• Emily A. Georgiades, Esq.

How Cyprus Companies Can Raise Venture Capital in the United States.

Whether you are a newly formed company just beginning in the business world or a medium- to large- sized enterprise looking to complete a second or third round of financing, a capital injection in a company can help an entrepreneur take their business to the next level.

In the last few years, Cyprus has experienced serious growth in start-up businesses and the future looks bright for more of these companies to flourish. The primary concern for all entrepreneurs is raising capital to conduct more research and development of their product or service, to lease office space, to take their product to market and to hire employees. The question becomes, “How can these Cyprus-based companies obtain capital in a larger market like the United States to grow?” The answer is crowdfunding and Regulation A+.

Breaking the U.S. Barrier

Since the enactment of the Jumpstart Our Business Startups Act of 2012 (the “JOBS ACT”), more start-ups have entered the market. Although the JOBS Act was designed with the aim of promoting small businesses, Crowdfunding Title III and Reg A+ Title II made venture capital more accessible to all businesses across the board.

Crowdfunding & Reg A+

Crowdfunding is obtaining capital from the public. Moreover, there are 4 types of crowdfunding (i.e. equity, lending, rewards, donation). With a population of approximately 326 million people, it’s no wonder why crowdfunding is popular in the United States. Under Title III, businesses can obtain up to $1 million in funding. If a business has gone through its Series A round and wants to obtain higher amounts of capital, then Reg A+ may be a better option since the company has a choice of raising up to $20 million under Tier 1 or up to $50 million under Tier 2. Crowdfunding and Reg A+ each have their advantages and nuances including whether only accredited investors may invest or a mix of unaccredited and accredited, or even whether a formal audit of a company’s financials must be conducted. Whichever route an entrepreneur selects, an experienced U.S. securities attorney should be consulted as there are formal filing requirements to make with the Securities and Exchange Commission.

Where Cyprus-United States Interests Meet

Establishing a company based in Cyprus does not have to be a disadvantage. In fact, it may be very savvy to be based in Cyprus and grow from abroad. Similarly, it is may also be business savvy to take an American-based company and establish a branch in the Cyprus. After all, Microsoft is a global American company whose headquarters were in the E.U. to take advantage of a more beneficial corporate tax rate. Cyprus has banking, finance and corporate legislation that is not only in line with the European Union directives but is geared towards helping businesses grow. The tax advantages alone can save a company much needed money. Cyprus, for example, has a corporate tax rate of 12.5% and no withholding taxes. There’s also the added advantage of intellectual property legislation that is also geared towards helping businesses.

With Cyprus’ tax advantages and the United States’ capital raising advantages, it’s a perfect meeting of east meets west to help create a globally thriving business.

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