Richard Weiner, Fredrikson & Byron P.A. - SACC USA

Presentation For:Access Seminar in SwedenMarch 2011

“Different Ways of DoingBusiness in the United States”Richard E. Weiner009.1.612.492.7009rweiner@fredlaw.com

Various Business Relationships• Distributors• Sales Agents• Licensees• Branch Offices• Joint Ventures• Subsidiaries© 2011 Fredrikson & Byron, P.A.

Distributors• Definition– independent company– takes ownership– for re-sale– sets re-sale prices– local advertising and promotion© 2011 Fredrikson & Byron, P.A.

Distributors• Advantages– distributor has knowledge of U.S. market– manufacturer has no need to keepinventories in the U.S.– manufacturer not involved in collection orcredit issues– distributor can ensure that products andadvertising comply with U.S. laws© 2011 Fredrikson & Byron, P.A.

Distributors• Advantages (cont.)– distributor can provide information oncompeting products and services– distributor can report on U.S. politicaland economic conditions– manufacturer is not subject to U.S.taxation© 2011 Fredrikson & Byron, P.A.

Distributors• Disadvantages– distributor limits manufacturer’s access tocustomers– distributor limits manufacturer’s control overre-sale prices– distributor limits manufacturer’s profit andafter-sales services– distributor may not carry enough inventoryor have enough support personnel– distributor may be difficult to terminate© 2011 Fredrikson & Byron, P.A.

Sales Agents• Definition– independent company– represents manufacturer– takes order, not ownership– usually paid on commissions– prices set by manufacturer– does not offer warranty service orpost-sales support© 2011 Fredrikson & Byron, P.A.

Sales Agents• Advantages– agent can provide contacts andconnections in U.S. market– manufacturer maintains control overpricing and direct connection withcustomer– manufacturer is not subject to U.S.taxation© 2011 Fredrikson & Byron, P.A.

Licensees• Definition– independent company– receives intellectual property (i.e.,technology, patents, trademarks, copyrights,trade secrets, know-how) frommanufacturer– to manufacture products or provide services– in exchange for license fee© 2011 Fredrikson & Byron, P.A.

Licensees• Advantages– low financial risk for manufacturer– allows products to be manufacturedand services provided in the U.S.© 2011 Fredrikson & Byron, P.A.

Licensees• Disadvantages– U.S. licensee may become futurecompetitor of manufacturer– image of manufacturer damaged ifU.S. licensee’s work is sub-standard© 2011 Fredrikson & Byron, P.A.

Branch Offices• Definition– not a separate legal entity– registered with U.S. state government© 2011 Fredrikson & Byron, P.A.

Branch Offices• Advantages– easy to establish– completely controlled by manufacturer– easy to manage– keeps company informationconfidential© 2011 Fredrikson & Byron, P.A.

Branch Offices• Disadvantages– may put the assets of manufacturer atrisk– may subject manufacturer to U.S.taxation© 2011 Fredrikson & Byron, P.A.

Joint Ventures• Definition– two or more companies– contribute assets– to new legal entity formed in the U.S.– with separate directors, officers andemployees© 2011 Fredrikson & Byron, P.A.

Joint Ventures• Advantages– provides manufacturer with marketaccess in the U.S.– U.S. company provides distributionnetwork and government connections– companies share the risk of doingbusiness© 2011 Fredrikson & Byron, P.A.

Joint Ventures• Disadvantages– joint venturers share profits– joint venturers may have differentbusiness and financial goals– joint venturers may have differentmanagement styles and capabilities© 2011 Fredrikson & Byron, P.A.

Subsidiaries• Definition– Separate U.S. legal entity– with separate directors, officers andemployees– may be a share company or a limitedliability company© 2011 Fredrikson & Byron, P.A.

Subsidiaries• Advantages– projects global corporate image– U.S. state government incentives (i.e.,subsidies, tax holiday or tax reduction) toestablish company in that state– allows manufacturer to control all aspects ofbusiness operations– will not put the assets of manufacturer at risk– will not subject manufacturer to U.S. taxation© 2011 Fredrikson & Byron, P.A.

Subsidiaries• Disadvantages– complexity of establishing businessoperations– high start-up and maintenance costs© 2011 Fredrikson & Byron, P.A.

U.S. Legal Issues to Consider• Taxation• Corporate Laws• Termination• Intellectual Property Rights© 2011 Fredrikson & Byron, P.A.

Questions?© 2011 Fredrikson & Byron, P.A.