foreign nations and US LLCs and tax law

Foreign Owner – US Limited Companies

Can United States Limited Liability Companies be Owned by Foreign Members?

Yes. The United States allows citizens of foreign countries to own a US Limited Liability Company (LLC). A foreign owner can own an equity ownership interest of one hundred percent or a fractional interest.

Is it Advantageous for a Citizen of Foreign Nation to Own a US LLC?

Yes. Ownership of a US Limited Liability Company (LLC) allows a foreign citizen to participate in the largest single economy on earth.

For the purposes of this post, what is referred to as a US LLC is, in fact, a LLC created under the laws of one of the Fifty States or the District of Columbia. Some States allow the formation of a Professional Limited Liability Company (PLLC). A PLLC is a specific type of LLC.

Taxation of US LLCs

Business Patent Law, PLLC does not provide specific tax counsel for its clients. However, we can offer some general principles regarding foreign ownership of US LLCs:

  • Most nations tax the income of their citizens, regardless of jurisdiction where the income was generated.
  • Under US federal tax law, LLCs are considered “pass-through entities” for tax purposes.  This means that profits and losses are passed through to the owners of the LLC.
  • As a general rule, most LLCs are required to pay some type of taxes and/or fees in the State of the LLC’s organization and any other State in which the LLC does business.
  • State law taxes and fees vary from state to state and are usually less than US federal taxes.

Does the US Participate in Tax Treaties with Other Nations?

  • Yes.
  • Before purchasing ownership in a US LLC, a potential foreign owner should seek legal and tax counsel in both the owner’s home nation and the United States.
  • The United States has enacted tax treaties with different nations.
  • Different tax treaties produce different tax consequences for the foreign owner of a US LLC.
  • Among other things, the tax treaties can control what is taxed or is not taxed and payment of taxes in the United States and the foreign owner’s home nation.

Does a Foreign Owner of a US LLC need to register with the IRS?

It depends on the Tax Treaty between the foreign owner’s home Nation and the United States.

As a general rule, a foreign owner owning 25% or more of the US LLC will need to register with the US Internal Revenue Service (IRS). When the foreign owner is required to register with the IRS, the foreign owner must secure a Foreign Taxpayer Identification Number (FTIN). It can take several months for the IRS to issue the FTIN.

Under some tax treaties, an owner of less than a 25% equity interest in the US LLC may not be required to register with the US IRS.

Under some tax treaties, an owner of less than a 25% equity interest in the US LLC may not be taxed on the owner’s profits from the US LLC. However, the foreign owner will likely be taxed on the LLC’s profits in the foreign owner’s home Nation.

If the US LLC should file certain documents related to foreign ownership and does not file the documents with the IRS, the IRS will financially penalize the US LLC.

Business Patent Law, PLLC provides intellectual property and business counsel for businesses and companies.

If you have questions about equity ownership of a US LLC, please contact Business Patent Law, PLLC and we will discuss possibilities for your business.

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US Patents Held By Foreign Companies

Foreign Companies and US Patents

Can Companies Outside the United States Obtain US Patents?

Yes. The United States has the largest Gross Domestic Product on earth. Foreign Companies that do not have a physical presence in the United States can sell their goods or services in the United States.

For most foreign companies, sales in the US market improve earnings for the foreign businesses.

Advantages of US Patents for Foreign Businesses

  • The United States has a long history of enforcing domestic or foreign Patentees’ rights
  • Granting a US Patent gives the Patentee the right to file a legal action to stop third parties from making, using or selling their patented invention
  • Under Title 35 of the United States Code, a foreign Patentee can sue an alleged infringer in a United States District court and win damages

Options for Foreign Companies

Foreign Companies filing a US Patent Application in the United States Patent and Trademark Office (USPTO) may:

  • Initially file the US Patent Application in the USPTO
  • File a Patent Application in their company’s jurisdictional Patent Office followed by the subsequent filing of the US Patent Application (prior to the expiration of the treaty deadline)
  • Initially file a Patent Cooperation Treaty (PCT) Application in the USPTO followed by the subsequent filing of the US National Stage Application (prior to the expiration of the PCT Treaty deadline)
  • File a Patent Application in your company’s jurisdictional Patent Office followed by the subsequent filing of a PCT Application claiming priority to the initially filed jurisdictional Patent Application
  • Prior to the PCT Treaty deadline, file a US National Stage Application in the USPTO which claims priority to the PCT Application filed by your company that claimed priority to the initial Patent Application filed by your company in its jurisdictional Patent Office

Basic Requirements for Foreign Company Patent Filings

  • English language translation/transliteration of the jurisdictional Patent Application or PCT Application – if the language of the as-filed jurisdictional Patent Application or PCT Application was not English
  • Pay USPTO Processing Fees
  • Submit Specifications and Drawings
  • Claims – usually presented in an “Americanized” preliminary amendment format to increase clarity and minimize USPTO Processing Fees
  • Provide Inventor(s) Declaration(s)

If all this sounds a bit complex, we can help. Business Patent Law, PLLC provides intellectual property and business counsel for businesses and companies.

If you have questions about filing your company’s US Patent Application, please contact Business Patent Law, PLLC and we will discuss possibilities for your business.

If you would like to stay up-to-date with news that impacts your business and intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Patent Maintenance Fees & Annuities

Patent Maintenance Fees and Annuities

In most jurisdictions, utility-type Patents require that periodic patent maintenance fees or annual annuities be paid to maintain the Patent. These payments are usually made to the appropriate governmental body. Most jurisdictions, other than the United States, also require the payment of annual annuities.

United States Patent Maintenance Fees

Title 15 of the United States Code requires the owner of a utility US Patent to pay maintenance fees at three and one-half, seven and one-half and eleven and one-half years subsequent to the issue date of the US Patent.

What Happens if the US Patent’s Maintenance Fee Is Not Paid?

The Patent will expire if the fee is not paid prior to the expiration of the fourth, eighth or twelfth year subsequent to the issue date of the Patent.

An Example Case: Unpaid Patent Maintenance Fees

Due to a Programmer’s Error, Company A did not Generate the Payment for the Seven and One-Half Year Maintenance Fee for Company A’s US Patent for “Gizmo.”

At this point, Company B approaches Company A regarding a license of the “Gizmo” Patent. Is it possible for Company A to enter into a Valid License Agreement with Company B?

Scenario 1

Seven years and nine months subsequent to the issue date of the Gizmo Patent, Company A discovers the maintenance fee was not paid:

  • Pursuant to 37 CFR 1.362(e), by paying the maintenance fee and the surcharge during the “grace period,” Company A and Company B can enter into a license for the Gizmo.

Scenario 2

Nine years subsequent to the issue date of the Gizmo Patent, Company A discovers the maintenance fee was not paid:

  • Pursuant to 37 CFR 1.378, by filing a petition with the Director of Patents stating that the failure to pay the maintenance fee was unintentional, paying the USPTO fee for the petition and the required maintenance fee, the Director may reinstate the expired Gizmo Patent. As a general rule, the Director usually reinstates an expired Patent as long as these above mentioned conditions are met before two years subsequent to the expiration of the Patent.  Subject to any intervening rights, Company A and Company B can enter into a license for the Gizmo.

Scenario 3

Ten and one-half years subsequent to the issue date of the Gizmo Patent, Company A discovers the maintenance fee was not paid:

  • Pursuant to 37 CFR 1.378, by filing a petition with the Director of Patents stating that the failure to pay the maintenance fee was unintentional, paying the USPTO fee for the petition and the required maintenance fee, the Director may reinstate the expired Gizmo Patent. As a general rule, after two years subsequent the expiration of a Patent, the Director exercises more discretion in reinstating any expired Patent. Subject to favorable decision by the Director to reinstate the Patent and any intervening rights, Company A and Company B can enter into a license for the Gizmo.

If you have questions about your company’s Patent maintenance fees or annuities, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Multijurisdictional Patent Infringement World Patents

Multijurisdictional Patent Infringement

Patent Cooperation Treaty Patent Applications have the potential to mature into Patents in most nations, but currently, there is no enforceable World Patent. Unaddressed Patent infringement can reduce your company’s profits.

Patent Rights in Multiple Jurisdictions

Many companies own patent rights in at least some of the jurisdictions in which they conduct business.

What If We Don’t Own Patent Rights in Jurisdictions Where We Do Business?

A frequent multijurisdictional situation is:

My Company owns ten US Patents, three European Patents, five Chinese Patents and three Japanese Patents. The Patents cover the company’s fifth most profitable product.

At a tradeshow in Singapore, our regional vice president discovers that a Vietnamese company has duplicated our invention and is exporting the duplicated invention to Australia, Canada and Japan. Further, the Vietnamese company intends to export the invention to Germany and the United States.

What Can You Do About “Knock offs” of Your Product Overseas?

As a general rule, Patent rights are only enforceable in the jurisdiction that granted the Patent.

  • In Australia and Canada, your company owns no Patent Rights and cannot stop the importation and use of the knock off in those jurisdictions
  • If Germany is one of the European nations covered by the European Patents, then your company can utilize European counsel to assert its Patent rights in Germany
  • In Japan, your company can use Japanese counsel to enforce its Japanese Patent rights
  • In the United States, your company can utilize US counsel to enforce its Patent rights that can include a court order to stop the knock offs at the port of entry

In the global economy, when another determines that your Company’s product is profitable, it is almost inevitable that someone will attempt to “bend the rules” and trade on your Company’s market share and goodwill for their own financial gain. Without Patent rights, you have little to no recourse in most jurisdictions.

What Should My Company Do To Prevent Patent Problems?

It is astute to procure Patent rights in all jurisdictions where your business plan, business model, actual and projected market forces justify the procurement of intellectual property.

A small front-end investment in intellectual property can reap increased future multijurisdictional sales.

If you have questions about your company’s multijurisdictional intellectual properties, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

How To Expedite Foreign Patents

How to Expedite Foreign Patents

Will a US Patent Application Expedite Foreign Patents?

Yes, one way to expedite foreign patents is to apply for a US Patent. This approach can expedite procurement of foreign Patents in many foreign jurisdictions.

Under European Patent Office practice, the grant of a US Patent may or may not correlate with the expedited grant of its parallel European Patent.

Three General Rules for Domestic and Foreign Patents

  • The sooner the Nonprovisional Patent Application is filed, the sooner the Patent can issue
  • In most jurisdictions, the sooner the Patent issues, the less expense incurred by the Patentee
  • The sooner the Patent issues, the sooner the Patentee has enforceable patent rights, and the sooner the Patent can become a wealth-generating asset

Business Strategy to Expedite Foreign Patents (Example)

  • Regardless of the nationality of the Patent Applicant, file a Patent Application in the USPTO
  • It best for your company to originally file a Provisional, Nonprovisional or PCT Application in the USPTO — however, if the Provisional, Nonprovisional or PCT Application was first filed in another jurisdiction, a US Nonprovisional Application can be filed in the USPTO until the US statutory deadline has passed
  • If a PCT Application is not the first Application filed, a PCT Application claiming priority to a Provisional or Nonprovisional Application is filed in a PCT Receiving Office (preferably, the USPTO Receiving Office)
  • File a US Nonprovisional Patent Application shortly after the PCT Application was filed, rather than waiting until near the deadline allowed by the PCT
  • By using this procedure, it is possible for your company to receive the grant of the US Patent before parallel Applications filed in other jurisdictions are examined
  • As previously indicated, the grant of a US Patent can expedite the grant of parallel Patents in many foreign jurisdictions

If you have questions about cost-efficient business strategies for filing your company’s Patent Applications, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Foreign Jurisdictions for Patents

Patent Applications – Foreign Jurisdictions

How To Select the Best Path for Patent Applications in Foreign Jurisdictions

My company is contemplating filing Patent Applications in foreign jurisdictions. Is the use of the Patent Cooperation Treaty or the Paris Convention Treaty the better route?

Patent Cooperation Treaty vs. Paris Convention Treaty

Your business model and judgement determine the best course for the filing of Patent Applications in foreign jurisdictions. Both the Paris Convention Treaty and the Patent Cooperation Treaty routes have advantages and disadvantages.

Under each Treaty, the Applicant makes a claim to the priority application (document) that was filed in a jurisdiction other than the jurisdiction (country/region/union) which you desire to file the new Patent Application. The priority document can be a non-provisional, a provisional or an international Patent Application.

The Paris Convention Treaty

  • The non-provisional Patent Application must be filed before the expiration of one year following the filing of the priority document
  • For US businesses, the priority document is usually a US provisional or non-provisional Patent Application
  • If you are only filing in a few foreign jurisdictions, the Paris Convention will likely be the least expensive route to file the foreign Patent Application
  • Most foreign jurisdictions require annual maintenance fees to perpetuate pendency of the Patent Application/Patent

The Patent Cooperation Treaty (PCT)

  • The non-provisional Patent Application must be filed before the expiration of thirty months (some jurisdictions allow thirty-one months) following the filing of the priority document
  • For US businesses, the priority document is usually a US provisional or non-provisional Patent Application
  • The PCT Application can be filed as the original and priority document
  • An International Search Report is generated by the International Searching Authority of the World Intellectual Property Organization
  • When needed, the International Search Report can provide a basis for amending the claims of the PCT Application prior to entry into the national stage of a foreign jurisdiction’s Patent Office or the United States Patent Office.
  • Amendment of the claims of a PCT Application prior to entry into the national stage can result in a speedier and more cost-effective issuance of a Patent in the United States or a foreign jurisdiction
  • Most foreign jurisdictions require annual maintenance fees to perpetuate pendency of the Patent Application/Patent

If you have questions about filing Patent Applications under the Paris Convention Treaty or the Patent Cooperation Treaty, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.