Holland in the Valley sat down with Attorney at Law, Dana H. Shultz, to discuss issues related to setting up a business in the US. Shultz has helped numerous international companies with the process, and based on these experiences, he has the following advice to offer Dutch companies looking to establish themselves in Silicon Valley.
US-Based Entity vs. Foreign Entity
In order to do business in Silicon Valley as a Dutch company, it is best to have a separate California-based entity in place. This separate entity creates a legal “firewall” between the US company and the Dutch parent. In case of litigation against the US company, the assets of the Dutch corporation will not be affected.
To bring in a new employee, you will need three documents:
1) Employment Offer Letter
This letter provides basic information about the job, such as the title, salary, etc. It also states that employment is “at will.”
2) Proprietary Information and Inventions Agreement
This document ensures that everything created by the employee, including all IP rights, belong to the company.
3) Employee Handbook
This document provides detailed information about pay dates, personal time off, privacy expectations, etc. Startup companies usually do not need an elaborate one – 15 pages or so should suffice.
To succeed in the US, your product or service first need to have traction in the Netherlands. It will not be sufficient to come with a concept alone. Having an established relationship with local business partners – anything from a reseller, satisfied customers, or some other business partner – can also be very helpful in gaining a foothold and helping to avoid the futile, money-draining exercise of trying to build a business entirely on your own.
Shady Venture Capitalist
When working with investors, it is essential to seek legal advice before committing to any agreements in order to ensure that contract terms are fair and appropriate. One of Shultz’s Dutch clients has previously accepted an investment from an source who, the client later learned, was a former securities dealer whose license had been revoked. The investor’s contracts – which the entrepreneur signed without legal review – in short order allowed the investor to take over the US company, the Dutch counterpart, and the underlying technology.
Maintaining financial and managerial control over your personnel in the US is critical. Another of Shultz’ Dutch clients had previously sent an employee to the US only to find out, years later, that he had been stealing money from the company and creating a whole host of problems. The company ended up spending a substantial amount of money to sue the employee, to have him arrested and deported, and to clean up the mess he had created.
In Europe, suing is regarded as an extreme measure taken to exercise your rights. In the US, however, litigation it is much more common and can be terribly expensive. The best way to avoid litigation is to talk to a lawyer about business practices early on and to make sure you have the right disclaimers and other provisions in your contracts.
Startup Company Lawyer – Website by Silicon Valley attorney Yoichiro Taku, who is very experienced in working with startup companies
Dana Shultz Blog – Blog by Dana Shultz, with discussion on real questions from entrepreneurs