Entrepreneurship Roundtable: Setting Up Dual-Entity Companies, an Open Discussion (4/14 5:00 PM PT)

Setting up a dual-entity structure—one for U.S. marketing and another for R&D—is a sophisticated move that can optimize both market presence and operational costs. However, it requires careful navigation of tax laws, especially regarding intellectual property (IP) and intercompany transactions.

As of 2026, here are the steps to establish this structure.

Phase 1: Establish the U.S. Marketing Entity

Since this company will focus on marketing and sales, its primary goal is to establish a “nexus” in the U.S. to hire staff and sign contracts.

Select a State of Incorporation: * Delaware is the gold standard for most businesses due to its well-established corporate law.
- Nevada or Wyoming are alternatives often cited for lower state-level fees.
Choose the Entity Type: * C-Corp: Best if you plan to seek VC funding or want a “blocker” to keep the foreign R&D entity’s tax liabilities separate.
- LLC: Offers more flexibility but can lead to “Permanent Establishment” tax issues for the owners if they are not U.S. residents.
Registration & EIN: * File Articles of Incorporation with the Secretary of State.
- Apply for an Employer Identification Number (EIN) via the IRS (Form SS-4). This is your “business social security number” required for banking.
Open a U.S. Bank Account: This typically requires a physical presence or a U.S.-based officer to sign documents in person, though some “neobanks” offer remote options.

Phase 2: Establish the R&D Entity

The R&D entity is usually located where the talent is (e.g., South Korea, India, or Eastern Europe).

Incorporate Locally: Register the entity according to the laws of that specific country.
Define the Relationship: You must decide if the R&D office is a subsidiary (owned by the U.S. company) or a sister company (owned by you personally).
- Note: If the U.S. company owns the R&D office, any IP created generally flows up to the U.S. parent.
Local R&D Incentives: Research local tax credits. Many countries offer significant subsidies or tax “holidays” for R&D activities that can offset your initial burn rate.

Phase 3: The “Connective Tissue” (Crucial Steps)

This is where most founders encounter legal friction. You must formalize how these two companies interact.

1. Intercompany Agreements

You need a legal contract (Intercompany Agreement) between the two. The most common model for R&D is “Cost Plus.”

The U.S. company pays the R&D company for its expenses plus a small profit margin (e.g., 5-10%).
This ensures the R&D company has enough “income” to satisfy local tax authorities while keeping the bulk of the profit in the U.S. entity.

2. Intellectual Property (IP) Ownership

Clearly define who owns the “work product.”

Recommendation: Usually, the U.S. company should own the IP. The R&D entity performs the work as a “service provider” or “contract researcher.” This simplifies future exits or licensing deals.

3. Transfer Pricing Compliance

The IRS and foreign tax offices are very strict about Transfer Pricing. You cannot simply “gift” money between the companies. The prices charged between your entities must be “at arm’s length”—meaning the same as if you were dealing with a stranger.

Key Tax Considerations for 2026

Amortization of R&D: Under current U.S. tax law (Section 174), R&D expenses incurred outside the U.S. must be amortized over 15 years, whereas domestic R&D is amortized over 5 years. This may make foreign R&D less “tax-efficient” than it used to be.
GILTI Tax: If the U.S. company owns the foreign R&D company and that company starts making a profit, you may be subject to “Global Intangible Low-Taxed Income” tax.

Expert Tip: Before you file anything, consult a tax professional who specializes in International Tax. A mistake in how you structure the IP ownership early on can cost hundreds of thousands of dollars in “withholding taxes” later.

Marketing in the US and R & D in Korea

Expanding into Nevada and South Korea creates a powerful “Marketing + R&D” engine. Nevada offers a business-friendly environment with no state corporate income tax, while South Korea is a global leader in R&D infrastructure and incentives.

As of early 2026, here is the specific roadmap for this structure.

1. Nevada: The Marketing Headquarters

Nevada is ideal for a marketing hub because it has no state corporate or personal income tax, and it offers high privacy for directors.

Step 1: Choose an Entity Type: Most choose a C-Corp for this structure to keep the foreign R&D entity’s tax liabilities separate from personal tax returns.
Step 2: File Articles of Incorporation: Submit via the SilverFlume portal. You will need:
- A registered agent in Nevada (can be a service).
- An Initial List of Officers and Directors ($150 filing fee).
- A State Business License ($200 filing fee).
Step 3: Federal EIN: Apply via the IRS website. You need this before you can open a bank account or hire marketing staff.
Step 4: Privacy & Governance: Nevada does not share information with the IRS by default, but you must still maintain a “Corporate Minute Book” to protect your limited liability status.

2. South Korea: The R&D Center

South Korea has a specific legal framework for foreign-owned R&D companies called the Foreign Investment Promotion Act (FIPA).

Step 1: Foreign Direct Investment (FDI) Notification: Before sending money, you must notify a Korean “Foreign Exchange Bank” or KOTRA (Invest KOREA) of your intent to invest.
- Threshold: To qualify for certain tax benefits and D-8 investment visas, a minimum investment of ₩100 million (approx. $75,000 USD) is typically required.
Step 2: Remit Capital: Transfer the funds from your U.S. bank to a temporary “escrow” account in a Korean bank. The bank will issue a “Securities Subscription Deposit Certificate.”
Step 3: Court Registration: Register the company (usually a Jusik Hoesa or Yuhan Hoesa) at the local District Court. You will need notarized and apostilled copies of your Nevada company’s incorporation documents.
Step 4: Business Registration: Register with the National Tax Service (NTS) to get your business ID.

3. The 2026 Tax Strategy (Crucial)

The tax landscape changed significantly with the “One Big Beautiful Bill” (OBBB) signed in late 2025.

Section 174 Amortization

Foreign R&D: Unlike domestic U.S. R&D (which can now be fully expensed in the year incurred as of 2025), R&D performed in South Korea must still be amortized over 15 years for U.S. tax purposes.
Impact: You cannot deduct the full cost of your Korean engineers’ salaries immediately against your U.S. marketing income. You must spread that deduction out over 15 years.

Transfer Pricing: The “Cost Plus” Model

The Nevada company should pay the Korean company for its R&D services.

The Math: If the Korean office spends $100k on R&D, the Nevada office pays them $110k (the “Cost” + a 10% “Arm’s Length” profit).
Benefit: This keeps the “Intellectual Property” (IP) in the Nevada company, making the U.S. entity more valuable for future investors or a sale.

Korea’s R&D Tax Credit

South Korea offers one of the world’s most generous R&D tax credits (up to 25% for SMEs). Since your Korean office will likely be an SME (Small/Medium Enterprise), it can significantly reduce its local tax liability on that 10% profit margin.

Summary Checklist

Action	Nevada (Marketing)	South Korea (R&D)
Primary Portal	SilverFlume (NV SOS)	KOTRA / Foreign Exchange Bank
Min. Capital	$0 (Practical: $5k+)	₩100,000,000 (~$75k)
Key Advantage	No State Income Tax	High R&D Tax Credits (25%)
Tax Treatment	Immediate Marketing Deductions	15-Year R&D Amortization

Several companies and organizations operate with dual entities or strong, formal partnerships spanning Nevada and South Korea, often leveraging Nevada’s favorable business environment for U.S. operations and Korea for technology, manufacturing, or market expansion.

Key Dual-Entity and Partnership Examples:

ValueOne, Inc. (Medical Device Technology): Operates as both a Korean corporation and a Nevada corporation, collaborating through a joint venture to develop, market, and distribute medical technologies.
Sable Systems International & Mirae STC Co. Ltd.: A Las Vegas-based metabolic measurement technology company (Sable Systems) that partnered with Mirae STC in South Korea to expand into the Asian market, utilizing US Commercial Service-Korea for support.
Namsung (Consumer Electronics): A Seoul-based multinational with subsidiaries including Namsung America, which has distribution centers in Nevada.
Ryze Renewables (Renewable Fuel): Involves Nevada-based entities (Holdings and Nevada LLCs) with investment and contractual ties to Mirae Asset Securities Co., Ltd. in Seoul.
SK Tes (IT Asset Disposal): A global company with a significant presence in South Korea (Seoul/Incheon) that services global technology needs, often intersecting with Nevada-based data center businesses.
Government/Strategic Partnerships: The Nevada Governor’s Office of Economic Development (GOED) signed an MOU with South Korea’s Munhwa Broadcasting Corporation (MBC) to connect Nevada’s media infrastructure with Korean content production. Additionally, Nevada is actively engaging with Korean firms specializing in electric vehicle battery testing. nv.gov +6

Contextual Business Environment (2026):

Trade Focus: Many Korean companies (nearly 900) participate in Nevada-based events like CES, focusing on AI, clean energy, and manufacturing, driving Nevada-Korea ties.

Regulatory Shift: The Korean government is moving to restrict “dual listings” (IPO of a subsidiary when the parent is already listed), which may affect how Korean conglomerates structure their Nevada-based subsidiaries.