DINSMORE & SHOHL LLP
National and Regional Law Firm
Offices: Ohio, Kentucky, Pennsylvania and West Virginia
280 Lawyers (40 in Intellectual Property, 160 in
Litigation, 100 in Business/Tax/Real Estate/Banking, etc.)
Clients: 60 Foreign (including Indian) clients
with offices in the USA
Clients: 60 Non-U.S. (including Indian) clients
who do business in the USA without official offices
Large Automotive and Manufacturing Practice
Harvey Jay Cohen, Esq.
harvey.cohen@dinslaw.com
Telephone 1-513-977-8144
Facsimile 1-513-977-8423
At Dinsmore & Shohl for more than 19 years
Georgetown University A.B. Cum Laude 1982
Columbia University, Masters International Affairs,
Magna Cum Laude 1984
University of Cincinnati, Juris Doctor, Order of the Coif 1987
Please do not hesitate to ask questions during our presentation and
afterward by e-mail or telephone
Automotive
• Close working Relationship with State Governments
• Corporate/Real Estate/ Tax
• Unions and Employment
• Intellectual Property and Franchising/Distribution/Sales
• Retirement Plans
• Immigration
• Litigation
FUNDAMENTALS OF BUILDING YOUR
BUSINESS:
Principal Questions for Indian/Non U.S.
companies doing business in the USA
• Many services provided are faster, easier and cheaper
in the USA ...
Lawyers
Accountants
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•
•
•
Banks
Registrations with the Government; No Approvals
Regulation of products is less stringent in many areas. This laxity
varies greatly depending on the type of products and whether they
are for sale to consumers or businesses
Distribution of products, even across and into a vast market
Taxes, unemployment insurance
Principal Questions for Indian/Non U.S. companies
doing business in the USA (continued)
Competition is less regulated
Use of Distributors and Sales Agents as an entry strategy
Termination of Distribution and Sales Agent contracts without fear of
large damages.
This can vary depending on the state
Labor less organized into strong unions, less regulated
Discharge/Termination of employees is less complex and costly
Private ownership of real estate with no government regulation.
Private buying and selling of companies (manufacturing or services),
and private equity investment in companies, all with no government
regulation. A proven entry strategy
Entry into the US, Initial Advice
Always use a top-notch local lawyer, not just a Los Angeles or New
York lawyer, etc. (2-3 times expense)
A Delaware Corporation is not necessary
For example, Procter & Gamble, large oil companies and other
U.S. large companies are Ohio corporations. The vast majority of
public corporations are not Delaware corporations
Do not double your expenses and administrative burden
First steps
Hire an Accountant/Tax advisor, register patents
and trademarks and fulfill immigration formalities
Create an Indian or offshore subsidiary to make U.S.
sales or to own the U.S. entities, isolate the mother
company from liability from the USA
State vs. Federal (Washington, D.C.) Law
Uniform Commercial Code (state law on sales)
Each state has its own Corporation/Business Code
Each state is different in some ways, some important and some
insignificant
Competition
Competition/Anti-Trust rules are liberal/lax
No agreement between competitors on price
Credit
It is difficult to recover lent money or accounts
receivable, as federal and state laws favor the debtor,
especially in bankruptcy
Protect Yourself
Retain Security Interests/Collateral in inventory,
equipment, etc.
Credit Insurance
Use a well-drafted contract with tight payment terms
You can demand interest up to typically 18%/year,
depending on state law
Product Liability
It is often said that this is a problem in the USA, and it is true
Lawyers for victims are not paid by the hour, but take
33% of all awards
Product liability insurance is essential
Again, it is key to operate in an affiliated structure,
reducing risk to the parent
Sales Laws
The UN convention on the International Sales of Goods (CISG)
applies in the USA. Pay attention. If a governing law clause in a
contract designates a State (UCC) or Indian law, without
specifically opting out of the CISG, the CISG will control and
apply as the CISG automatically substitutes for state or Indian
law. Pay attention to these clauses and opt out of the CISG if you
wish.
Jurisdiction/Courts
In contracts, it is possible:
To be silent on venue
Or to designate an Indian tribunal; but arbitration is best
Or to choose a State/County court in the U.S.
Or to choose mediation
Or to choose arbitration
Or to require business executives escalation between the
parties before commencing litigation
Form of Contracts
Insist that all contracts be complete and signed. Avoid verbal
contracts or those on “scrap paper”/“cocktail napkins”
In the USA you can choose the law to apply
Conclusion: Freedom of contract is the rule in the U.S. You
should use this freedom to your advantage
Contract Clauses
You can limit damages to the value of the products or services sold
You can limit warranties, e.g., the only warranty is performance to
specifications for 90 days
You can limit types of damages, e.g., eliminate consequential, indirect and
punitive damages
You can have an internal statute of limitations, e.g., after one year an
aggrieved party cannot sue the other party
It is possible to exclude all other guarantees/warranties, sometimes it is
even possible to sell “as is” without a warranty
Distributors/Re-Sellers and Sales Representatives
Use a carefully written-contract
Keep the term short
No automatic renewals
Register all marks, URLs, patents, etc.
Non-competition clauses are essential and may continue after
expiration/termination
Minimum sales levels to retain exclusivity
Use a list of objective standards, which if breached, leads to termination
You can terminate a Distributor or Sales Representative Agreement more
simply than in other countries with less fear of damages. This result,
depends on state law.
Entities
Corporation
Limited Liability Company (LLC)
General Partnership (Partnership)
Branch office of foreign entity (Branch)
Articles of a Company filed with State Government
All forms of entity are granted/governed on receipt by states. No
application process, approvals, financial statements, feasibility
studies, etc. In Ohio, this happens on same day service.
No extra form(s), reporting or approvals for foreign ownership
US state laws in general are more liberal, less regulatory and less
rigid, especially the LLC (you can almost do anything from a
governance standpoint
Little or no required capitalization. No approval of
dividends.
No requirement for an annual audit or filing of
financial statements
The identity of officers and directors is secret
Financial results are secret
Conclusion
In general, it is more simple, fast, easy, less regulated and
cheaper to do business in the USA
If you need assistance in the USA, please call us early in the
process to use us to your maximum advantage.
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