Legal Question in Business Law in California

In order to give you some direction, I am providing you with some quick answers (I am sure other attorneys might give you a more detailed response). Basically:

1) He should register in the US and his home country, as well as Europe if he is planning to sell there in the future.

2) Consult an Intellectual Property Attorney with knowledge of International Law. (We can provide you with referrals).

3) Yes, he can open stores in the US, an can own 100% of the company (he doesn't need a local partner). We can assist with the tax planning and business entity formation.

4) There could be tax advantages to using a Nevada or Delaware corp, but it would depend partially on where he opened his first stores. The benefit will become more tangible as he has more of an overall US presense.

I hope this helps and feel free to contact us for more information.

Good luck,

I agree with Mr. Nazarian in general. I would add on question 1) that there is no such thing as a unified international trademark. Every country has it's own trademark laws and registration (though I think the EU now has a centralized system) So you have to register everywhere you want protection. On question 3) a foreign national and foreign companies can do business in the US without any US ownership and only general registration and local business license requirements. There does not need to be any US ownership or even a US legal entity. Most foreign businesses, however, find it very advantageous to set up a wholely owned US subsidiary to do business here. On 4) there are tax advantages to setting up the subsidiary in Nevada only if that is where you physically do business. Most taxes are based on where the business operates, not where it is incorporated or formed. Delaware has corporate governance and securities laws that are very advantageous to management of publicly traded companies. Unless he intends to issue a public offering of stock, Delaware would be no better than most any state for incorporation.

I suggest referring your client to the "Madrid system" or "Madrid protocol," which may provide the best coverage, but is not without some drawbacks. There are several basic but worth-while discussions of the Madrid system available on the Internet, including Wikipedia.

The main limitation on foreign ownership of U.S. business is that an "S" corporation cannot have a nonresident alien shareholder. For this reason, your client should consider an LLC as well as other forms of business organization.

I cannot comment in detail on the selection of a state in which to domicile the business. In general, I would think it sensible and economical to choose the state in which either (1) the first store, or (2) the greater number of stores, will be opened. The advantages of forming a business in a state where it doesn't actually operate significantly are outweighed by the disadvantages, except for large (publicly-traded) corporations. However, I cannot say that California is necessarily better than any other state, and it probably isn't -- a careful review should be done of the LLC, corporation and related taxation laws of several states in which the business plans to operate. Give some consideration to the location of manufacturing, importation, warehousing, employees, etc.

As a Franchise Attorney I agree with the other attorney answers, and add the following. Registration under the Madrid Protocol can protect the brand in a large number of countries and is managed by the World Intellectual Property Organization. Their website has a lot of useful information about this process, fees, etc. As far as bringing your client's stores to the U.S., he should consider franchising as a more efficient and profitable growth strategy. It would eliminate virtually all of the red tape, and shift the financial responsibility for establishing and running stores to franchise owners. Consult with a good business or franchise attorney for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation