A European technology group prepares to establish its first US operating entity. Its directors assume the process mirrors what they know from EU company registrations. Within weeks, they discover that choice of state, governance structure, and federal compliance obligations create a web of decisions that cannot be reversed cheaply once made. The wrong vehicle – chosen for speed rather than strategy – can block future fundraising, complicate an eventual exit, and generate tax exposure that persists for years.
Corporate law in the United States operates across a dual federal-state system, where each state maintains its own company legislation while federal law governs securities, antitrust, and certain employment obligations. The most common structures for international clients are the Delaware limited liability company and the Delaware corporation. Each formed by filing with the Secretary of State and governed by a set of internal documents that define shareholder rights and board authority. Formation can be completed in days, but structuring decisions – entity type, governance rules, and equity arrangements – require careful analysis before any filing is made.
This page explains the primary corporate instruments available to international businesses in the United States, the procedures and timelines involved. The pitfalls that most commonly affect foreign-headquartered groups. Additionally, the cross-border considerations that arise when US operations intersect with Brazilian or EU parent structures.
The regulatory setting for international businesses in the US
The United States has no single national company law. Corporate legislation exists at the state level, and businesses choose their state of incorporation or formation independently of where they operate. Delaware dominates as the preferred jurisdiction for sophisticated commercial entities. Its corporate legislation is mature, its courts have developed extensive case law on fiduciary duties, and its procedural predictability makes it the default choice for venture-backed companies, private equity vehicles, and multinational subsidiaries.
At the federal level, the Securities and Exchange Commission (SEC) regulates the issuance and trading of securities. Any equity arrangement that involves a third-party investor – even in a private company – must satisfy federal securities legislation or qualify for an exemption. International founders frequently underestimate this requirement. Offering shares to investors in multiple countries triggers both US federal rules and, potentially, the securities legislation of each investor's home jurisdiction.
Federal antitrust legislation adds a further layer. Acquisitions above defined thresholds require pre-merger notification under competition law. Additionally. The review period can run from 30 days to several months depending on the complexity of the transaction and the response of the reviewing authority. For a foreign group acquiring a US business, the timeline implications are material: signing and closing cannot happen simultaneously at the scale that triggers mandatory review.
Beyond these headline regimes, US corporate practice involves know-your-customer (KYC) and beneficial ownership rules administered through federal financial crime legislation. Since the introduction of enhanced beneficial ownership reporting obligations, companies formed in the US must file information on natural persons who ultimately control or own the entity. Non-compliance carries civil and criminal penalties that apply to both the entity and its responsible officers. International clients who manage US entities remotely are often unaware that the reporting obligation rests on them personally.
Key corporate instruments and formation procedures
The two structures used by the overwhelming majority of international clients are the Delaware corporation and the Delaware LLC. Each has distinct governance rules, tax treatment, and suitability for different business objectives.
The Delaware corporation is the required vehicle for companies intending to raise venture capital, list on a US stock exchange, or issue stock options to employees under favourable tax treatment. Its governance is defined by a certificate of incorporation (equivalent to articles of association in civil law systems) and a set of bylaws that regulate board and shareholder procedures. The board of directors holds authority over day-to-day management. Shareholders act through resolutions, which may be passed at annual or special meetings or, in many cases, by written consent without a meeting. Delaware corporate legislation permits significant flexibility in customising shareholder rights, protective provisions, and economic entitlements through preferred stock instruments.
Formation requires filing the certificate of incorporation with the Delaware Division of Corporations. The process takes one business day in standard processing or a few hours on an expedited basis. The entity must then appoint a registered agent – a service provider with a registered office address in Delaware – within the state. Once formed, the corporation must obtain a federal employer identification number, open a US bank account, and, if operating in any state other than Delaware, register as a foreign corporation in each operating state. That secondary registration requirement surprises many international clients. A company incorporated in Delaware but conducting business in California, New York. Alternatively, Texas must register separately in each of those states. Maintain a registered agent in each. Additionally, file annual reports and pay franchise taxes in each.
The Delaware LLC suits businesses that do not intend to raise institutional equity, prefer pass-through tax treatment, or want maximum flexibility in internal governance. An LLC is governed by an operating agreement rather than a certificate and bylaws. The operating agreement can be drafted to give members (the LLC equivalent of shareholders) virtually any economic and governance arrangement the parties agree on. LLCs are often used for joint ventures, real estate holding vehicles, and subsidiaries of foreign groups that wish to consolidate US profits into a non-US parent without triggering double taxation at the entity level.
For cross-border M&A and private equity transactions, see our analysis of mergers and acquisitions in the United States, which covers deal structuring, representations and warranties insurance, and regulatory approval timelines in detail.
Governance documentation at formation is not a formality. The shareholder agreement – or in an LLC, the operating agreement – defines the rights that will govern the relationship between founders, investors, and the company for the life of the entity. Key terms include board composition rights, approval thresholds for major decisions, anti-dilution protections, drag-along and tag-along rights, and information rights. Disputes about these terms after the company has raised capital are expensive to resolve and frequently damage investor relationships. Experienced practitioners in the US strongly recommend resolving all governance terms before accepting the first external investment, not after.
A shareholder resolution in a Delaware corporation requires proper notice, quorum, and – for certain decisions – a supermajority vote. Failures in meeting procedure can render resolutions void, which creates problems when the company later seeks to close a financing round or complete an acquisition. The board of directors must also act by proper resolution, documented in written minutes or unanimous written consents signed by all directors. US courts scrutinise board process when fiduciary duty claims arise.
To receive an expert assessment of your corporate structure in the United States, contact us at info@ferrazwhitmore.com.
Pitfalls that most frequently affect international clients
The most common mistake made by foreign-headquartered groups is choosing an entity type based on short-term convenience rather than long-term objectives. A European parent that forms a US LLC for its subsidiary may find, when the subsidiary later seeks venture investment. That the entire structure must be converted to a corporation. a process that triggers legal costs, tax filings. Additionally, delays at precisely the moment the business needs to move quickly.
A second persistent problem is the failure to maintain corporate formalities. US courts – particularly in Delaware – will pierce the corporate veil and hold parent companies personally liable for subsidiary obligations where the subsidiary has not maintained separate books. Separate bank accounts, and documented board decisions. International groups that treat their US subsidiary as an informal extension of the parent operation expose themselves to liability that can reach into the parent's assets.
Equity compensation arrangements present a third area of frequent error. US employment legislation and tax legislation impose specific rules on the grant of stock options and restricted stock. Options granted at below fair market value create immediate taxable income for the recipient and penalty taxes. Determining fair market value requires a formal valuation – commonly called a 409A valuation after the relevant provision of federal tax legislation – which must be updated regularly. International companies that replicate their home-country equity schemes without adapting them to US rules routinely create tax problems for their US employees.
The US dispute resolution environment also differs markedly from civil law systems. Litigation in the United States District Court (federal court) or state court is expensive and slow. Discovery – the pre-trial exchange of documents and testimony – is far broader than the disclosure obligations in European or Brazilian proceedings. A single commercial dispute can generate years of litigation and legal costs running into millions of dollars at the document-intensive phase alone. Many international businesses operating in the US address this risk by including mandatory arbitration clauses in their commercial contracts, specifying either JAMS or AAA arbitration (the two principal private arbitral institutions in the United States). These clauses can limit discovery, shorten timelines, and produce a confidential award enforceable under the New York Convention in over 170 countries. The choice between JAMS and AAA depends on the nature of the dispute, the amount in issue, and the preferred procedural rules.
A company registration that omits a carefully drafted dispute resolution clause. or that adopts one without specifying the seat, the governing law. Additionally. The number of arbitrators. will face procedural litigation about the clause itself before the substantive dispute can even begin. Courts in the US enforce arbitration agreements broadly, but ambiguous clauses generate preliminary disputes that defeat the efficiency the parties sought to achieve.
Finally, international clients frequently underestimate the compliance obligations that attach once a US entity has employees. US employment legislation – which exists at federal, state, and local levels – imposes rules on minimum wage, overtime, anti-discrimination, leave entitlements, and termination procedures that differ substantially from European labour law. California, New York, and Massachusetts impose requirements that exceed federal minimums in significant ways. A company that hires its first US employees without specialist advice regularly creates wage-and-hour liability that accumulates silently until a termination triggers a claim.
Cross-border and strategic considerations: Brazil and EU dimensions
International groups structured with a Brazilian parent or with EU holding companies face specific issues when introducing a US entity into their corporate chain. These issues arise in three main areas: tax structuring, governance authority, and enforcement of agreements across jurisdictions.
On the tax side, the interaction between US corporate tax legislation and the tax rules of the parent jurisdiction determines whether profits earned in the US can be repatriated efficiently. The United States imposes a withholding tax on dividends paid to foreign shareholders, subject to reduction under applicable tax treaties. Brazil and the United States do not currently have a bilateral tax treaty in force. This means that dividends paid by a US corporation to a Brazilian parent are subject to withholding at the standard treaty-absent rate. a material consideration when modelling the post-tax return on a US investment from Brazil. EU-based parents may benefit from treaty protection. However, the applicable rate varies by member state. Additionally. Several treaties impose conditions. such as minimum holding periods and ownership thresholds. that must be satisfied before the reduced rate applies.
For groups with a Brazilian parent considering US expansion. Our analysis of corporate law in Brazil covers the domestic governance and regulatory requirements that interact with the US structure. This includes Brazilian foreign exchange rules that affect how equity contributions and loan proceeds flow into the US entity.
On the governance side, the authority of a foreign parent to direct the US subsidiary raises questions under both US corporate law and, in some cases, the law of the parent's home jurisdiction. A Brazilian or European parent that exercises excessive operational control over a US subsidiary without proper board delegation may inadvertently expose itself to claims that it is the de facto operator of the US business – with attendant liability implications. Proper governance means the US subsidiary has an independent board (or at minimum a documented delegation structure), holds its own board meetings, and makes its own contracting decisions within authorised parameters.
For EU-based groups, the General Data Protection Regulation creates a cross-border compliance obligation that runs alongside US data protection legislation. A US subsidiary that processes personal data of EU residents must comply with GDPR as well as applicable US state privacy legislation – currently most stringently in California. Reconciling these two regimes requires specific contractual instruments between the US entity and its EU affiliates. Additionally. The practical requirements differ sufficiently that a single privacy policy drafted for one regime will not satisfy the other.
Enforcement of contractual rights across the US-Brazil corridor presents a further structural issue. The United States and Brazil are not parties to a treaty providing for automatic mutual recognition of court judgments. A judgment obtained in a US federal or state court against a Brazilian defendant requires recognition proceedings before Brazilian courts. Those proceedings apply Brazilian conflict-of-laws rules and can take considerable time. Structuring significant commercial arrangements with Brazilian counterparties to include international arbitration avoids this problem: arbitral awards are enforceable in Brazil under the New York Convention, to which Brazil is a signatory.
Our practical guide to company formation in the United States provides a step-by-step breakdown of the filing process, timelines, and document requirements for each major entity type.
For a tailored strategy on corporate structuring and cross-border compliance in the United States, reach out to info@ferrazwhitmore.com.
Self-assessment checklist for international clients
Corporate law services in the United States are most immediately relevant where one or more of the following conditions apply:
- You are forming a US entity to receive investment, employ staff, or sign commercial contracts with US counterparties.
- You are acquiring a US business or entering into a joint venture with a US partner.
- Your existing US entity has grown and its governance documents have not been updated to reflect its current shareholder base or operational scale.
- You are planning a fundraising round involving US institutional investors and need to ensure your cap table, option pool, and constitutional documents meet investor expectations.
- You face a commercial dispute with a US counterparty and need to assess your enforcement options under your existing contract.
Before initiating any formation or restructuring procedure, verify the following:
- Have you determined whether a corporation or LLC better serves your medium-term objectives, including any anticipated equity raise or exit?
- Have you identified every US state in which the entity will conduct business and confirmed the foreign qualification requirements in each?
- Have you appointed a registered agent with a registered office in Delaware and in each operating state?
- Have all founders, employees, and consultants signed intellectual property assignment agreements transferring pre-existing and future IP to the entity?
- Have you obtained a 409A valuation before granting any equity-based compensation to US employees or service providers?
- Have you reviewed the beneficial ownership reporting obligations and confirmed that responsible officers are prepared to file required disclosures?
- Have your commercial contracts been reviewed for dispute resolution clauses appropriate to the US environment?
If a US operating entity encounters insolvency conditions. or if a dispute escalates to the point where a counterparty seeks to enforce a judgment against US assets. the matter shifts from corporate governance to insolvency or enforcement proceedings. Those procedures are governed by distinct bodies of law and require immediate specialist attention. The trigger point is typically a payment default or a court order. Acting before that point preserves strategic options that are unavailable once formal proceedings begin.
Frequently asked questions
- How long does it take to form a Delaware corporation or LLC, and what are the main cost components?
- The state filing itself can be completed in one business day under standard processing, or within a few hours on an expedited basis. However, the total timeline to an operational entity. including federal tax registration, bank account opening, and preparation of governance documents. typically runs from two to six weeks depending on the complexity of the shareholder arrangements. Legal fees vary with the complexity of the governance documentation; government fees are modest. The more significant cost is getting the constitutional documents right at formation rather than correcting them later.
- Is it a misconception that a Delaware company can operate freely throughout the United States?
- Yes. Incorporating in Delaware gives you a Delaware legal entity, but operating in another state. defined broadly to include having employees, an office, or regular commercial activity there – requires separate foreign qualification in that state. Each operating state has its own registration requirements, annual report obligations, and franchise or income tax filings. Failing to qualify as a foreign corporation in an operating state can result in the entity being barred from bringing claims in that state's courts, and can expose the entity and its officers to penalties.
- Engaging a lawyer in the United States with cross-border experience – is it necessary if we already have a local US formation agent?
- Formation agents handle the mechanical filing of documents. They do not advise on entity selection, governance terms, securities law compliance, cross-border tax implications, or dispute resolution strategy. A law firm with United States corporate experience and an international perspective can identify the structural issues that a formation agent will not raise. and that. If left unaddressed, create liability or inefficiency that costs far more to fix than it would have cost to avoid. This is particularly true for businesses with parent structures in Brazil, the EU, or other common law or civil law systems where the interaction between legal regimes requires coordinated advice.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions on corporate law, M&A, dispute resolution, and cross-border compliance. Our corporate law practice covers US entity formation, governance structuring, equity arrangements, and cross-border transactions for international clients entering or operating within the United States. We combine English common law expertise – directly relevant to Delaware corporate practice and US arbitration – with Portuguese civil law grounding and a network of relationships across EU, Brazilian, and Latin American jurisdictions. As a law firm serving international clients in the United States, we advise entrepreneurs, institutional investors, and in-house legal teams who require results-oriented counsel that spans multiple legal systems simultaneously. Our practitioners have advised on corporate matters before US federal courts and in JAMS and AAA arbitration proceedings. Additionally. Our Lisbon base provides direct access to EU and Portuguese regulatory counsel for groups managing transatlantic structures. To discuss your corporate situation in the United States, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.