Evolving our structure
Learning more about tax treaties, stock options, and revenue sources
by Andrew Roper

Reflections on setting up a consulting agency with founders in New Jersey and Amsterdam.


Creating up a startup with bases in two countries is complicated. Don’t underestimate the logistical challenges (in additional to cultural); and expect to pay more than you want in legal and accounting fees.

In our case, with the US and the Netherlands as our bases, it’s probably not advisable to setup a subsidiary in the beginning. Better to spend time building your actual business than iterating on legal and accounting formulations. This also reduces the amount of uncertainty when consulting with local agents who probably have never dealt with international constructions before. You’re not Apple or Google yet.

Here's how we originally set things up: => 10,947 easy steps to setting up a company

See below for a somewhat detailed breakdown of the evolution of Proto’s legal entities, and why these changes have come about.


Sean and I started our consulting firm Proto in September of 2013. You can read about how we set things up and what our costs for the first year looked like [here]. We've built ecommerce sites such as Pictli.com link

2.5 years after the founding, it seemed like a good time to reflect on the structure we setup and what changes we've made and why. A quick recap:


Aside on partner equity

Separately, we went through various machinations trying to determine the best equity incentive plan for ourselves and our contributing partners. Initially we were going to do a profit share arrangement -- if the company did well, then the partners who were significant contributors would benefit from that success. But what legal form would that plan take? would there be any vesting? would it be tied to the BV or to the Inc?

In the end, we granted options (NSOs) in the Inc to the Partners. Again, this was a well trodden path, and trying to do something non-standard just lead to FUD (and what felt like excessive legal fees). After all, we're just a startup consulting firm, not a Fortune 500 company (yet!). The decision to grant NSOs comes back into play below.

Recent Changes

During the intervening years, things have played out as follows:


What would we do differently?

Looking back, I want to say that there's a lot we should have done differently. We could have saved time and money by starting with the structure that we have now put into place. Though, that's a 20/20 hindsight situation, since we couldn't have known that business would be so hard to come on the NL side. Amsterdam wants to be the Silicon Valley of Europe etc, etc.

Nevertheless, it's clear we took an optimistic view on our prospects (we will get business everywhere!) instead of a more measured approach let's find a way to start simple, and expand/evolve from there. When entering the realm of international business, it is extremely difficult to get clear answers to tax and legal questions. People can tell you about the NL implications, or the US implications, but not how those two play together. We consulted a LOT of advisors and nobody really had specific experience that was instructive for us.

Still, we could have started with an LLC on the US side and a BV on the NL side, and run all contracts through the LLC. The BV would serve only as an adminstrative entity on the NL side, and it invoices the LLC for expenses (as a customer of the LLC). A drawback to that is that NL clients have not always been excited about their contracts being governed by Delaware Law, nor paying in dollars. I don't believe that's an insurmountable challenge though, but when you're trying to get to YES it would be nice not to have annoying impediments like that.

Written by Andrew Roper on March 24, 2016