I decided to write this essay after the recent update happened between France and the USA. Beginning on November 16th, 2023, Treaty Trader (E-1) and Treaty Investor (E-2) Visas for French nationals will be issued for 48 months, an increase from the previous validity of 25 months.^[1] Originally signed by France and USA on December 21, 1960 this treaty used to have 60 months validity for the French. In 2019, Trump based on a lack of reciprocity decided to shorten the length of the E visa for French, from first 15 months, to finally reach after negotiations 25 months. This decision will without any doubt facilitate and strengthen French investment in the US.

As an adept of the United States, I didn’t choose this destination by chance. Beyond the news, let me give you some information and key figures on the commercial relations between these two countries.

Cross-border FDI supports a significant number of jobs. Subsidiaries of French companies employed 779,900 people in the USA according to BEA statistics (2019, latest data available), making France the 5th largest foreign source of direct jobs created in the USA. In 2019, new FDI from France created or maintained 19,500 jobs in the United States. Conversely, over 4,400 US companies employed around 583,000 employees in France in 2019, making them the leading foreign source of jobs in France (BEA).^[2]

In 2020, Nicolas Dauré from the Insee reported that the United States remained the leading country for the establishment of French multinationals abroad^[3].

In 2022, bilateral trade between the two countries reached a new record, with almost $153 billion in trade in goods and services, representing a 32% increase on 2021. This makes France the United States’ 3rd largest trading partner within the European Union.

Cross-investment between the two countries has reached $406 billion by 2022. The United States is the leading destination for French investment abroad, and the leading foreign investor in France.

In the France and the United States – 2023 economic report, our French Minister for the Economy, Bruno Le Maire, said “The United States remain the prime destination for French companies investing abroad. Conversely, U.S. investments account for the largest position of foreign direct investments in France, which is the leading destination for foreign investment projects in Europe according to the latest EY ranking. These remarkable figures remind us of the depth and the mutually beneficial trade and investment ties connecting our two countries^[4].”

If you are willing to expend your business, you have to consider the US (if your market analysis is positive in your field). This short essay will give you the main guidelines on the legal context.

Market Analysis

Territory and resources

Despite having a territory 17 times larger than that of France, the United States has a relatively simple geography. However, exporters may face challenges when entering the American market, such as considerable distances and time differences between major regions that essentially function as self-contained territories. Additionally, there is a significant dispersion of urban areas, particularly in the expansive Midwest and South.

In terms of population, France has approximately 67,936,000 people compared to 333,288,000 in the United States. However, the population density is 123.7 inhabitants per square kilometer in France, whereas it is 23.9 in the United States^[5].

Packed with key insights and up-to-date analysis, the following report underlines the strength and potential of the French-American economic partnership. From trade statistics to sector-specific overviews, it gives a comprehensive understanding of the bilateral relations and the French footprint in the United States: https://media.franceintheus.org/wp-content/uploads/misc/2023_Economic_Report_RGB150_pages.pdf

Creating a company in the United States might also be an open door to benefit from the United States-Mexico-Canada Agreement (USMCA).

Political system and administrative structure

“It is essential to bear in mind the federal structure of the United States and the division of powers between the states and the federal government. Broadly speaking, state jurisdiction is the rule, and federal jurisdiction the exception. The U.S. Constitution lists the subjects that are reserved to federal power (e.g. foreign policy, patents, copyright, regulation of trade with foreign nations and between the states, the famous interstate commerce clause). It is on this basis that the federal Congress has been able to intervene, and continues to do so, in many areas of federal policy.

Some areas of law fall within the exclusive jurisdiction of the individual states, such as company law, contract law and liability law. Some matters, regulated by federal law, can be supplemented, or clarified at state level (e.g. taxation, environmental law).

This complex system explains the role and importance of attorneys at law in the United States.”^[6]

Competition law

“The United States have the oldest, most developed and certainly the most complex competition law. American legislation was enacted at the end of the 19th century and the beginning of the 20th, at a time when the main monopolies were being formed, in response to the need to maintain the fundamental conditions of free competition.

The main texts

The Sherman Act of 1890 is the fundamental and most general text. It prohibits (1) any form of agreement whose purpose is to restrict business, (2) any monopoly or attempted monopoly.

The Clayton Act of 1914 clarifies the Sherman Act. It declares illegal (1) price-fixing agreements, discriminatory pricing, and the addition to a contract of clauses imposing additional services unrelated to the object of the contract, (2) mergers and acquisitions of companies which may have the effect of restricting competition or creating a monopoly.

The Federal Trade Commission Act of 1914 is a general law designed to prohibit unfair competition. It created the Federal Trade Commission (FTC), giving it the power to investigate companies’ organization and practices.

The Robinson-Patman Act of 1936 specifies pricing practices that are contrary to competition rules.

Since American law is based on case law, it is the decisions of the courts, and in the last instance the rulings of the Supreme Court, which determine the scope of the provisions of the antitrust legislation.

Two agencies share responsibility for ensuring compliance with antitrust rules: the Antitrust Division of the Department of Justice and the Federal Trade Commission.

The great originality of the American system is the possibility for companies or individuals who consider themselves wronged by actions contrary to antitrust legislation to sue for damages before the courts.

In practice, when it comes to sales and distribution, French companies must pay particular attention to pricing practices (any agreement on prices, including fixed prices, is illegal; on the other hand, it is possible to suggest a resale price). They must also guard against agreements aimed at dividing up markets and concerted refusals to sell between competitors. A list of illegal practices under competition law can be found on the FTC website: www.fc.gov/bc/compguide/index.htm

It is therefore important to check with a lawyer whether certain clauses or practices are legal under competition law.”^[7]

Incoterms® rules

“Although the United States was among the first countries to ratify the United Nations Convention for the International Sale of Goods (CISG), American lawyers have typically been reluctant to use it. This situation may reflect the 20th century mindset that because the U.S. party was frequently dominant in a sale or purchase contract, it should dictate the choice of law. It may also come from a former relative lack of interest or experience in foreign markets. […] Fortunately, we have the Uniform Commercial Code (UCC) which acts as a sort of matrix. It is largely incorporated into the contract law in the forty-nine common law states [2]. So, while not word-for-word identical, contract law is reasonably similar throughout most of the country.

The UCC includes its own shipment and delivery terms [3] which have some of the same names and abbreviations as Incoterms® rules but entirely different meanings. These U.S. terms are vague, obsolete, confusing, little understood, and were nearly deleted from the UCC in 2004. However, they survived, and remain embedded in the contract law of all forty-nine common law states. Of course, sellers and buyers are perfectly free to use Incoterms® rules in international and domestic contracts provided they clearly indicate their intention.” ^[8]

It is imperative to inform yourself about the terms and conditions of access (accompanying documents for customs use, tariff classification, customs value, customs duties, etc.) and the American regulations governing imports (particularly those concerning food, medicines, consumer product safety and environmental protection). Main information can be found on: www.cbp.gov.

Having explored the American market’s rich history and cultural nuances in Article II, we seamlessly transition to Article III, where we delve into the critical aspects of the Company Legal Structure. This shift emphasizes the need to align our understanding of the market’s cultural context with a legally robust business framework for navigating the intricacies of the United States.

Company Legal Structure

“Introductory note: corporate law in the United States is a matter of state, not federal, jurisdiction. The company is therefore governed by the law of the state in which it is incorporated.”^[9]

“Once you’ve carefully prepared your approach to the market, there are several options you can choose from to make your move a reality. You may decide to incorporate a company, acquiring an existing business or joining forces with an American company.

The choice of legal form is not only linked to tax considerations. It will have important repercussions on factors such as the structure’s legal personality and degree of responsibility, its internal way of working, how it will be perceived by the American public, and the geographical scope of its business activities.

You will need to take into account a whole range of legal and commercial factors in order to make the right decision for your set-up strategy.

It will be very useful to seek the advice of a lawyer who specializes in these issues. The legal department of the French Trade Commission in Washington, D.C., as well as the “Implantation department “in New York can also provide you with information in this field.

As an introduction, the table below provides a summary of the main U.S. legal structures with their main characteristics, particularly in terms of responsibility.”^[10]

Summary – Main legal structures

American legal structures

Main characteristics

Branch

No legal personality: in the event of legal action in the against a U.S. branch of a foreign company, the latter may be held liable foreign company, not only for the assets and the property belonging to the U.S. branch, but also on all its assets.

Companies

Corporation

(or C-Corp)

-Shareholder liability limited to the amount of their investment: the corporation avoid the parent company from being held liable on its assets in France for the commercial activities it carries out in the United States.

-Taxation at entity level (corporate income tax).

-No minimum capital requirement in general.

Limited Liabi-

lity Company

(or LLC)

-Shareholders’ liability limited to their investment: the LLC prevents the parent company from being held liable on its assets for commercial business activities in the United States.

-Individual income tax. Regulation Entity Classification Election” regulation, better known as the check the box rules.

-No minimum capital requirement in general.

Sole

Proprietorship

(or “doing business as” DBA)

-Unlimited liability of the owner (i.e. on all his assets) for the company’s debts.

for the DBA’s debts.

-Taxation at owner level (individual income tax).

Partnership

General

Partnership

Unlimited joint and several liability of partners for DBA debts partnership.

Limited Liabi-

lity Partnership

(or LLP)

Unlimited liability of the general partner in charge of managing the management of the partnership.

Limited liability of limited partners who take no active part in the control and management of the partnership.

Co-companies

Joint-venture

Legal form:

– corporation, or

– LLC, or

– partnership.

Branch

“You may decide to set up a branch, either as an office or as a purchasing or sales office. Since branches have no legal personality, one of the disadvantages of setting up a branch rather than a subsidiary is that, in the event of legal action being taken in US courts against a US branch of a foreign company, the latter may be held liable not only for the property belonging to the US branch, but also for all its assets. For this reason, it is generally advisable to consider other solutions, such as incorporation, which is also better suited to the subsequent development of the company’s business in the USA.”^[11]

Companies

In general

“There are various forms of business corporations in American law, of which the two most important are the public corporation ^[12] and the close corporation^[13].

This introduction sketches the characteristics common to all corporations. The most important characteristic is that a corporation is a separate legal entity that participates in commerce and conducts business independently from its owners (shareholders).

In contrast to unincorporated associations, which depend on the continued participation and membership of their owners for their existence and personality, the existence of a corporation does not depend on any one individual shareholder. He can freely transfer his participation (shares). Unlike partners in an unincorporated association, the shareholders of a corporation do not themselves manage the company. Instead, management is entirely in the hands of the board of directors, headed by a chairman^[14]. The shareholders elect the board of directors; thereafter, the corporation is not subject to their direction. The board of directors then designates “officers,” who perform the operational tasks of the corporation^[15].”^[16]

C Corp

C corporation or C corp has been named for being in subchapter “C” of the Internal Revenue code.
“Direct investment through the incorporation of a subsidiary (corporation) of the French company is a formula widely used by French investors: the liability of the shareholders of a corporation is limited to their investment. In other words, the corporation prevents the parent company from being held liable on its assets in France for the commercial activities it carries out in the United States.
The French parent company may, however, be held liable for the debts of its American subsidiary on the basis of the legal concept known as piercing the corporate veil. This doctrine is tantamount to denying the legal existence, i.e. the legal personality, of the subsidiary and to considering it as the alter ego of the parent company, the two companies becoming one in the minds of the judges. The veil of legal personality is lifted when, for example, the subsidiary’s corporate bodies are purely representative, with decisions being taken by the parent company’s directors.
The corporation is a tax entity distinct from its shareholders, which is why it is taxed as such at the level of the company’s profits (corporate income tax) and cannot benefit from the pass-through option, which allows taxation at the level of the shareholders (individual income tax).”^[17]

LLC The Limited Liability Company

“The limited liability company (LLC) is becoming increasingly popular. As empirical proof, all states have recently adopted statutes dealing with LLCs. In a way, this company is a limited partnership clothed in corporate form, meaning that it has, among other things, a legal personality of its own. Its members enjoy limited liability and, for tax treatment, it is similar to a partnership. Each member can participate in management without becoming personally liable for the business’ obligations, and at the same time, double taxation may be avoided. In contrast to a corporation, however, many statutes require the agreement of other partners for the transfer of shares.”^[18] Furthermore, dissolution of the LLC may result from a partner’s departure from the venture. The exact consequences, however, will be regulated in the operating agreement.

This agreement must be filed with the appropriate state agency (e.g., the Secretary of State) at the time the company is established. Similar to a partnership agreement, the document must specify the purpose of the company, which may be rendered very flexible by the addition of such general language as “any lawful business.” Most states require two partners for the establishment of an LLC. ^[19]”^[20]

Sole proprietorship

“A “sole proprietorship” means just that: a single person owns the company.^[21] The company does not have separate legal personality; the shareholder therefore is liable, directly and personally^[22]. This company form is comparable to the partnership to a certain extent, with the main difference that the latter requires at least two persons for its establishment. Beyond that, the establishment of a “sole proprietorship” does not require many formalities; it is relatively uncomplicated and therefore a practicable mechanism. From a tax point of view, this company form may be attractive because, as in a partnership, there is only a one-time levy of taxes.”^[23]

Partnership

General

“A limited partnership consists of one or several partners with unlimited liability (“general partners”) and one or more partners with limited liability (“limited partners”)^[24] The traditional statutory bases for this kind of partnership were the Uniform Limited Partnership Act (ULPA, 1916) and the Revised Uniform Limited Partnership Act (RULPA, 1976)^[25]. These model rules were supplanted in 2001 by the Uniform Limited Partnership Act. The provisions of the 2001 ULPA are designed to address two identified needs that were deemed to be inadequately served by the prior regime: (1) sophisticated commercial deals with strong, centralized managements and long-term passive investors, and (2) estate planning arrangements, such as family limited partnerships^[26].

With respect to the foregoing, it is important to remember that these matters are within the province of state law, and each state decides independently which act to adopt. Each of these three alternative models finds support in the United States. Since state practice is not uniform and divergent legislation exists, it is therefore necessary to consult the law of the particular state when considering issues of limited partnerships.

Limited and General Partnership Distinguished

“A limited partner’s contribution (participation) need not consist of the payment of money; it may take the form of a transfer of property or the rendition of services^[27]. Under the traditional model, the most important difference between limited and general partners concerned their respective liability, which depended upon the partner’s actual or intended participation rather than his nominal designation as “general” or “limited.” Under the contemporary regime, whether, and the extent to which, a limited partner may participate in management and control of the partnership business varies as between the alternative models. The most restrictive provisions are found in the ULPA (1916), which treats limited partners as silent partners, and the most liberal are found in the ULPA (2001), which places no restrictions on the level of participation by limited partners^[28]. The RULPA adopts a middle-ground approach whereby limited partners may not participate in control of the business, but may engage in enumerated “safe harbor” activities^[29]. Thus, the most noteworthy distinction between the ULPA (2001) and its predecessors is that the former permits limited partners to participate in management without thereby becoming personally liable for partnership debts^[30].

The establishment of a limited partnership is subject to form requirements. There must be a written document, evidencing the agreement of the parties, which becomes the “certificate of limited partnership.”^[31] The share of a limited partner is transferable, but the transferee does not thereby automatically become a successor-limited partner. Initially, he has the position of an assignee or transferee^[32]; however, he may be given full (limited) partnership rights by unanimous vote of the partners.^[33]”

When a limited partner leaves the partnership?^[34] or dies^[35], this does not result in the automatic dissolution of the limited partnership, as in the case of a general partnership.^[36]”

Limited Liability Partnership (or LLP)

“The name of this company form suggests that it closely resembles a partnership, yet this is not entirely correct. Like the partnership described above, an LLP^[37] is established by agreement among natural persons. Registering^[38] the association with the Secretary of State of the particular state and securing the required liability insurance^[39], however immunizes each partner from liability for the tortious conduct of the other partners. Thus, it is the LLP that is liable, and only to the extent of its insurance coverage. The LLP is the association form of choice for professionals, such as lawyers, engineers, and physicians, especially since participation in assets and income held by the LLP has tax advantages over direct income and taxation of each individual member. Another advantage of this form of association is that it can acquire real property in its own name and undertake investments. It thus appears, in all respects, as an independent entity with legal capacity^[40].”^[41]

Co-companies – Joint venture

“A joint venture is an agreement between two or more persons to come together for the pursuit of a specific project. In contrast to a partnership, their agreement does not necessarily contemplate a continuous association over an indefinite term. The legal nature of a particular joint venture depends on the nature of its participants, specifically whether they are natural or legal persons. In the case of natural persons, partnership rules generally apply, otherwise, rules applicable to corporations are applicable.^[42]”

As we conclude our exploration of the intricate legal structures within the USA in Article III, we seamlessly transition to Article IV, where the focus shifts towards the practical aspects of bringing a business to life through Company Registration and Creation. Here, we’ll unravel the procedural intricacies involved in establishing a company and ensure a seamless connection between legal frameworks and practical implementation.

Company Registration – Creation

States

Location / Incorporation

“The company’s headquarters do not have to be located in the state in which it is incorporated. On the other hand, the company’s internal operations and its powers vis-à-vis third parties always depend on the law of the latter, regardless of the state where its registered office is located and where its activities are actually carried out.

However, before setting up the company, it is advisable to check the availability of the name and reserve it in the state of incorporation as well as in the states where the activity is carried out. You will have the choice of incorporating your company in the State of Delaware (as is the case for almost 50% of American companies), or in the State where you are located.”^[43]

Focus on Delaware

Delaware’s corporate laws provide strong legal and liability protections for businesses. The state’s legal framework is well-established and is designed to offer clarity and flexibility for companies operating there.

Delaware’s Court of Chancery is known for its specialization in business and corporate law cases. The use of judges instead of juries is believed to expedite legal proceedings. The court also maintains an advanced and up-to-date body of case law, which is beneficial for corporate lawyers and businesses.
The specialized nature of the Delaware Court of Chancery, along with experienced judges in corporate law cases, is said to lead to faster and more informed decisions on legal matters. This predictability can reduce the uncertainty and potential liability for business owners.
Delaware offers a level of privacy for business owners that may not be available in other states. The ability to file a company without listing the names of owners provides a degree of confidentiality and protection for owners’ identities and personal information.
Delaware does not require the public disclosure of the names and addresses of members and/or managers of LLCs. This information is generally kept private unless there is a legal proceeding or a request from law enforcement.^[44]

Imperative elements for the constitution

Corporation (S+C)

- - 1. Certificate of incorporation

After choosing the state of incorporation^[45] (in the following example^[46] the form is the one of the NY State)^[47] :

“(a) A certificate, entitled “Certificate of incorporation of …… (name of corporation) under section 402 of the Business Corporation Law”, shall be signed by each incorporator, with his name and address included in such certificate and delivered to the department of state.

It shall set forth:

(1) The name of the corporation.

(2) The purpose or purposes for which it is formed.

(3) The county within this state in which the office of the corporation is to be located.

(4) The aggregate number of shares which the corporation shall have the authority to issue

(5) If the shares are to be divided into classes, the designation of each class and a statement of the relative rights, preferences and limitations of the shares of each class.

(6) If the shares of any preferred class are to be issued in series, the designation of each series and a statement of the variations in the relative rights.

(7) A designation of the secretary of state as agent of the corporation.

(8) If the corporation is to have a registered agent, his name and address within this state and a statement that the registered agent is to be the agent of the corporation upon whom process against it may be served.

(9) The duration of the corporation if other than perpetual.

(b) The certificate of incorporation may set forth a provision eliminating or limiting the personal liability of directors to the corporation or its shareholders for damages for any breach of duty in such capacity, provided that no such provision shall eliminate or limit:

(1) the liability of any director if a judgment or other final adjudication adverse to him […] or

(2) the liability of any director for any act or omission prior to the adoption of a provision authorized by this paragraph.”

- - 1. Warning on the name of the corporation

“First, Section 301(a)(1) of the Business Corporation Law requires that the name of the corporation contain one of the following words: Incorporated, Corporation or Limited, or one of the following abbreviations: Inc., Corp. or Ltd.

Second, the name of the corporation must be distinguishable from the names of other corporations, limited liability companies and limited partnerships already on file with the Department of State.

Third, Section 301 of the Business Corporation Law prohibits or restricts the use of certain words and phrases in the name of the corporation. Generally, the name of a corporation may not include a word or phrase restricted by another statute unless the conditions of the restriction have been complied with. In addition, certain words and phrases in the name of a corporation require consent or approval from another agency prior to filing the Certificate of Incorporation with the Department of State.”^[48]

- - 1. Porpose – Special agreement

“The Certificate of Incorporation form developed by the Department of State contains an all-purpose clause which is sufficient for filing in most cases and nothing more needs to be added.

Certain corporate purposes, however, such as the establishment or maintenance of a hospital or facility providing health related services, and the establishment or operation of a substance abuse, substance dependence, alcohol abuse, alcoholism, chemical abuse or dependence program require the consent or approval of another state agency. In addition, a corporate purpose that promotes education in any way requires prior consent. A document indicating the consent or approval of the relevant state agency must be attached to the Certificate of Incorporation when the certificate is submitted to the Department of State for filing. Before issuing its consent or approval, the regulatory agency may require that specific purposes be stated in the Certificate of Incorporation.”^[49]

- - 1. Fees

In the NY State you have to pay $125 filing fee for the Certificate of Incorporation.
- - 1. Filling receipt
The Department of State issues an official filing receipt to the filer of the Certificate of Incorporation. The filing receipt is mailed two business days after the Certificate of Incorporation is filed by the Department of State.
- - 1. By laws
By laws are not intended to be made public, it is an internal document. The term “bylaws” refers to the rules and regulations that govern the internal operations of a corporation. Bylaws are a crucial document that outlines how a corporation will be run and managed as: directors, officers, shares, how might change the by-laws, …
- - 1. Company share capital

“Differences between French and American law

In most states, there is no minimum capital requirement for setting up a corporation. All funds invested at the company’s inception can be invested in current accounts and earn interest.

Authorized capital need not be fully subscribed at the time of incorporation.

– Financing the company by issuing shares: Stock market activities are strictly regulated in the United States.

At federal level, the Securities Act of 1933 (amended by the Sarbanes Oxley Act of 2002) requires the company offering securities to submit all relevant information on the securities and the company, by preparing two documents: one submitted to the Securities and Exchange Commission (SEC), the equivalent of our Autorité des Marchés Financiers (AMF), the other to investors, which is a less comprehensive information memorandum.

At state level, some states have enacted so-called blue-sky laws to protect shareholders against fraud.”^[50]

LLC- Limited Liability Company

As said above, each state has his own rule for a LLC. Staying in New York State, here are the main guidelines to create a LLC.

- - 1. Articles of Organization

The formation of an LLC involves the organizers submitting the Articles of Organization, as outlined in Section 203 of the Limited Liability Company Law, to the Department of State. These organizers, who can be individuals or business entities, are responsible for preparing, signing, and filing the Articles of Organization to establish the LLC. It’s important to note that organizers have the flexibility to be, but are not required to be, members of the LLC they are creating.^[51]

- - 1. LLC Name

“The name of an LLC must include the words “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.” The name of the LLC must be distinguishable from the names of other LLC’s, corporations, or limited partnerships on file with the Department of State. Section 204 of the Limited Liability Company Law contains a list of words and phrases that are prohibited or restricted in the name of an LLC. In addition, certain words and phrases require the consent or approval from other state agencies prior to filing the Articles of Organization with the Department of State. “^[52]

- - 1. Fees

The completed Articles of Organization and the filing fee costs $200.

- - 1. Filling Receipt

“The Department of State issues an official filing receipt to the filer of the Articles of Organization. The filing receipt reflects the date of filing, the name of the limited liability company, an extract of information provided in the Articles of Organization and an accounting of fees paid. Filers should verify that this information is correct. The filing receipt is your proof of filing.”^[53]
- - 1. Operating Agreement

LLC members must adopt a written Operating Agreement (Section 417, Limited Liability Company Law^[54]) within 90 days of filing the Articles of Organization. This internal document outlines member rights, duties, and more. If not filed, the LLC might be under the state law.

- - 1. Certificate of publication

Section 206 of the Limited Liability Company Law requires most LLCs to publish their Articles of Organization or a related notice in two designated newspapers for six weeks. The information published must match the Department of State’s records exactly. After publication, a Certificate of Publication, along with affidavits and a $50 filing fee, must be submitted to the Department of State. Failure to do so within 120 days will lead to the suspension of the LLC’s business authority, except for exemptions under Section 23.03 of the Arts and Cultural Affairs Law.^[55]

Sole Proprietorship

Establishing a sole proprietorship in the USA is relatively straightforward. Due to the minimal government rules and state regulations for this business structure, the process is often considered easy and uncomplicated. Staying in the New York State you can start a sole proprietorship without having to register with the Division of Corporations, NY State Department^[56]. “An Assumed Name Certificate must be filed with the clerk of the county/ies in which the business is conducted ONLY IF you are operating under a name other than the proprietor’s (no formation document is required).”^[57]

Certificate of conversion

Converting a corporation into an LLC is possible, but it necessitates hiring a lawyer to draft the required conversion documents. States like Delaware typically require a certificate of conversion with details such as the incorporation date, state, corporation name, LLC name, and the effective date of the transformation. Approval, according to the corporation’s documents, is necessary before registering the certificate with the state authority. In states without a certificate of conversion, a basic certificate of formation may be used.

As we conclude our exploration of the details involved in Company Registration and Creation in Article IV, it’s imperative to recognize that expansion strategies vary. In Article V, we pivot towards an alternative avenue for business growth – the Acquisition of an existing structure. Instead of starting from scratch, we can consider purchasing an established business, offering a nuanced perspective on strategic business expansion.

Acquisition of an existing structure

Buying a business offers several advantages over starting from scratch. The first advantage is adherence to an already established concept, eliminating the need to convince customers of the value of the business. This is often less risky. Taking over an existing business, particularly in the context of a well-chosen franchise, can offer additional security.

Another advantage is the possibility to verify the cash flow generated by the business through documents such as profit & loss, tax return, or bank statements, thus ensuring a more secure income. What’s more, the company’s location has already been validated, and existing staff are an asset, as they represent the transmission of know-how and customer relations. Relationships with professionals such as accountants, suppliers, insurers, and bankers are also already established.

Research and selection

Buying a company requires the same attention to detail as setting one up, whether in terms of its legal structure, the state in which it operates or its field of activity.

Once these criteria defined and chosen, the main websites for looking for a business are: BizbuySell.com, BizQuest, Businessesforsale.com, and so more. It is recommended to work with business brokers and lawyers in order to make some verifications.

Once a business selected, the main stages to acquire a US business are the following.

Letter of intent

In the United States, a Letter of Intent (LOI) is a document commonly used in various business transactions to outline the key terms and conditions of a proposed deal or agreement between two parties. The LOI is a preliminary, non-binding agreement that expresses the parties’ intention to enter into a more formal and detailed agreement in the future.

Key points about a Letter of Intent include^[58]:

Non-Binding Nature: An LOI is typically considered non-binding, meaning that it does not create a legally enforceable contract. It serves as a statement of the parties’ intentions and provides a framework for further negotiations.
Outline of Terms: The letter generally outlines the fundamental terms and conditions of the proposed agreement. This may include details about the price, timing, conditions, due diligence processes, and any other significant aspects of the deal.
Negotiation Basis: The LOI serves as a basis for negotiation between the parties. Once both parties agree on the key terms, they can proceed to more detailed negotiations and the drafting of a formal contract.
Confidentiality: In many cases, an LOI includes a confidentiality clause to protect sensitive information shared during the negotiation process.
Good Faith Commitment: Although the LOI is not legally binding, it often includes a good faith commitment from both parties to negotiate in earnest and work towards a final agreement.

Due diligence

“Due diligence in a broad sense refers to the level of judgement, care, prudence, determination, and activity that a person would reasonably be expected to do under particular circumstances. In corporate law, due diligence is the process of conducting an intensive investigation of a corporation as one of the first steps in a pending merger or acquisition. In a company acquisition, due diligence would include fully understanding all of the obligations of the company: debts, pending and potential lawsuits, leases, warranties, long-term customer agreements, employment contracts, distribution agreements, compensation arrangements, and so forth.”^[59]

Documents to analyze are: the last 3 years tax returns – profit & loss and sales taxes; lease and its renewal, supplier’s contracts, employees form (w2, 940, 941…) and all documents considered useful.

Acquisition agreement

A Business Acquisition Agreement (BAA) is a legal document that outlines the terms and conditions under which the acquisition of a business will take place. It is a comprehensive contract that is negotiated and entered into by the buyer and the seller. The agreement covers various aspects of the acquisition, protecting the interests of both parties involved. Below are the key components typically included in a Business Acquisition Agreement^[60] ^[61]:

Identifies the buyer and the seller.
Provides the effective date of the agreement.
Purchase Price (total purchase price and the payment terms, escrow if concerned)
Assets or Stock: acquisition involves the purchase of assets or the acquisition of stock.
Agreements by the buyer and the seller regarding actions to be taken or not taken before the closing of the acquisition (non-compete clauses, confidentiality agreements…).
Conditions Precedent: conditions that must be fulfilled before the acquisition (obtaining necessary approvals, consents, or financing).
Closing: date and location of the closing and outlines documents that must be exchanged.
Employees: information about benefits, employment agreements, and potential severance.
Post-Closing Obligations: any obligations of the parties (assistance with the transition….
Governing Law and Dispute Resolution: Authority and law that will apply (arbitration or litigation.
Miscellaneous Provisions: Includes miscellaneous clauses such as force majeure, etc.

A well-drafted Business Acquisition Agreement is crucial for protecting the interests of both parties and ensuring a smooth and legally sound acquisition process. Legal professionals are typically involved in the negotiation and drafting of such agreements to ensure compliance with relevant laws and regulations.

Signing and Closing

“Generally, contracts such as company acquisitions or mergers are carried out in two stages:

– Signing: This is the signing of the Purchase and Sale Agreement.

– Closing: This takes place on the day when all the contract’s conditions precedent have been fulfilled, e.g. antitrust clearance, shareholder approval of the merger, etc. It is at this stage that the price is paid, and the shares or assets are transferred or exchanged.”^[62]

Conclusion

In this first section, we have examined how to approach the American market as a French citizen, and what vigilance factors need to be taken into account, both in terms of context and legal aspects, when launching or buying a business in the USA. After this initial approach, as a French citizen, two other major themes will be addressed: the tax dimension, which will form the subject of the second part of this thesis, and then the immigration aspect, in particular visas. The US is a complex territory, and this essay was no more than an introduction to outline its main features. Once the right state and field of business have been chosen, a wide range of choices and laws still need to be carefully studied to ensure successful international development.

Source : https://fr.usembassy.gov/visas/treaty-trader-e-1-and-treaty-investor-e-2-visas/ ↑
Source : U.S. BEA, 2020, par pays de l’investisseur ultime ↑
Source : https://www.insee.fr/en/statistiques/6675148 ↑
Source : https://media.franceintheus.org/wp-content/uploads/misc/2023_Economic_Report_RGB150_pages.pdf ↑
www.worlddata.info ↑
Exporter aux Etats-Unis – Jean Christophe Donnellier p26-27 ↑
Exporter aux Etats-Unis – Jean Christophe Donnellier p31-32 ↑
https://icc.academy/incoterms-usa/ ↑
Exporter aux Etats-Unis – Jean Christophe Donnellier p178 ↑
S’implanter aux Etats-Unis – Hervé Ochsenbein P103 ↑
S’implanter aux Etats-Unis – Hervé Ochsenbein P104 ↑
Also called the “publicly held corporation.” ↑
Also called the “closely held corporation.” ↑
Some legal systems distinguish between the management of a corporation and the supervisory board to which the former is accountable. American law does not make this distinction: there is a single board of directors. For the latter see also infra-No. 592 et seq. ↑
For the functions of officers, see infra-No. 593 et seq. ↑
Law of the United States – 3^rd edition – Introduction au droit Americain – Peter Hay p 252-253 Ch6 – Texte 584 585 ↑
S’implanter aux Etats-Unis – Hervé Ochsenbein P105 ↑
See Hamilton, The Law of Corporations, § 1/2 1.16; Hynes, Agency, Partnership, and the LLC in a Nutshell § 1/2 104. ↑
For further discussion of the LLC, see Burkhard, LLC Member and Limited Partner Breach of Fiduciary Duty Claims : Direct or Derivative Actions, 7 J. Small & Emerging Bus. L. 19 (2003); Miller, A New Direction for LLC Research in a Contracta-rian Legal Environment, 76 S. Cal. L. Rev. 351 (2003). ↑
Law of the United States – 3^rd edition – Introduction au droit Americain – Peter Hay p 260-261 Ch6 – Texte 608 ↑
See Hamilton, The Law of Corporations §1/2 1.5; Gevurtz, Corporation Law 1/2 1.1.1 (a). ↑
For an overview of sole proprietorships and a proposal to extend limited liabilty protection to this form of business, see Crusto, extending the Veil to Solo Entrepreneurs: A limited Liability Sole Proprietorship Act 2001 Columbus L Rev 381 (2001) ↑
Law of the United States – 3^rd edition – Introduction au droit Americain – Peter Hay p 258 Ch6 – Texte 603 ↑
1922 New York statute first mentioned limited partnerships; its model was the societé en commandite of French law. See Farnsworth, An Introduction to the Legal System of the United States, 3d ed. 1999, 142 n. 49. The limited partnership also has its counterpart in the Kommanditgesellschaft (KG) of German law. ↑
Forty-nine states, as well as the District of Columbia and the U.S. Virgin Islands, adopted provisions modeled on either ULPA (1916) or RULPA. The provisions of the UPA (supra-No. 573 et seq.) also apply to limited partnerships when the applicable statute lacks specific provisions. UPA provisions used in this manner may not, however, contradict the provisions and policy of the ULPA (1916) and RULPA. ↑
See U.L.P.A. (2001) (Prefatory Note) for a comparison between the ULPA (2001) and its predecessors. As of January 2010, the 2001 Act had been adopted in Arkansas, California, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Minnesota, Nevada, New Mexico, North Dakota, Virginia, and Washington, and is under consideration in Alabama and Oklahoma. For the status of the Act’s implementation, see: http://www.nccusl.org. Unlike ULPA (1916) and RULPA, the 2001 Act is standalone legislation and does not rely upon UPA for gap-filling purposes. As such, it is substantially longer and more complex than either of the previous versions. ↑
R.U.L.P.A. § 1/21/2 501, 101 (1); U.L.P.A. (2001) § 1/2 501. Note, however, that the rendition of services is not a permissible contribution in states that adhere to the ULPA (1916). In these states, the contribution must be money or property. U.L.P.A. (1916) § 1/2 4. ↑
Compare U.L.P.A. (1916) § 1/2 7 with U.L.P.A (2001) § 1/2 303. ↑
R.U.L.P.A. § 1/2 303(b). ↑
While other distinctions exist, none differs markedly in terms of substantive policy. For instance, the right of a limited partner to be informed and to examine records under U.L.P.A. (1916) §1/2 10 and R.U.L.P.A. §1/2 305 is broadened in U.L.P.A. (2001) §1/2 304, but the general parameters of all three provisions achieve the same overall goal. ↑
Whereas neither the ULPA (1916) nor the RULPA require regular filings with the state, U.L.P.A. (2001) § 1/2 210 requires that the entity file an annual report with the secretary of state. ↑
An assignee or transferee has no general right to information but is limited to rights directly related to his capital participation. ↑
U.L.P.A. § 1/2 19 (1916); R.U.L.P.A. § 1/21/2 702, 704 (referring to “assignment”); UL.P.A. (2001) §1/21/2 701, 702 (using the term “transfer” rather than “assignment”). ↑
U.L.P.A. §1/2 20 (1916); R.U.L.P.A. § 1/2 801(4); U.L.P.A. (2001) $ 1/2 801(3). ↑
U.L.P.A. § 1/2 21 (1916); R.U.L.P.A. §1/2 705; U.L.P.A. (2001) 8 1/2 704. ↑
Law of the United States – 3^rd edition – Introduction au droit Americain – Peter Hay p 250-251 Ch6 – Texts 580-581 ↑
With few exceptions, the LLP company form has been introduced by statute in all states. ↑
Hence the reference to “registered” as part of the name of the company. ↑
The applicable statute specifies the minimum coverage required. ↑
See Huss, Revamping Veil Piercing for All Limited Liability Entities: Forcing the Common Law Doctrine into the Statutory Age, 70 U. Cin. L. Rev. 95 (2001); Puri, Judgment Proofing the Profession, 15 Geo. J. Legal Ethics 1 (2001). See also Hynes, Agency Partnership and the LLC in a Nutshell §1/21/2 14, 97 or seq. ↑
Law of the United States – 3^rd edition – Introduction au droit Americain – Peter Hay p 251 Ch6 – Text 583 ↑
Law of the United States – 3^rd edition – Introduction au droit Americain – Peter Hay p 251 Ch6 – Text 582 ↑
Exporter aux Etats-Unis – Jean Christophe Donnellier p179-180 ↑
https://delcode.delaware.gov/title8/c001/sc01/index.html ↑
Lancer sa start-up aux états unis – Patricia Carreras – p76 – C Corporation ↑
https://dos.ny.gov/system/files/documents/2023/01/1239-f.pdf ↑
SECTION 402 Certificate of incorporation ; contents Business Corporation (BSC) CHAPTER 4, ARTICLE 4 – www.nysenate.gov ↑
https://dos.ny.gov/certificate-incorporation-domestic-business-corporation ↑
https://dos.ny.gov/forming-business-corporation-new-york ↑
S’implanter aux Etats-Unis – Hervé Ochsenbein P109 ↑
https://dos.ny.gov/system/files/documents/2023/01/1336-f.pdf ↑
https://dos.ny.gov/articles-organization-domestic-limited-liability-company-0 ↑
https://dos.ny.gov/articles-organization-domestic-limited-liability-company-0 ↑
https://www.nysenate.gov/legislation/laws/LLC/417 ↑
https://dos.ny.gov/system/files/documents/2023/08/1708-f.pdf ↑
https://dos.ny.gov/types-businesses-operating-new-york-state ↑
https://www.nysac.org/countyclerks ↑
www.legalzoom.com ↑
www.definitions.uslegal.com ↑
S’expatrier aux États Unis Grace aux Visas d’entrepreneurs – Sylvain Perret – CH26 Le contrat d’acquisition. ↑
S’implanter aux Etats-Unis – Hervé Ochsenbein p 116 – Le contrat d’acquistion. ↑
S’implanter aux Etats-Unis – Hervé Ochsenbein p 117 – Signing puis closing. ↑

How to develop your French business in the US? 1st part – Context and Legal approach

Introduction.

Market Analysis

Territory and resources

Political system and administrative structure

Competition law

Incoterms® rules

Company Legal Structure

Summary – Main legal structures

Branch

Companies

In general

C Corp

LLC The Limited Liability Company

Sole proprietorship

Partnership

General

Limited and General Partnership Distinguished

Limited Liability Partnership (or LLP)

Co-companies – Joint venture

Company Registration – Creation

States

Location / Incorporation

Focus on Delaware

Imperative elements for the constitution

Corporation (S+C)

LLC- Limited Liability Company

Sole Proprietorship

Certificate of conversion

Acquisition of an existing structure

Research and selection

Letter of intent

Due diligence

Acquisition agreement

Signing and Closing

Conclusion

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