Why should I found my innovative, game-changing startup in litigious America?
12 comments
Preface: This is not legal advice. Consult your attorney and CPA. Blah blah blah
This is a great question.
The short answer is to license the IP between several corporate entities.
Here's a structure that offers a huge amount of protection and risk reduction:
-You own 100% of Company A
-Company A owns all IP
-Company B licenses the IP from Company A
-Company B is an operational company (with a merchant account, employees, office, etc).
Any potential litigation will target Company B because it's exposed. However, you structure the licensing agreement between Company A and Company B such that:
-Company A is indemnified of all of Company B's transgressions
-Company A has very little value because most income is paid to Company B as the licensing fee. You want Company B to essentially be worthless, which means it's not a big target for lawsuits.
Company B would probably be a US-based company. However, Company A could be based in another country, which would further reduce the likelihood of a lawsuit touching the IP.
So you get to operate in the US, but still protect your IP from litigation. The best of both worlds.
This is a great question.
The short answer is to license the IP between several corporate entities.
Here's a structure that offers a huge amount of protection and risk reduction:
-You own 100% of Company A
-Company A owns all IP
-Company B licenses the IP from Company A
-Company B is an operational company (with a merchant account, employees, office, etc).
Any potential litigation will target Company B because it's exposed. However, you structure the licensing agreement between Company A and Company B such that:
-Company A is indemnified of all of Company B's transgressions
-Company A has very little value because most income is paid to Company B as the licensing fee. You want Company B to essentially be worthless, which means it's not a big target for lawsuits.
Company B would probably be a US-based company. However, Company A could be based in another country, which would further reduce the likelihood of a lawsuit touching the IP.
So you get to operate in the US, but still protect your IP from litigation. The best of both worlds.
Here's a simple reason why: can you get the visas needed to move yourself anywhere else and can you find the resources you need in that country?
There are lots of places I would consider over the US, but in many countries to come in and start a business it will take showing that you can properly capitalize the business and provide for yourself until the business reaches profitability. You may be in tens of thousands in moving costs and legal fees before you even get yourself started in order to set up shop in a new place.
And, if your target audience is in the US, you may run into consumer perception or other problems if you are based elsewhere.
There are lots of places I would consider over the US, but in many countries to come in and start a business it will take showing that you can properly capitalize the business and provide for yourself until the business reaches profitability. You may be in tens of thousands in moving costs and legal fees before you even get yourself started in order to set up shop in a new place.
And, if your target audience is in the US, you may run into consumer perception or other problems if you are based elsewhere.
You do not have to move, all you need to do is split the company into different parts and setup those parts in different countries that give you the protection you seek. For example you could have a US company that does the development and a company in a different country that does the sales. You really need to talk to a lawyer about this so you can make informed choices about how the companies relate and also potential investors so that not only are you legally covered but that the arrangements do not spook future potential investors.
Why the US? Legally: low taxes; generally no personal liability for corporate bankruptcy or failed contracts. Culturally: businesspeople are respected; no shame in having a failed business.
How would hardware patent trolling affect your software business? How would the DMCA affect your software business? (Rhetorical.)
I don't like patent trolling or the DMCA, but that doesn't mean I need to move to Oslo.
How would hardware patent trolling affect your software business? How would the DMCA affect your software business? (Rhetorical.)
I don't like patent trolling or the DMCA, but that doesn't mean I need to move to Oslo.
Because of the size of the market. I had to experience it for myself: back in 1999 I founded the first flower and gift ecommerce store in Germany, at about the same time similar stores launched in the US. Within the following years the US Stores grew tenfold compared to us. We had the same products and comparable set ups, but the stores in the US had the market advantage by far.
OK, so then what do you propose as a better location?
What country offers a non-litigious society, allows outsiders to start and own a business, and has a tax basis that won't take all your money if you actually become successful?
Personally, I'm not aware of too many better options for an American than America, but I'd love to hear some viable alternatives.
What country offers a non-litigious society, allows outsiders to start and own a business, and has a tax basis that won't take all your money if you actually become successful?
Personally, I'm not aware of too many better options for an American than America, but I'd love to hear some viable alternatives.
Canada?
No healthcare costs (might have to become permanent resident, not hard to do). Low taxes for small business owners (tons of write-offs, lower tax rates). Less litigation. Very generous rules for foreigners to operate businesses. Close to US w/ easy travel. Short flights from major cities (re: Toronto, Waterloo, Ottawa, Montreal).
No healthcare costs (might have to become permanent resident, not hard to do). Low taxes for small business owners (tons of write-offs, lower tax rates). Less litigation. Very generous rules for foreigners to operate businesses. Close to US w/ easy travel. Short flights from major cities (re: Toronto, Waterloo, Ottawa, Montreal).
I am not trying to find a business environment that's better in some generic sense. I'm trying to find one where I can do this startup in particular and not get Netscaped.
I don't know. Maybe Appsterdam? :)
There are things you will find more easily in the US, like funding, mentors, strategic partners, and decent payment. Depending on where you move to, you have to contend with taxes and bureaucracy. All in all, you trade some money and convenience to minimize your risk. Personally, I won't be surprised if this becomes a trend.
The wording of the title is definitely tongue-in-cheek, but I think as a hypothetical it's something many of you could form an opinion on.
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Any thoughts anyone on Australia?
Are you Jewish? make Aliyah!
Set aside the details for now, because they don't really matter to my question. Just assume for the sake of argument that our startup has something quite a bit more interesting up its sleeve than some new photo-sharing app---and that we proceed to draw the anti-competitive ire of the established players. (If you're not comfortable with that assumption, instead fantasize about one of your own startup ideas. It's much easier to imagine that those are great.)
Cutting to the chase: the more I learn about the U.S. legal environment for software businesses, the less I want to actually start my business here. Among other things, the depressing history of DMCA jurisprudence; the new Nortel Cartel; and the profound dysfunction of the USPTO (and increasingly, the Library of Congress) have got me in a funk.
To sum up: as our project becomes more exciting, my gut feeling becomes stronger that I should take it outside the United States. As an American I am profoundly saddened by this.
So, can anyone on HN explain convincingly why I should bet on America?