IP Holding Companies
Establishing an offshore company for use as an IP Holding Company can provide several benefits. There are two main ways to establish intellectual property into an offshore company: either have the offshore company sponsor or co-sponsor the development of the intellectual property from the onset or transfer the intellectual property later via a purchase and sale agreement.
- Increased asset protection of the IP
- Minimizing taxation on the global royalty income earned from the IP
- Minimizing taxation on the sale of the IP at a future date
Setting up an IP Holding Company
Step 1: Choosing the offshore jurisdiction and vehicle. The jurisdiction and vehicle must be in a jurisdiction that offers tax incentives and solid asset protection.
Step 2: Formation of the IP Holding Company. Sterling will handle all of the formalities around the IP Holding Company setup.
Step 3: Attaching or assigning ownership of the Intellectual Property. Sterling along with legal counsel and tax advisors in the relevant foreign country, if applicable, will assist with the formalities around assigning/attaching the relevant IP to the new IP Holding Company. If existing IP is being transferred then the transfer will need to be in line with arm's length principals and considerations will need to be given to tax matters such as any applicable capital gains taxes payable.
Step 4: IP Licensing. Depending on the type of intellectual property and where it is being sold, the new IP Holding Company may directly license the IP to third parties or it may license the IP to other companies to sub-license for a specific region for instance where this makes sense (e.g. to a European company for licensing within Europe).