A distributor agreement is a commercial contract between a supplier of goods and a distributor of goods. The supplier may be a manufacturer, or it may be a reseller of the products. In the modern business world, more and more companies are involved in distribution arrangements that cross international boundaries. According to data provided by The World Bank, international trade accounted for nearly one third of U.S. gross domestic product (GPD) in 2017. Companies engaged in this type of cross-border business need well-structured international distributor agreements. Key Clauses in an International Distribution Agreement An international distribution agreement is essentially a contract that creates a framework for a business relationship between global parties. To ensure effective and efficient transactions, an international distribution agreement should be comprehensive. Among other things, some of the main clauses that you typically will find in an international distribution contract include products and territory, obligations of the parties, exclusivity provisions, renewal/termination, and dispute resolution. Products and Territory As a starting point, international distribution agreements will generally provide details regarding the specific products and the specific territory that will be covered by the contract. Obligations of the Parties Similar to other commercial agreements, it is imperative that an international distribution contract clearly outlines the responsibilities of each party. Both the supplier and the distributor must have clarity regarding their duties to perform under the terms of the deal. Exclusivity Provisions Some international distribution agreements include exclusivity provisions. While not all of these agreements are exclusive, this is an issue that should be addressed within the contract negotiations. Renewal/Termination The agreement should also define the length of the commercial relationship. In addition, procedures should be created to deal with issues related to renewal and termination. Dispute Resolution Finally, distributor agreements should include dispute resolution provisions. No matter how good the relationship between the supplier and the distributor, there is always a risk of dispute. With international business contracts, it is often advisable to include an arbitration provision. Arbitration offers many advantages compared to handling disputes under local laws. Of course, this list is just a brief sampling of the important contract terms that you will find in an international distributor agreement. These agreements should always be customized to meet the unique needs of each party. Get Help From an International Business Attorney Today If your company is considering entering into an international distributor agreement, it is essential that you seek professional guidance. As these are complex agreements, there are a number of different unique issues that need to be addressed. I will make sure that the agreement is properly drafted and that it protects the rights and business interests of your company. I frequently represent American clients doing business abroad and German speaking clients doing business in the United States. If you have questions about international distributor agreements, I’m happy to help. To schedule a fully confidential consultation, please contact me today.
For anyone who is currently living in the U.S. and is looking to invest in or start a business or anyone who currently lives abroad and is considering investing in or opening a business in the US, it is important to learn more about how employment contracts work in this country. While different employment contracts can vary considerably depending upon the specific role for which an employee is being hired, as well as the type of business doing the hiring, there are common elements to U.S. employment contracts. Here, I explain the variation from one U.S. employment contract to another, as well as to say more about what elements often are included in an employment contract USA. Not All Employment in the USA Requires a Contract The first thing to know is that there are no wide-ranging laws that govern employment contracts in Florida or in the U.S. more generally. In fact, there is no requirement under U.S. law that an employee has a written contract whenever there is an employer-employee relationship. In the US, many employees are what are known as “at-will” employees, which means that their employment is not governed by a work contract USA or another type of employment agreement. Rather, at-will employment means that either the employer or the employee can terminate the employment at any time and without cause. Even if an employee in the U.S. gets an offer letter, it is important to know that an offer letter is not the same thing as an employment contract. Typically, however, professionals and highly skilled employees in the U.S. will have an employment contract. Variation in U.S. Employment Contracts Even when employees are highly skilled or working in professional positions in which employment contracts are common, there is great variation in the types of employment contracts in the USA that can exist. Examples of some of the ways in which employment contracts vary include but are not limited to: Term of the employment contract: there is no specific employment law requirement that an employment contract be for a particular period of time. Some employment contracts have fixed terms, while others are open-ended in terms of the employment term. These variations can even exist within the same profession. Trial period: some employers have a trial period for new employees, while others do not. For most employers who require a trial period—also known as a probationary period or an introductory period of employment—the employee typically will receive a review after a specified period of time. Notice requirement: employment contracts may or may not include a notice requirement, meaning the amount of time an employer must give when terminating an employee. Common Employment Contract Sections While employment contracts in the U.S. do vary widely, they frequently have similar sections, including but not limited to: Employee’s responsibilities; Compensation; Benefits; Methods of dispute resolution; Nondisclosure and/or confidentiality agreements; Non-compete clauses; and Termination information. Differences Between U.S. and European Employment Contracts The main differences between U.S. and European employment contracts are vacation days, sick days, and maternity leave. For U.S. employees it is common to have only 10 vacation days plus some holidays per year and maybe 7 paid sick days (longer periods apply under the Family Medical Leave Act). Paid maternity leave extends only 6 weeks after birth. In Europe, all of these periods are considerably longer and governed by law. Get Help With Your USA Employment Contract If you have questions about U.S. employment contracts, you should get in touch with an international business law attorney who has experience with businesses in the U.S. and in Europe. Contact me today for more information.
For anyone outside the US who is considering doing business in America, the first step is learning more about how to start a company. Starting a business in the USA as a foreigner is challenging. There are many complex laws that apply. Here is an overview of how to open a company in the US. 1. Choose Your Business Structure The first step in starting any kind of business in the US is to choose the business structure that is best suited to your needs. The U.S. Small Business Administration (SBA) explains that there are numerous types of business structures, and each has its benefits and limitations. At the same time, not all business structures are right for—or even available—to everyone. Here is information about some of the business structures that you may be considering: Partnership This is the simplest type of business structure for two or more people who want to form a business together. You can form a limited partnership (LP) in which one general partner has unlimited liability while the rest have limited liability, or a limited liability partnership (LLP) in which all partners have limited liability. In this type of business, profits pass through personal tax returns. Limited liability company (LLC) This type of business has some elements of a partnership, but it also protects the business owners from personal liability in most situations. Unlike other states in the US, LLCs do not have a limited life span in Florida. Corporation There are different types of corporations, and this type of business structure provides owners with the most protection from personal liability. However, corporations cost more to form, and they have many more requirements than the other types of businesses listed above. 2. Choose Your Business Name and Location Once you determine the appropriate business structure for your business or company, the next step is choosing a name for your business and deciding where to open it. 3. Develop All Necessary Legal Documents and Filings for Your Business If you plan to start a corporation, for example, you will need to file articles of incorporation. Then, if you are starting a corporation, you will need to develop the corporation’s bylaws and maybe a shareholder agreement. If you are starting an LLC, you will have to file articles of organization and maybe need to develop an operating agreement. Shareholder and operating agreements are similar to one another, but they are specific to the type of business structure you choose. Depending upon the type of business, there may be other important local documents or filings that a business law attorney can discuss with you. Contact a Business Formation Lawyer in America There are other important steps in starting a company in the USA. An experienced business formation attorney can discuss your options with you and can help you to begin the process of opening a new business. Contact me today to get started.
Unlike real or physical property, intellectual property (IP) refers to a class of intangible rights in the implementation of specific ideas and concepts. Because of its intangible nature, IP often requires protection in multiple countries with different laws. International intellectual property law therefore represents an attempt to develop certain common standards for protecting the rights of creators and other IP holders. Protecting Copyrights, Patents & Trademarks on a Global Scale The term intellectual property is itself rather broad. It does not refer to a specific type of property but rather an entire group of intangible rights. The most common forms of international intellectual property are copyrights, patents, and trademarks. Copyright The Berne Convention for the Protection of Literary and Artistic Works is an international treaty that establishes certain minimum standards for copyright law. It also requires each member country to treat works created in another member state the same as their own when it comes to copyright protection. A second agreement, the 1996 WIPO Copyright Treaty, further extended international copyright protection to computer programs and materials contained in electronic databases. Patents The Patent Cooperation Treaty (PCT) makes it possible for inventors to file a single international application to seek patent protection in over 150 countries. It is important to understand that there is no such thing as an “international patent.” Each individual country must still review and approve patent rights for their jurisdiction. But the PCT greatly simplifies the process in seeking cross-border patent protections. Trademarks The Madrid protocol (also known as the Madrid system) is the equivalent of the PCT for trademarks. When a business applies for, or obtains a trademark in its home country, the Madrid System allows the business to simultaneously seek “international registration” of the same mark in other participating countries. This protection can also be extended to countries who later join the Madrid system. Need Help Developing a Comprehensive International IP Strategy? It is generally a good idea to consult with an attorney if you are looking to protect your international intellectual property. The agreements referenced above are complex documents, and each contains specific registration requirements that must be carefully followed. You should never assume that just because your IP is protected in the United States that it will automatically be protected in other countries as well. That includes even those who are signatories to the above-referenced treaties. And keep in mind, registration is just the first step in protecting your company’s international intellectual property. Your business will also need advice and assistance when it comes to licensing intellectual property across international lines and potentially asserting your rights in non-U.S. courts. If you are looking to develop a comprehensive international intellectual property strategy, contact me today. I work with specialized IP Attorneys internationally and together we will develop a worldwide strategy to protect your IP.
Not without my Daughter! Entering the U.S. market can have many forms. One option is maybe selling goods or services directly from your home country to U.S. customers. Additionally, you could have a representative office in the U.S. which paves the way for your market entry. Another option could be to go through a local agent or distributor or to enter into a joint venture. It all depends on what makes the most sense economically and how much control you want to be able to exert. If you want to commit to the U.S. market more fully and you don’t want to share your profits with third parties and want to be able to control your business activities in the U.S. you may want to establish a branch office or form a subsidiary. What Is a Subsidiary? In its most basic form, a subsidiary (daughter company) is simply a legal entity that is owned or controlled by another entity (parent company). Compared to a branch office which is only a different office location of a legal entity abroad. This distinction is extremely important for tax and liability purposes as I will explain. Benefits of a Subsidiary over a Branch Office First and foremost a subsidiary is its own legal entity. From a liability perspective, only the subsidiary is liable for damages caused by its employees or breach of contract. The subsidiary therefore shields the parent company from liability. A branch office on the other hand is not a separate legal entity and the foreign company doing business in the U.S. is directly exposed to liability. From a tax perspective, a subsidiary also has its benefits. A subsidiary, when structured right as a corporation, is a U.S. person for tax purposes which means that it will be taxed like any other U.S. corporation at the corporate tax rate of 21%. Under the rules of international taxation, a branch office will create a “permanent establishment” for the foreign company in the U.S. This means that the foreign company itself will be taxed in the U.S. on all the income it creates with this branch in the U.S. at the corporate tax rate and additionally will have to pay 30% of U.S. branch profit tax. If structured right a subsidiary can avoid the U.S. branch profit tax. Under most tax treaties there are also many other benefits available for subsidiaries. Of course, forming a subsidiary company–particularly in a new country–also carries significant legal and financial risks. That is why it is important to work with an international business and tax attorney who has experience in such transactions. Do you have more questions about subsidiaries? Contact me today to schedule an initial consultation if you would like to discuss if a subsidiary company is the right business decisions for you.
We may live in a global economy, but businesses are still required to follow certain national and local laws. This can make cross-border deals quite complicated. For example, if a U.S. company decides to form a subsidiary in Germany, what are the legal and tax implications for both businesses? This is where working with an international business attorney who specializes in cross-border transactions is essential. Cross-Border Transactions A cross-border transaction is basically any transfer of property, goods or services between individuals or business entities who reside in different jurisdictions. The transaction itself may be something as simple as buying widgets over the internet from China or as complex as multi-tier joint venture investment structures in another country with complex service and distribution agreements. Cross-Border Deals Examples The following includes other types of cross-border transactions from my own practice: A U.S. and German company form a joint venture. A U.S. distributor of devices entered into a joint venture with a German manufacturer. The joint venture became the exclusive distributor for the manufacturer’s products in the U.S. We structured the joint venture as a corporation and I worked closely with German tax counsel to structure the deal so no tax problems would come up down the road. The shareholder and the distribution agreement required careful drafting regarding control rights product description, territory, and non-compete. German individuals transfer intellectual property to a U.S. company in return for shares. Two German software engineers transferred IP rights to an algorithm to their U.S. startup company. The company was formed in Delaware and the parties chose Delaware law as governing law and agreed on binding arbitration in Hamburg, Germany. A U.S. company negotiates a distribution agreement with a German manufacturer. The U.S. company had distributed world leading products of a German manufacturer for years without a written distribution agreement. Now the U.S. distributor was to be acquired by a large U.S. company which wanted to see a written distribution agreement. The U.S. distributor turned to me to negotiate a written distribution agreement with the German manufacturer. Unfortunately, we found out that the U.S. distributor had no distribution rights at all, merely a right to sell as an authorized dealer. The German manufacturer did not want to enter into a binding distribution agreement and the deal fell through. A German company seeks to acquire or buyout a U.S. company. A German manufacturer of special devices wanted to buy its U.S. distributor. The U.S. distributor owed the German manufacturer a considerable amount of money for ordered products. The German manufacturer asked for help and we tried to turn debt into equity and acquire the U.S. distributor. I drafted a letter of intent and share purchase agreement and conducted the preliminary due diligence. Unfortunately, the U.S. distributor filed for chapter 11 and we had to register the claims in the following bankruptcy proceeding. A U.S. company buys real estate in Germany. A U.S. real estate developer company buys a large property in Germany. I was called to assist in the deal together with U.S. and German co-counsel to avoid tax traps and to ensure a smooth transition of the project and the sale of the property once the project is finished. What Makes Cross Border Transactions Tricky? Any of these types of cross border deals can raise a host of legal issues on both sides. First and foremost, there are tax considerations. This requires not only consideration of the tax laws of the individual countries involved, but also any tax-related treaties between the two governments. Next, the cross-border transaction may face broader regulatory scrutiny. In the case of a merger or acquisition, antitrust authorities in both the United States and the European Union may need to review the deal. This can lead to a situation where one regulator approves the transaction while the other may require certain conditions, or even oppose the deal outright via a legal proceeding. And even in simpler, non-merger transactions, there are still legal and cultural differences. Particularly in the United States, where each state (and even each municipality) has its own laws that may affect a particular business deal, it is imperative to work with experienced counsel who can help the parties navigate unfamiliar terrain. One of the most critical decisions that the parties to a cross-border transaction will make is the choice of governing law applicable to the deal. Most courts in most countries will respect the parties’ right to decide which country’s law to apply. But the choice itself will depend on a number of factors. And again, within the United States the choice of law will often come down to a particular state, as that is where most contract and business law matters are handled. Get Help with Your Cross-Border Transaction If you are contemplating a cross-border transaction, it is in your best interest to contact a qualified international business attorney sooner rather than later. Call me today to schedule an initial consultation.