Many non-U.S. startup founders initially incorporate in their home country but later reincorporate or create a subsidiary in the U.S. to access venture capital financing and a larger customer base. This trend is common among tech startups and businesses seeking global expansion.
Additionally, the Trump administration’s new tariff policies have prompted certain companies to examine expanding or relocating to the US. Italian coffee maker LavAzza announced on April 3 that it plans to increase US production to 100% of what it sells in the United States, up from 50% currently.
“Our goal remains to grow in the U.S. because … it has an immense market size compared to the rest of the world,” Chief Executive Antonio Baravalle said in a press conference in Milan as the group presented annual results.
As reflected by the White House, other multinational companies are thinking about whether the increased tariffs will push them to move portions of their operations to the United States. Many of these companies are well past the size to issue Qualified Small Business Stock at this point, but many smaller companies are also considering such moves and may be able to realize the advantages of QSBS.
In their March 10, 2025 article, QSBS experts Christopher Karachale and Nancy Dollar of Hanson Bridgett examine whether shareholders in non-US companies can obtain the benefits of QSBS when they move their operations to the United States.
What are the QSBS implications?
Qualified Small Business Stock (QSBS) can provide significant tax savings for foreign founders who become U.S. taxpayers. If structured correctly, founders may avoid federal income tax on up to $10 million of gain when selling their startup shares. To qualify, shares must be received at original issuance, held for over five years, and the company must meet business activity requirements.
What should companies moving to the United States consider to optimize for QSBS?
As highlighted in the article certain commonly utilized strategies for expanding to the US may negatively impact QSBS prospects:
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Delaware Flip
Many companies utilize a “Delaware Flip” through an “F reorganization” under IRC section 368(a)(1)(F), whereby they exchange shares of the foreign company for shares of a US (i.e. Delaware) corporation. While this method has certain efficiencies, QSBS stock can not be obtained for non-QSBS stock and therefore generally fails to satisfy the “original issuance” requirement for QSBS.
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US Subsidiary
Another strategy involves creating a US subsidiary. If the US entity issues new stock, it may qualify as QSBS in the hands of the holders, however, due to the QSBS “aggregation rules” the foreign parent’s assets will likely need to be added to the US entity’s assets for purposes of the $50M gross asset threshold in addition to other QSBS tests. An alternative involves a brother-sister structure, however, transfer pricing rules may cause certain tax inefficiencies.
Obtaining the QSBS benefits in any such corporate relocation is not obtained simply by moving to the United States, but requires thoughtful planning. Steps should be taken to first evaluate QSBS eligibility before moving operations, consider the most efficient structure for the move to optimize the tax benefits, and considering state tax implications.
Are you or is a company you’re involved with looking to relocate to the US? Contact Us to think through the planning process.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.