The establishment of an overseas company structure is of great significance in terms of saving tax costs, establishing an equity structure, reducing investment risks, consolidating the founders' equity rights, increasing future fund-raising capabilities, and clarifying the functions of each company. In the United States, listed companies must disclose their corporate structure in their prospectus, and explain to all potential investors the holding status of each company. For larger companies, if an overseas company does not have a reasonable entity structure in the early stage, the company may not only endure high costs for a long time but may even face legal risks and has to pay for unnecessary penalties.
Every country has a regulated system stating the types of companies allowed by the law and their establishment requirements. When building an overseas entity structure, it is necessary to comprehensively consider the nature and establishment requirements of each country to meet the short-term, medium-term, and long-term needs of enterprise development, and at the same time choose the best company set-up plan from the perspective of reasonable tax saving.
Based on the requirements of the partnership company, at least one shareholder has to bear unlimited liability of the company. In this structure, a limited liability company GP is established to play the role of the shareholder with unlimited liability. According to the nature of a limited company, the founder has 100% control over Company A and Company B and assumes limited liability for both companies.
Company C is incorporated to further restrict company A/B's power over the core company. The founders can control the portion of shares hold by company A/B easier in this structure then.
For example, if enterprise A/B owns 20% of the core company and enterprise C owns 60% of the core company, then enterprise A/B do not have decisive power over the core company at any time.
At the same time , this structure can also reduce the difficulty of registration for new investors and employees. When registering changes of shares hold by employees and investors, equity changes will only take place in the company A/B.
So the equity structure of the core company can remain stable. To conclude, this structure helps to realise the separation of "power" and "money".