Business Without Borders – International Business and Tax Planning Blog

Archive for March, 2010

In the U.S., a party can be sued either in the federal courts or in the courts of one of the fifty states.  The federal courts generally have jurisdiction in matters that (1) involve an issue of federal law – called federal question jurisdiction, or (2) if the parties are citizens of different states and the matter in controversy exceeds $75,000 – called diversity jurisdiction.  In a recent case decided by the United States Supreme Court – Hertz Corp. v. Friend, the Court finally put an end to a open issue concerning in which state or states a corporation is a citizen.

The federal diversity jurisdiction statute provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.”  28 U.S.C. §1332(c)(1).  The Supreme Court has now held that a corporation has its principal place of business in the state where its “nerve center” is located.

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The L-1 visa program offers multinational businesses a rather straightforward way to place executive, managerial, or “specialized knowledge” employees in the United States.  This program allows employers to bypass the traditional quota limits and labor certification requirements applicable to other visa categories, such as the H-1.  The L-1 visa is for intra-company transferees.  In order to qualify, the subject employee must have worked for a multinational company outside the United States in an executive, managerial, or “specialized knowledge” capacity for at least one continuous year within the three years prior to coming to the United States and, further, must be coming to the United States to work for a related company (parent, subsidiary, sister company, etc) in a similar capacity. 

Sometimes stories do not have happy endings.  Unfortunately, the same holds true for employer-employee relationships.  What happens when your “super star” L-1 visa employee turns into a “problem child” (or worse, a problem child with a penchant for litigation) and you need to terminate the relationship?  

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Globalization affects nearly every business.  Companies developing new products or methods have to carefully develop an intellectual property portfolio, including a patent filing strategy, to respond to and compete on an international scale in the global market. For sure, the patent filings start with filings in the companies’ home land, most likely where the inventions were made.   But considerations of foreign filings are a must for developing an international filing strategy that is truly in line with globalization.  Questions of where the newly developed product will be manufactured should be resolved as part of such strategy.  Is the newly developed product or method a candidate for successful distribution or sales abroad?  Where or in what part of the world would such sales be expected? In what countries are the competitors situated?  Often, the most obvious countries, i.e., the immediate neighboring countries, such as Canada and Mexico for U.S. companies, are not considered in a timely fashion.  The company may even wrongly assume that, due to NAFTA agreements, U.S. patent protection would extend into NAFTA states, not realizing that the protection stops at the countries borders.  Although the company may have a manufacturing agreement in place with a foreign manufacturer, which may give the company proprietary rights to any pre-manufacturing or manufacturing tools and molds, it is certainly advisable to include the country of manufacture into the foreign filing strategy.

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In what has been described as a “radical departure” from established precedents that form the hallmark of due process, the New Jersey Supreme Court recently upheld jurisdiction in New Jersey over a foreign manufacturer whose only act was to target the United States market for the sale of its product.

In Nicastro v. McIntyre Machinery America, Ltd., the Court concluded that a foreign manufacturer that places a defective product into the stream of commerce in this country, through a distribution scheme that targets a national market, may be sued in a New Jersey court for damages for injuries caused by the product.  In its liberal application of the stream-of-commerce doctrine, the Court reasoned that the new reality of the globalization of commerce, coupled with New Jersey’s long-arm rules and the severity of the injury involved, dictated that a British manufacturer should be subject to suit in New Jersey, despite its utter lack of contacts or presence in this state.

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A foreign business seeking to enter the United States market faces many business and legal hurdles notwithstanding that it may have a better mouse trap or service to sell.  In what form should it enter the U.S. Market? Should it establish a direct branch operation? Should it form a separate legal subsidiary?  If so, should that subsidiary be a corporation or a limited liability company?  Should it enter into a joint venture with an existing U.S. partner or a foreign partner?  There are many options.  How will those choices affect the foreign company’s business risk, legal risk, tax cost and repatriation of profits?  This blog entry seeks to provide a general discussion of some of the choice of U.S. entity questions and the related business and tax issues. 

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Guest Blogger: Stefanie R. McNamara, General Counsel at St. Peter’s University Hospital (formerly a Senior Associate with Norris McLaughlin & Marcus, P.A.)

As health care reform is now the law of the land in the U.S., foreign entities who do business here in the U.S. need to know about a few aspects of the law that will immediately impact them.  While the Senate is expected to further tweak the entire health care reform package that was passed by the House and signed into law by the President, there The following are a few key things that U.S. employers, together with their insurance carriers, must begin to address now.

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During the early 19th century immigration wave into the USA, “… and the streets are paved with gold!” was widely broadcasted to the huddled masses seeking a better life. Some immigrants did find “gold.” While others only “fools gold,” all found freedom. Today, the same three options exist for those seeking to invest in the USA.

While our streets are not paved with gold, there is a path into the USA that is. Since 1999, the law has allowed one to obtain permanent residence in the USA by making a significant investment in the USA. One has the option of starting a business, buying a distressed business, or investing in a project in area designated by the government as in need of economic assistance. The amount of the investment varies from a minimum of $500,000 to $1 million depending upon the type of investment chosen.

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Bringing your business to United States?  Or taking your business outside U.S.?  There are a myriad of issues facing the business seeking to enter new marketplaces.  We look to provide current informative content directed at those in the business community who have the need to understand the constantly changing and complex path for people to come into or going out of the U.S. marketplace.

Our firm provides a full service commercial and international legal practice with corporate, tax, intellectual property, immigration and litigation being significant components.  We would like to give you information that will be useful in taking advantage of the opportunities and laws of the United States and its constituent 50 states.  Alternatively, through our experience and membership in Meritas, an established global alliance of independent, full-service law firms, we also hope to offer insight for businesses expanding into non-U.S. markets.

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