When structuring a flip transaction – a deal in which shareholders in an overseas company exchange their shares for shares in a new US company – there are multiple initial issues to consider as outlined below. In a flip transaction, the new US company becomes the parent company, and the overseas company becomes a wholly owned subsidiary of the parent.

1. Tax planning and tax clearances (if required) for current shareholders

To identify taxes triggered by the flip for current shareholders in an overseas company and determine future tax consequences (e.g., controlled foreign corporation rules):

• Consider tax consequences for individual and corporate/institutional shareholders.
• Explore steps to minimize tax impact (e.g., individuals holding shares through a corporate entity).
• Find out whether other arrangements could alleviate costs if the flip is taxable for a shareholder.

2. Cap table review

Do smaller or friends and family shareholders wish to participate in the flip, or should they be bought out by larger shareholders?

3. Relocation of management and/or employees

Is relocation – permanent or secondment (temporary) – of overseas employees or founders to the US required? Consider:

Secondment or relocation terms, tax equalization, etc.

Immigration clearance or visas – think about employee eligibility and the timing of the visa process.

4. Incorporation in the United States

A flip typically is incorporated as a Delaware corporation. The timing depends on commercial needs,...

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