Raising Capital and/or Conducting Business in the US Y
ou do not need to conduct business in the US to take advantage of US investor money. Why consider the US as a business market? You can raise money from private equity investors. Private equity means that the investments are not registered on any public exchange, reducing your risk and costs compared with those in dealing with public investors. Another reason is that the business climate in the US welcomes entrepreneurial initiative. There are numerous private equity and venture capital firms that can provide your company initial financing, bridge or mezzanine financing and an exit strategy when you seek to partially or entirely liquidate your financial stake in the company. Having previously lived and worked in a Finnish investment bank, which had affiliations and companies in Europe and the US, I am familiar with the different legal and cultural attitudes towards doing business in the US. There is a perception of substantial legal risk. Whether in Finland, the other EU markets or the US, there are ways to develop business and capital formation strategies to reduce regulatory and legal risks, while taking advantage of the prevailing business climate. In the final analysis, conducting business is similar around the developed world— the details differ, but the broad legal and policy issues are resoundingly sim-
company must determine the State of the US in which it wants to form. Part of the analysis over choice of entity should be the sale of ownership interests to the public or venture capital financing. There are several types of organizations, but let’s briefly consider the three most popular broad categories. LIMITED LIABILITY COMPANIES Generally
Keith Kessel
ilar. Now, let’s consider some of the details and planning objectives that may benefit you by either (i) obtaining investors from the US or actually (ii) conducting business in the US. Define Business Objective The first step in establishing a business is to define its objective. It seems elementary, but many companies do not clearly define their objective. The importance of defining the objective usually results in a corresponding degree of clarity about capital needs and the exit strategy. Both are important. Choice of Entity In the US, there are several choices of entity, which each have their advantages and disadvantages. Also, a
Many smaller companies elect to form as a Limited Liability Company (“LLC”). The main advantages to an LLC are the protection the LLC owners receive from business creditors and the fact that, unlike a limited partnership, the owners can still participate in the management of the business, similar to the General Partners in a partnership. The people who actually manage the LLC for the Members are called the Managers. The Members can serve as the Managers themselves or they can appoint non-Member Managers. The Members usually enter into a written agreement about how the LLC will be operated, who is in charge, how profits will be divided up, etc. This agreement is aptly called the Operating Agreement. If there is not an Operating Agreement, then the “default” rules for running an LLC apply. For safety and prudential planning, the founders of the LLC should
12 ajantasa ajan tasa • 5/2008