Re:Ask HN: Is there any country that allows foreigner setup ...
by charlesdm on Sunday January 11, 2015 @05:19PM
(#8871564)
Yes, that sounds reasonable.
Well, in this specific case, you can probably argue that business (and not tax) reasons are at the heart of the decision. After all, the US corporate tax rate is higher than the Canadian one.
But, the OECD is trying to combat some of these practices. Tax authorities in certain jurisdictions are now also disregarding directors who are sitting on 10-20-50 boards for substance purposes. Some countries also want them to have relevant skill sets, for example: can an ex real estate developer really be much added value for a pharmaceutical subsidiary company doing Ebola research? He might be, but many western countries are running an extreme deficit, so they are looking for all sorts of ways to increase revenue collection
The Delaware company may indeed need local agents, but those can be the same agents (i.e. lawyers) that run twelve other Delaware shells in a particular VC's portfolio. Effectively, the investors make up the Delaware company's board, while the founders of the venture (and the Delaware company itself) make up the Canadian company's board. You could think of it as the investors founding the company and simply outsourcing development to another country—which is, I'm sure, the argument that would be used to defend the practice in a suit.
The important bit is that income flows into the Delaware company, not from nowhere, but from what are in all practicality customers of the Delaware company. The founders—although undertaking 99% of the company's day-to-day operations—are nowhere to be seen from a customer perspective.