Discuss current corporate taxation and dividend taxation a U.S. citizen pays versus a foreign citizen.

In regards to Federal Income taxation of C corporations, the US employs a classic double-tax system. That is, a C corporation's profits are taxed to the corporation when earned and again taxed to the shareholders when distributed as dividends. As a result, a US citizen or resident alien shareholder of a C corporation must pay taxes separately on his or her share of the dividends.

Generally, a nonresident alien shareholder is subject to a 30% U.S. withholding tax on U.S.-source dividend income unless the dividend income is effectively connected to a U.S. trade or business (in which case the dividend may be subject to the Federal income tax). The 30% withholding tax rate may be reduced by U.S. treaty.

Can a non-resident alien that plans to become a tax resident of the U.S. form an S-corp?

Under 1361, it appears that a resident alien can form an S corporation. An S corporation and LLPs are treated as a flow throughs for federal tax purposes although certain taxes may apply to S corporations. State and local tax may depart from this treatment depending on the state or local jurisdiction.

When does a taxable presence start for a foreign company in the U.S.?

For state and local taxation purposes a company is taxable if it has "nexus", which is a fairly easy standard to meet (e.g., the presence of inventory or an employee may give rise to nexus depending on specific state law). For Federal income tax purposes, presence starts for a foreign company when it is engaged in a trade or business within the U.S. (which generally requires conduct of a business in the U.S. on a regular basis).

If a treaty is applicable, then a foreign company will generally not have a taxable presence in the US unless the US trade or business is conduced through a permanent establishment. Permanent establishment is a higher standard and requires a fixed place of business in the U.S. through which the business of an enterprise is wholly or partly carried on; or a dependent agent that has and habitually exercises the ability to bind the principal in the U.S. A foreign company can have taxable presence for state purposes and no permanent establishment and therefore be taxed at the state level and not at the Federal level.

Please describe how the anti-kickback laws factor into buying a business.

We focused our webinar on establishing new operations in the U.S., rather than buying an existing U.S. business, in part because purchasing an existing business in the U.S. implicates a wide variety of additional issues that we could not possibly have addressed in the time allotted. We may consider presenting a new webinar on the subject of acquiring a U.S. business in the future.

A foreign acquirer should seek to ensure that it is in compliance with all applicable U.S. anti-kickback laws, since acquiring a business in the U.S. may expose the foreign parent to jurisdiction in the U.S., if it is not already so subject. As part of the due diligence process, the acquirer will also want to find out if the U.S. target has been in compliance with applicable laws, including anti-kickback laws.

What laws surrounding harassment in the workplace should we be most familiar with as international companies?

International companies that do business in the U.S. must be concerned about applicable equal employment opportunity laws at the federal, state, and in some cases county and city levels that prohibit workplace harassment. These laws generally prohibit harassment, which is considered a form of discrimination, based on any status that is protected by the law, such as race, color, religion, sex, national origin, age, disability, and in some cases, sexual orientation.

Harassment generally means unwelcome conduct that shows hostility, anger or aversion to an applicant or employee based on a protected status, that is so severe or pervasive that it creates an intimidating, offensive or hostile work environment. Sexual harassment has a special legal definition. It generally means any type of unwelcome conduct that is sexual in nature and is so severe or pervasive that it creates an intimidating, offensive or hostile work environment.

In order to minimize potential exposure to harassment claims, employers in the U.S. are advised to provide training to employees and to publish a comprehensive policy against all forms of unlawful harassment that includes a procedure for employees to file complaints of harassment and have them investigated by management.

For additional information, please contact Michael Stevens at stevens.michael@arentfox.com.

Please describe the differences between European and U.S. operations from a legal perspective. What legal problems do most European companies have when they start a division in the U.S.?

Our webinar mentioned some of the initial issues that European companies would face. For example, immigration restrictions can pose difficulties to foreign entities desiring to transfer executives here to the U.S. There are innumerable other laws at the federal, state or local level that might potentially impact the new U.S. company's business.

For example, if the foreign parent company plans to send products to the U.S. subsidiary for resale, there are customs and import restrictions that may be applicable. Certain types of products, such as pharmaceuticals, will be subject to strict regulations. Many or most of these laws may differ in material respects from analogous European laws.

Arent Fox has considerable expertise across a wide array of regulatory areas, including customs and import matters, as well as regulations governing pharmaceutical drugs.

How can Arent Fox support mid-sized customers in cross-Atlantic M&A activities? Does Arent Fox offer also due diligence?

Arent Fox has extensive expertise in cross-border M&A transactions, including legal due diligence. We have advised many non-U.S. companies in connection with buying and selling businesses in the U.S., and in financing these transactions. Our M&A clients have included large, medium and small businesses, spanning a broad array of industries.

The firm's other practice areas further strengthen our ability to serve our clients on M&A transactions. For example, our employment lawyers are able to assist with any labor, pension, or other employment issues, and can negotiate the terms of employment agreements for executives of the target company.

Our real estate department can assist with any real property transfers, and our IP department can advise on the transfer of any patents, trademarks or copyrights. These practice areas are also of enormous benefit to clients during the due diligence process, as lawyers with considerable expertise in a given specialty area can advise a client on important issues in that area.

What are the most important issues involving registration of trademarks from Germany (or any European country) to the U.S.?

The U.S. TM law system allows anyone to file a U.S. application on the following bases: 1) an intent to use a mark in the U.S.; 2) actual use of the mark in the U.S., or 3) on a treaty basis (i.e., the U.S. and many countries have treaties whereby, if an applicant has a registration in their home country, they can base their U.S. application on the fact that they own this "foreign" registration (this right extends to foreign applications as well, but only if the application is less than 6 months old).

Notwithstanding the above, the U.S. legal system has ruled, with very few rare, technical exceptions, that to assert trademark rights in a U.S. Court against another party's infringement, the trademark must be in use in the U.S. So, if you obtain registration under (3) above, you may be able to stop another party from registering the same mark in the USPTO (assuming the second party is trying to cover the same or similar goods/services in their application), but unless you use the mark here, another party can use their mark in an unregistered form and you will not be able to stop them.

For additional information, please contact Bill Marames at marames.william@arentfox.com.

What size clients does Arent Fox normally deal with? Any limit on size (i.e., anything too small)?

We assist clients of all sizes. No client is too large or too small.

Which U.S. states are typically best for foreign businesses?

From a non-tax standpoint, we recommend that clients desiring to form a new entity do so under the laws of the State of Delaware, regardless of whether the entity to be formed is a corporation, limited partnership or limited liability company. Delaware's statues governing these entities are very modern and permit more flexibility than analogous statutes under other state laws.

An entity can be formed under the laws of any state, even if that company does not plan to operate in such state. (An entity formed under the laws of one state that desires to operate in another state will need to qualify as a foreign entity in such new state. However, this process is not difficult.)

A foreign company is taxable on an allocable portion of its profit in any state in which the company has nexus regardless of where it's incorporated. Therefore, a Delaware incorporated company may be subject to tax in other states depending upon where it does business.