Topic: I think I may have found a solution for "real world" companies and GLBSE. (Read 1416 times)

Correct.  The optimal structure is then a C-Corp (LLC which has elected to be taxed as a C-Corp).  The withholding would then only be on dividends not retained profits.  The trust could file a non-resident tax return each year and get some of that withheld taxes back.  I would also point out that the GLBSE "standard" of 1 day old "companies" throwing off 20% dividend yield is somewhat unrealistic.  I am not sure how investors would approach a startup where the intent is to have share price apreciation.  The more profits the parent company retains the more tax efficient the structure then becomes. 



Correct however in my limited research I haven't found anything.  Belize at one time had "bearer" corporations where the shares were issued as bearer bonds however there are now significant restrictions and it looks like that structure will be pushed out in favor of nominated shareholders.  Granted I don't want to say my research is anything approaching complete but even in areas with no taxation and financial privacy there is no company structure which allows changing anonymous owners.  The use of a trust is a legal workaround.  The trust is simply structured that its obligation to GLBSE is perpetual and irrevocable.  Each quarter the trust receives a dividend from the parent company, subtracts its operating costs and then passes the balance to GLBSE contract holders.

Thank you. I had a plan to do a small IPO to acquire some new equipment for the studio (nothing to do with mining, https://bitcointalksearch.org/topic/art-issue-the-mug-004-included-crowdfunding-the-project-102010)
2 problems we have at the moment:
1) We have to figured out how to show this in our books.
2) Currency risk. BTC-> fiat -> BTC cab be a bloody expensive roundtrip.

Things I learned from a bit of Googling.  The source of income is in the U.S. and therefore the the US LLC or corporation would need to withhold 30% of the dividends and quarterly pay those withholdings to the IRS.  There could possibly be a similar withholding requirement for the state.   This is not a "maybe", but instead mandatory.    If the actual taxes due would be less, the foreign entity might want to file a tax return to get a partial refund of the withholding.

A country likes it when foreign sources of money arrive and are invested.  So the laws are just fine with an foreign entity having ownership in a U.S. corporation or LLC (as a rule of thumb ... there are certain protected industries and other specific restrictions on foreign ownership).

The challenge is finding a foreign jurisdiction that doesn't have prohibitive securities law.  One that doesn't care that a corporation or LLC is listed on unregulated exchanges in foreign jurisdictions.  I know Iceland had a virtual company provision on the drawing board.  That's about the closest thing I think.

This might work very well. I was looking at something like this for a security I had planned to issue but for tax and liability reasons need a company to hold the assets.

Let us know if you find out the best way to structure this as it might be good to "open source" the knowledge so in future we can grow the bitcoin economy by providing companies with the right tools . These are really missing from glbse right now.

This is very interesting read and I like where your head is at.  I will look this over more and really dig in.  If you do more work or find out more about this please share.  I was thinking about something like this too but you have some steps I did not consider.

GLBSE is a useful trading platform but it isn't viable for US based companies.  I don't mean "company" (xyz mining company) in the casual usage of the word but rather legally formed constructs under the law (LLC, Corporation, partnership, etc).  The regulatory and taxation reporting requirements simply make it impossible to issue equity to unknown entities.  Furthermore SEC rules of investments for private companies make it impossible to even seek investors who aren't "qualified".  

Speaking with a friend who is a lawyer I think I may have come across a "workaround".  Say there is a company in the US which wishes to indirectly raise equity on GLBSE.   Instead of offering an equity stake in the company which, it would be possible to form an offshore trust and give that trust an equity stake.   The trust could be structured such that all the net revenue (minus operating expenses of the trust) received is exchanged for BTC and distributed to GLBSE shareholders.  By creating an assets on GLBSE which represents a stake in an offshore trust (that has a partial equity stake in the US company) the offshore-trust acts like a pass-through and keeps the ownership structure of the parent company "clean".


In this example the US based company is a registered LLC.  It has multiple owners and is seeking additional capital.  While having a foreign trust as a partial owner it has been determined that it is inadvisable for the company to issue contracts on GLBSE in order to keep it's ownership, and reporting compliant.  The example company has an appraised value of $600,000 and is seeking to acquire $100,000 in additional capital.

Step 1: Formation. A trust is formed in an off-shore location.  It would be best if the trustee of the trust had no ownership in the US company.  This to my understanding isn't a legal requirement but it does create a clean separation of ownership so it may be desirable.  The trust issues a GLBSE asset with 100K shares @ 0.1 BTC.  95K shares are sold in an IPO.  The trust retains 5% (to provide liquidity) and IPO the remained for 0.1 BTC ea.  This raises 9,500 BTC.  The trust has some upfront and ongoing costs.  At a minimum the trust would need an off-shore bank account, bitcoin exchange accounts, and verification of GLBSE.  It is very important that all these accounts exist in the name of the trust not the name of the US company or any individual.

Potentially unresolved issues:
Do any exchanges allows opening of an account in the new of a trust?
What does would GLBSE require for verification of a trust?

Trust capital structure
Assets:
9,500 BTC
5,000 GLBSE contract shares

Ownership:
GLBSE 100K shares (95K issued).  Each share represents 1/100,000th ownership of the trust and all its assets.



Step 2: Trust raises capital for equity stake. The trust sells BTC for USD.  The trust will retain some of the issued shares, and acquired BTC (to improve liquidity acts a a self market maker). This example ignores any formation costs of the trust as well as exchange fees.  They would reduce the net capital raised.  If a specific target is desired the IPO would need to raise enough capital to cover the ownership stake, any formation and trading fees, and any slippage in BTC exchange.

Trust capital structure
Assets:
500 BTC
5,000 GLBSE contract shares
$100,000 (if sold @ $11.20 per BTC)

Ownership:
GLBSE 100K shares (95K issued).  Each share represents 1/100,000th ownership of the trust and all its assets.


Step 3: Trust acquires owership stake in US based company.  The trust provides capital to the US based company and the company grants an equity stake in the company.  The trust (not the GLBSE shareholders) is the shareholder (for C-Corp) or member (for LLC) of the US based company. In our example scenario here the US based company would gain $100,000 in capital and issue $100,000 in equity.  This dilutes the equity % of existing owners although the nominal value of all owners stake remains the same.  The company now has a value of $700,000 and an additional equity owner. The exact mechanism of this equity offering would depend on the company structure but the end result is the same.  

Trust capital structure
Assets:
500 BTC
5,000 GLBSE contract shares
Equity stake in Company "X" valued at $100,000.

Ownership:
GLBSE 100K shares (95K issued).  Each share represents 1/100,000th ownership of the trust and all its assets.


US based S-Corps can not have foreign entities as shareholders so this mechanism wouldn't be possible.  In most states it should be possible to form an LLC instead and then elect taxation as an S-Corp by filing with the IRS.  

US LLC and C-Corps will be required to withhold 30% taxes on the profits of foreign owners.  For an LLC the default  tax structure is a partnership.  All profit (even those not passed to the partner is taxed).  A C-Corp would only need to withhold taxes on profits disbursed as dividends (not retained profits).  An LLC could elect to be taxed as C-Corp.  The trust would also file as a non-resident and recover any excess taxes withheld (withholding beyond actual tax liabilities).  None of this should be construed as tax or financial advice.

Startup costs would be roughly $1,000 to $2,000 (trust formation, trustee fees, offshore bank account, etc) and ongoing costs probably in the range of $500 to $1,000.  So this type of structure really only makes sense for a larger offering as the costs are relatively fixed and become more efficient handling more equity.  In theory the trust could acquire equity in multiple US companies and become a sort of mutual fund like offering although that greatly increases the complexity and is beyond the scope of this draft.

This setup (or a similar setup) may be possible countries other than the US. The example refers to "US company" to represent a company in a country where there are significant ownership restrictions.  This would apply to most developed nations. This type of pass through structure may be possible in other similar countries but given the law varies significantly by country it would require independent legal analysis.