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Corporate Structures for Investment in Barbados

The question concerns the optimization of the corporate structure to be used for the incoming investment, on-island operations, future repatriation of capital, profits, and proceeds from the sale of the company in a 5-8 year timeframe.  Under consideration are some combination of US, Canadian, off-shore (Bermuda or Cayman), and Barbadian corporations.

If any of our members have any specific experiences, knowledge, or thoughts on this matter, I would greatly appreciate the assistance.

Answers

Bob Scarborough
Title: CEO
Company: Tensoft, Inc.
(CEO, Tensoft, Inc.) |

Hi Keith,

The one thing I would suggest is to consider the inter-company transaction flow as part of your corporate structure and tax strategy. Other folks will certainly be more expert on the legal requirements. My company has worked with companies on the execution part (ERP, Systems) – and there are definitely some specific items that will help make sure you don’t add to your administrative costs while you optimize your taxes.

A fairly common model for technology companies is to have the Caribbean entity own the Intellectual Property rather than the transactions – with some type of off shore fulfillment operation and continuation of the management and R&D functions where they currently stand. For my point the specifics are less important than how they structure the transaction flow.

In years past we used to setup lots of internal company transactions – buy/sell agreements between subsidiaries. Value was captured internally at different organizational points. Often there were more transactions internally than there were externally. Sometimes these buy/sell arrangements are required for internal management reporting – even more often they add no organizational value other than tax reporting.

What most technology companies do these days – and the reason they sell their IP to the tax entity – is they use a royalty model to compensate the tax entity. Sales occur where material ownership exists – if you need to do some movement between entities for buy/sell you do so. However the tax entity is compensated (and absorbs the tax value) by getting a royalty payment each month for the value of the goods sold. This streamlines your internal required transaction flow while still retaining the arm’s length process required for your entity structure.

Bob Scarborough
www.tensoft.com

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