap into and these entities are likely to help a company find employees or institute training programs to ensure the next generation of graduates meets our market’s corporate needs. Additionally, there are several popular job fairs, online and print job sites on which to post vacant positions as well as several staffing agencies whose primary role is to assist companies with their hiring needs.

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Staffing Agencies Many staffing firms also offer a Recruitment Process Outsourcing (RPO) model. When businesses hire a staffing or RPO staffing firm, the firm works on behalf of the company to locate candidates, screen resumes and recommend qualified candidates based on the open positions in the company. It is then the company’s responsibility to interview, perform final screening and background checks, and manage the hiring process.

Another option is to outsource your entire recruiting process to a staffing or executive search firm – even if you prefer to use a contract employment model. These firms have the knowledge, experience and capability to handle any or all of the recruiting process.

Additionally, using contract personnel is a way to staff your company quickly without the commitment and expense of hiring employees directly on your payroll. Contract employees are employed by the staffing firm, and are be billed per hour worked for these employees. Rates can vary greatly, depending on the expertise of the staffing firm, the length of time they are to be employed by the firm, the types of positions being filled and the number of positions being filled.

Picking the right firm is important; you will want to find one that is well versed in your industry, well versed in the types of positions you are trying to fill and one that can handle the size of your project.

HUMAN RESOURCES AND EMPLOYMENT LAW When considering investment into the United States and in Greater Phoenix, there are a multitude of questions you may have with regard to your workforce, including how compensation works, specific employments laws and regulations and benefit plans for your employees. *For comprehensive info on the topics below, please visit www.gpec.org/toolkit: Stock options Minimum wage and executive compensation Employment law (At-will employment, discrimination, wage payment laws, etc.)

Union regulation Employee benefits (medical plans, retirement plans, etc.)

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IMMIGRATION LAW FOR EMPLOYEES & INVESTORS The typical process under employment-based immigration is to either enter the United States to create a business, or enter with an offer from a sponsoring employer. There are two main types of visas in the United States. Immigrant visas (green cards), and non-immigrant visas (work visas). A non-immigrant visa allows an individual to work and live in the United States for a temporary period. Non-immigrant visas are easier to obtain and have short delays. Immigrant visas permit an individual to live and work in the Unites States permanently. They also provide a path to become a citizen. Immigrant visas are more difficult to obtain and typically have long delays. Below is a description of several different types of nonimmigrant visas, and Immigrant visas.

Non-Immigrant Visas H-1B & L-1A Visas: Under the H-1B visa program, a professional with specialized knowledge may work and live in the United States with sponsorship from an employer. The H-1B visa holder must remain employed by a sponsoring employer to remain in the United States. The H-1B visa holder’s spouse and children under the age of 21 are permitted to live in the United States and attend school, but they may not work. Spouses and children of H-1B visa holders may petition for their own H-1B visas to allow them to work.

Every year, the United States issues 65,000 new H-1B visas to skilled professionals with the equivalent of a Bachelor’s degree, and an additional 20,000 H-1B visas to those who hold a Master’s degree. H-1B visas are valid for three-year periods and may be renewed once. The H-1B application takes around 90 days to obtain.

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To obtain permanent residency (green card), the H-1B visa holder must file additional petitions with the U.S. government, and the employer must sponsor the visa holder. Currently, there is a back log for green cards issued to people with H-1B visas for citizens of China and India. The processing time ranges from two years to ten years. If the visa holder has applied for a green card within the first six years of having an H-1B visa, he can obtain additional extensions of his H-1B visa.

The L-1A and L-1B visas are very similar to an H-1B visa. To qualify for an L-1A or L-1B visa, the applicant must be working for a U.S.-based company that has operations in the applicant’s native country. This visa is known as an intra-company transfer visa. The applicant must have worked for the sponsoring company for at least one year. Under the L-1A visa, the applicant must be coming to the U.S. to perform an executive or managerial role. Under the L-1B visa, the application must be have specialized knowledge.

The L-1A visa is valid for three years, with the option to renew for an additional four years. The L-1B visa is valid for three years, with the option to renew for an additional two years. The L-1A visa holder must remain working for the sponsoring employer to remain in the United States.

The L-1A visa provides for an expedited green card application for those qualifying as a Multi-National Manager (which is discussed below).

Immigrant Visas (Green Cards) EB-5 Visas: Under the EB-5 immigrant visa program, an investor, his or her spouse, and all unmarried children under the age of 21 can secure permanent residency (green card) within the United States in less than 18 months and petition for U.S. Citizenship 5 years later. EB-5 visas are available to citizens of all countries. This is an immigrant visa that does not require a sponsoring employer in the traditional sense.

To qualify for a visa under the EB-5 category, an EB-5 investor must invest at least $500,000 (generally $1,000,000) in a for-profit U.S. business and create not less than 10 full-time permanent jobs for American workers.

While the number of jobs a project can create limits the amount of EB-5 capital that can be raised, both indirect and induced jobs can be counted.

Indirect jobs are stimulated through construction expenditures for a new or remolded facility and the subsequent spending of the operational business (supply chain spending). Induced jobs are a function of the payroll. The more a business pays their employees, the more those employees spend in the surrounding community - thus stimulating job creation.

To obtain immigrant investor status an alien investor must first apply to the United States Citizenship and Immigration Service (“USCIS”) with all supporting documentation clearly demonstrating that the investment meets all EB-5 requirements. To become a lawful resident, the investor must provide proof of the jobs created and the investment sustained in the U.S. business within 90 days of the second anniversary of first arrival in the U.S.

EB-5 capital terms tend to be quite favorable. With a low simple interest payment, a five- to seven-year balloon payment, flexible terms, and an ability to structure the investment as debt or equity. EB-5 can be an attractive financing option for new job creating projects and could greatly simplify the visa process for their employees.

B-1 and B-2 Visas Under the B-1 visa, foreign nationals may come to the U.S. to participate in business activities, including business meetings, conventions, contract negotiations, training, and conducting business transactions. Certain other activities may qualify, including settling an estate. These visas may also be used to travel to the U.S. to identify investments and trades eligible for EB-5 immigrant visas and E-1 and E-2 non-immigrant visas.

To be eligible for a B-1 visa, the foreign national must demonstrate that the purpose of his trip is legitimate, he plans to leave after a specific period of time, he has money to fund his activities in the U.S., and he has a residence in his home country. The B-1 visa permits a foreign national to remain in the U.S. for a maximum of one year. The family of a B-1 visa holder must obtain separate B-2 visas to enter the U.S. The B-2 visa permits the family of B-1 visa holders to enter the U.S. and it is also used by those who wish to enter the U.S. to vacation, travel, visit family and friends, and obtain medical treatment.

Student Visas There are several student visas available to those who wish to enter the U.S. to obtain an education. The most common is the F-1 visa. The F-1 visa permits foreign nationals to enter the U.S. to obtain an academic education. Under the F-1 visa, foreign national must be a full time student at an accredited college, university, high school, primary school, or language training school. The education must result in a degree, diploma, or certificate, and the school must be authorized by the U.S. government to accept foreign students.

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The M-1 visa is similar to the F-1 visa, but it is used by those foreign nationals entering the U.S. to obtain a vocational education. Under both the F-1 and M-1 visas, the foreign national has restricted work authorization.

The J-1 visa is an exchange visa is used to educate the foreign national in the U.S. so that the foreign national may use their education in their home country.

Under the J-1 visa, the government designates a sponsoring institution that usually pays for the foreign national’s education. Each exchange program has its own requirements, and many programs require the foreign national to return to their home country for two years after completing their education. Each exchange program determines whether the J-1 visa holder may work in the U.S. while obtaining their education. *For comprehensive info on the topics below, please visit www.gpec.org/toolkit: All types of visas Family-based immigration Diversity visas I-9 and E-Verify (employment verification)

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TAXATION Income and other taxes are imposed by both the federal government and the state governments and, in some cases, by municipalities.

Corporations are subject to federal income tax. In many states, they are also subject to state income taxes. Employers and employees must pay social security tax. The United States does not have a value-added tax (VAT) system, but almost all of the U.S. states impose sales taxes.

8.1: BUSINESS TAXATION Type of Tax System Profits are taxed at corporate income tax rates in the year earned and are taxed again when received by shareholders. Shareholders are taxable at the rates applicable to their status – whether it is corporate, individual, trust or estate.

Dividends are not deductible from the taxable income of the paying corporation.

Taxable Persons Legal entities subject to corporate income tax include corporations, associations, joint-stock companies, insurance companies and banks.

Domestic corporations are taxable on their worldwide income. Income is broadly defined to include all income of whatever type and from whatever source derived. A flat tax of 35 percent applies to a corporation that has taxable income equal to or greater than $18,333,333. Graduated rates, starting as low as percent, apply to income of a corporation with total taxable income less than $18,333,333.

Corporations that make a valid Subchapter S election are treated as “passthrough” entities. Partnerships are also treated as pass-through entities. Income is taxed at the shareholder/partner level and is not taxed at the corporate/ partnership level.

Foreign corporations are subject to U.S. taxation if they are engaged in business in the United States or derive certain types of income from U.S. sources.

Taxes on Capital Net worth tax is not imposed in the United States at the federal level.

If you own real estate in Greater Phoenix, you will not be taxed at the federal level; your real estate taxes will be imposed by the local municipality or the county where you live. Tax rates and methods for assessing the value of property vary from jurisdiction to jurisdiction.

Corporations are subject to tax on capital gains. The tax rates that apply are the same as those for ordinary income. Capital losses are subject to special rules.

Incentives You may be eligible to take advantage of tax incentives, including credits for certain types of activities (such as Research and Development), a deduction for qualifying domestic production activities and various provisions to accelerate

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You are required to pay the full amount of tax you owe for the year on or before the due date of the tax return (without extensions). In addition, your company will be required to make estimated tax payments on a quarterly basis during the year in an amount each equal to 25 percent of the required annual payment. Your organization will have access to optional safe harbor methods for determining your quarterly estimated payments (i.e., annualization approach).

State Corporate Income Taxes Corporate income taxes are imposed by almost all U.S. states and, in some cases, by municipalities. Although the rules for computing the tax base differ from state to state, the tax is normally computed on the amount of the overall income of the corporation that is allocated or apportioned to the taxing jurisdiction. State and local corporate income taxes are deductible from gross income for federal income tax purposes. the benefits of depreciation. For more information on incentives, please refer to section 4.2.

Foreign Tax Credit Foreign income taxes may offset your U.S. income tax on taxable income, to the extent the U.S. tax is allocated to foreign-source taxable income and additional conditions and limitations are satisfied.

Tax Returns and Assessment Corporate tax returns are due on or before the 15th day of the third month following the close of the taxable year. An automatic extension of 6 months can be granted if you file an extension request with the IRS before the initial due date of the return and if you pay the properly estimated amount of tax owed at that time.

Partnership tax returns are due on or before the 15th day of the fourth month following the close of the taxable year. An automatic five-month extension is granted if the partnership files an extension request with the IRS before the initial due date.

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The maximum rate of income tax currently imposed in Arizona is 6.968 percent and will be decreasing to 4.9 percent by 2017.

8.2 INTERNATIONAL TAXATION Taxes on Income and Capital Gains: Foreign corporations are subject to U.S. federal income tax on income that is effectively connected to the conduct of a trade or business in the United States. The permanent establishment standard does not apply under U.S. domestic law but does apply for tax treaty purposes. « Disposition of U.S. Real Property: Foreign corporations and non-residents are subject to tax by the Foreign Investment in Real Property Tax Act (FIRPTA) on the disposition of real property and interests in real property located in the United States. The income or gain from the disposition is treated as if it were effectively connected with a U.S. trade or business.

The FIRPTA applies to interests in real property that are held directly and to interests in a U.S. real property holding corporation (USRPHC). A USRPHC is defined as a domestic corporation if 50 percent or more of

its total fair market value of real property and business assets consist of interests in real property located in the United States. The tax is collected by means of withholding. A domestic corporation will not be treated as a USRPHC if, for the five-year period preceding the date of disposition, it has not held sufficient U.S. real property interests to meet the definition. « Taxes on Capital: Net worth tax is not imposed in the United States at the federal level. Foreign corporations that own property in the United States will be subject to real estate taxes in the local municipalities and counties where the real property is located. « Partnerships with Foreign Partners: Foreign corporations are subject to withholding tax on their allocable share of the effectively connected taxable income of a partnership that is engaged in a trade or business in the United States. The withholding tax is collected by the partnership; it is not the final tax liability, and can be claimed as a credit on the tax return filed by the corporation. « Transfer Pricing: Section 482 of the Internal Revenue Code (IRC) authorizes the IRS to make transfer pricing adjustments in transactions between commonly controlled entities if the price set by the parties is not at arm’s length. I.R.C. section 482 applies to organizations that are owned or controlled, either directly or indirectly, by the same interests.

The IRS is authorized to allocate income, deductions and other tax items between commonly owned or commonly controlled organizations as it deems necessary, in order to prevent evasion of taxes or to clearly reflect the income of the parties. In the case of transfer or license of intangible property, the income from the transfer must be “commensurate with the income attributable to the intangible.”

BANKING Unlike banks in many countries, U.S. banks are not government-owned and managed. They provide deposit facilities for the general public, provide loans for businesses and individuals, and perform various financial services.

The only major governmental banks that actively participate in the banking system are the 12 Federal Reserve banks, which function as a central bank and have policies determined by the Board of Governors of the Federal Reserve System.

The U.S. banking system can be classified into two broad groups: Commercial banks and thrift institutions. Commercial Banks are oriented primarily to commercial activity with corporate customers, although they do provide services to individuals. Thrift institutions traditionally have had a primary function of encouraging personal savings and home buying through mortgage lending, though their activities have expanded beyond this *For comprehensive info on the topics below, please visit www.gpec.org/toolkit: Commercial banks Thrift institutions Establishing a bank account Cash management Credit solutions International money transfers

*For comprehensive info on the topics below, please visit www.gpec.org/toolkit: Individual Taxes

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IMPORTING & EXPORTING 10.1: IMPORTS The World Trade Organization notes one of the benefits of international trade is that it gives consumers more choice and a broader range of goods from which to choose. The WTO also says can also bolster the quality of locally produced goods in the U.S. because of the competition from imports.

There are multiple resources – including the U.S. Customs and Border Protection (CBP) and the U.S. Chamber of Commerce – available to assist companies of any size and with any level of import experience. The CBP is part of the Department of Homeland Security. The CBP has the responsibility of securing the United States’ borders and facilitating lawful international trade and travel. The U.S. Chamber of Commerce represents the interests of more than 3 million businesses across the country. The Chamber of Commerce has colleagues in a number of countries around the world and can offer information on importing from these areas.

10.2: EXPORTS “More than 70 percent of the world’s purchasing power is beyond our borders,” Israel Hernandez, Director General of the U.S. and Foreign Commercial Service, recently said.

In Arizona, you will have multiple resources at your disposal that can assist you with exporting goods, no matter the size of your company or the level your export experience. Such resources include the U.S. Commercial Service (with two offices in Greater Phoenix), the Arizona Commerce Authority (ACA), Arizona’s State Trade and Export Promotion Program, the Export-Import Bank of the United States, and the U.S. Small Business Administration (SBA). You can find contact names and information for each of these agencies and programs in the appendix at the end of the toolkit.

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10 IMPORTING & EXPORTING

FLIGHT HOURS & FREQUENCY TO MAJOR GLOBAL CITIES Airport

City

Total Flights per Week

Flight Duration*

HND

Tokyo, Japan

9

14 Hours

ICN

Seóul, South Korea

1

18 Hours

MEX

Mexico City, Mexico

28

3 Hours

LGA, JFK, EWR

New York, New York

313

4.5 Hours

DEL

Delhi, India

6

25 Hours

HKG

Hong Kong, China

8

20.5 Hours

LAX, LGB, SNA, BUR, ONT

Los Angeles, USA

456

1 Hour

CAI

Cairo, Egypt

6

20 Hours

CDG

Paris, France

21

13 Hours

IST

Istanbul, Turkey

6

20 Hours

LIM

Lima, Peru

7

11 Hours

ORD, MDW

Chicago, USA

193

3.5 Hours

ATL

Atlanta, USA

82

3.5 Hours

BER

Berlin, Germany

7

14 Hours

BCN

Barcelona, Spain

7

14 Hours

LHR

London, England

32

10 Hours

YVR

Vancouver, Canada

53

3 Hours

*One way

Source: Phoenix Sky Harbor International Airport

Foreign Trade Zones Companies who choose to locate in a Foreign Trade Zone (FTZ) or wish to create a magnet zone (area within a certain proximity of an FTZ) are eligible for benefits that can save the company millions of dollars per year. Foreign Trade Zones are secure areas under supervision of the U.S. Customs and Border Protection (CBP) that are considered outside of the customs territory of the U.S. at which special CBP procedures may be used. You may move foreign and domestic merchandise into an FTZ for storage, assembly, manufacturing and processing, all without the payment of dues and other import restrictions until you decide to enter the goods into the U.S. market.

10 IMPORTING & EXPORTING

45

Arizona is one of only two states in the nation with the ability to lower real and personal property taxes up to 72 percent for FTZ-qualified companies. Greater Phoenix has three FTZs: One each in Phoenix, Mesa and Western Maricopa County. Companies locating within a certain distance of these FTZs may apply to be considered having located in a subzone. GPEC has assisted several companies with FTZ paperwork and qualification. Numerous companies have already taken advantage of Foreign Trade Zone benefits in Greater Phoenix, including ST Microelectronics, Intel, Conair, Abbott Laboratories, PetSmart, Microchip Technologies and Sub-Zero.

full list and contact information of the member companies in all of Arizona, please visit the appendix at the back of this toolkit. To get more information about the NCBFAA, visit www.ncbfaa.org.

Export-Import Bank The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank’s mission is to assist in financing the export of U.S. goods and services to international markets.

Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). No transaction is too large or too small.

LEGAL CONSIDERATIONS

GPEC consistently works with Ex-Im Bank officials to support additional financing for export companies.

Transportation If you need assistance with the transportation of goods, your best option is to go through the National Customs Brokers and Freight Forwarders Association of America (NCBFAA).

Headquartered in Washington, D.C., the NCBFAA represents nearly 940 member companies in international trade, including the nation’s leading freight forwarders, customs brokers, ocean transportation intermediaries (OTIs), non vessel operating common carriers (NVOCCs) and air cargo agents. Established in 1897 in New York, the NCBFAA maintains a close watch over legislative and regulatory issues that affect its members.

The NCBFAA currently has 13 members within Greater Phoenix. To see the

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11 LEGAL CONSIDERATIONS

*For comprehensive info on the topics below, please visit www.gpec.org/toolkit: Basic guide to importing Transportation of goods Ports

Depending on the industry, type of company and complexities involved, many of the companies we work with have a need to protect their intellectual property. The online information provides details on how this works in the U.S. *For comprehensive info patents, trade secrets, trademark and copyright law, please visit www.gpec.org/toolkit.

GPEC would like to extend a very special thank you to the City of Phoenix whose support made this international toolkit possible.

We would also like to thank those who have contributed their time and expertise to the content development of the toolkit:

Additional thanks to GPEC’s International Leadership Council members for their ongoing support and strategic direction: ILC MEMBERS Arizona State University Arizona Hispanic Chamber of Commerce BBVA Compass Bryan Cave, LLP Canada Arizona Business Council Chase Bank City of Avondale City of Chandler City of Goodyear

City of Phoenix Consulate of Germany Cox Communications Freeport-McMoRan Growth Nation Henry & Horne, LLP Honorary Consul of The Netherlands in Arizona Intel

Power-One The Ellman Companies Quarles & Brady University of Phoenix U.S. Department of Commerce

Greater Phoenix Economic Council 602.256.7700 | 1.800.421.4732 | info@gpec.org

@gpec

gpecgreaterphoenix

greater phoenix economic council (groups)

facebook.com/gpec4jobs