9.4 KiB
Asset Protection & Corporate Structure — Research
- The Assets to Protect
- Common Structures
- Key Considerations for This Specific Venture
- Recommended Path
- What This Means for the Growth Strategy
- References
Research on corporate structures for a US-incorporated tech company with offshore holdings. This is preliminary research, not legal advice. Every structure needs a qualified lawyer and accountant to execute.
The Assets to Protect
The triad has three distinct asset classes, each with different protection needs:
- IP (Logos): Passepartout codebase, gate rules, ACL2 proof libraries, the verification monopoly. This is the core defensible IP. Needs to be owned separately from the operating company so that if the operating company is sued, the IP is not reachable.
- Platform (Agora): The network itself — user base, reputation graph, contract history, protocol specification. This is harder to value and harder to protect because its value is partly in the user base. But the code, protocol spec, and network infrastructure can be owned separately.
- Revenue streams: Enterprise compliance contracts, transaction fees, PDS hosting subscriptions. These flow through the operating company. A judgment against the operating company attaches to the revenue in that entity.
Common Structures
Structure A: Standard Delaware C-Corp (no offshore)
- Delaware C-Corp owns everything: IP, platform, operations
- Founders hold common stock
- Investors hold preferred stock
Pros: Simplest, most familiar to investors, standard for venture fundraising Cons: All assets in one basket. A judgment against the operating company attaches to everything, including the IP. No asset protection beyond the corporate veil (which is thin for a single-member/controlled startup).
Assessment: Fine for Phase 0. Upgrade when revenue exceeds liability risk tolerance.
Structure B: Delaware C-Corp + Offshore IP Holding Company
- Delaware C-Corp is the operating company (sells verification, runs the Agora PDS infrastructure)
- A separate IP holding company in BVI, Cayman, or Nevis owns the Passepartout code, gate rules, ACL2 libraries, and the Agora protocol spec
- The operating company licenses the IP from the holding company at arm's-length royalty rates
- The holding company accumulates IP licensing revenue in the offshore jurisdiction
Pros: Strong IP protection — a judgment against the operating company cannot reach the IP (the operating company doesn't own it). Profits from licensing are outside US tax jurisdiction until repatriated. Cons: US tax reform (TCJA 2017) introduced GILTI (Global Intangible Low-Taxed Income) — this structure is less tax-effective than pre-2017. Transfer pricing documentation required. Increases administrative complexity.
Structure C: Offshore IP Co + US OpCo + Offshore Trust
- Same as B, but the IP holding company is owned by an irrevocable offshore trust (Cook Islands, Nevis) rather than by the founders directly
- The trust has a corporate trustee and the founders are discretionary beneficiaries
- The trust also owns the founder's equity in the US operating company
Pros: Maximum asset protection. The trust is beyond the reach of US courts (Cook Islands trusts have the strongest asset protection laws — they do not recognize US judgments and require creditors to litigate in Cook Islands under Cook Islands law). Cons: Complex, expensive to set up and maintain. Many investors are uncomfortable with trust-held equity (loss of control). Triggers PFIC (Passive Foreign Investment Company) tax issues.
Structure D: Delaware C-Corp + Delaware LLC Series + Offshore
- Delaware C-Corp as parent
- Each business line (Logos verification, Agora network, compute marketplace, PDS hosting) is a separate Delaware series LLC
- IP held in an offshore company, licensed to each series LLC
- Series LLCs protect assets within each series from liabilities arising in other series
Pros: Good liability separation between business lines. If the social network (Agora) generates liability, the verification business (Logos) assets are in a separate series. Each series can be spun out independently. Cons: Series LLC is legally untested in many jurisdictions. Some states don't recognize them. Tax complexity.
Key Considerations for This Specific Venture
The IP is the crown jewel
The verification monopoly is the moat. The ACL2 proof libraries, gate rule library, and regression suite are accumulated over years and cannot be recreated quickly. These must be owned by a separate entity from the operating company. If the operating company is sued, the IP survives.
The Agora network is harder to protect**
The Agora's value is partly in its decentralized architecture (no central entity controls the network) and partly in the code that runs the PDS infrastructure and protocol. The AGPL license means anyone can run the code — the network value is in the user base, not the software. This is a structural asset protection advantage: even if the operating company fails, the network continues.
Revenue splits suggest separate entities**
Enterprise compliance revenue ($2-12M/year) is high-margin, low-volume, and comes from a small number of customers. Agora transaction fees (0.5-2%) are low-margin, high-volume, and come from millions of users. Mixing these in the same entity creates regulatory complexity — compliance contracts have different liability profiles than payment processing.
Jurisdiction for the IP company**
| Jurisdiction | Asset protection | Tax treatment | Cost | Reputation |
|---|---|---|---|---|
| BVI | Strong | No corporate tax, but GILTI limits benefit | Moderate | Standard, well-understood |
| Cayman | Strong | Same as BVI | High | Well-understood by investors |
| Nevis | Very strong | Same as BVI | Moderate | Less common, stronger AP laws |
| Cook Islands | Strongest (no US judgment recognition) | Same as BVI | High | Niche, but gold standard for AP |
For a venture-funded tech company: BVI or Cayman is the standard choice. Cook Islands is overkill unless there is a specific high-risk profile. Nevis is a middle ground.
Recommended Path
Phase 0: Delaware C-Corp (simplest, standard)
Single Delaware C-Corp. IP is owned by the corporation. Founders hold common stock. This is what every seed-stage investor expects. The IP protection is minimal (all eggs in one basket), but the liability risk in Phase 0 is also minimal — you have zero revenue, zero users, zero contracts.
Action items for Phase 0:
- Incorporate in Delaware (legalzoom, clerky, or a startup lawyer)
- Assign all IP to the corporation via a standard IP assignment agreement from founders
- Set up standard corporate records (board minutes, cap table)
Phase 1: Separate IP + OpCo (before significant revenue)
Before enterprise compliance revenue exceeds $5M cumulative or Agora users exceed 10K, establish the IP holding company structure. The IP must be out of the operating company before a significant lawsuit is plausible.
Structure: Delaware C-Corp (OpCo) + BVI IP Co
- OpCo licenses verification IP from BVI Co
- OpCo licenses Agora protocol IP from BVI Co
- Founders own both entities (same cap table or mirror ownership)
Timing: The IP transfer is a taxable event if the IP has appreciated. Transfer early, when the IP has minimal appraised value (before the verification monopoly exists), to avoid a tax hit.
Phase 2: Series Separation (when Agora has significant users or revenue)
If the Agora has 100K+ users and payment volume, separate the business lines into different entities under the same parent:
- Logos LLC (verification, enterprise compliance)
- Agora LLC (social network, transactions, PDS hosting)
- Compute LLC (marketplace operations)
- BVI IP Co (owns all IP, licenses to all three)
Phase 3: Trust Structure (if wealth preservation becomes primary concern)
When the cumulative value justifies the cost and complexity: move the BVI IP Co ownership into an irrevocable offshore trust with the founders as beneficiaries.
What This Means for the Growth Strategy
The institution-first path (enterprise compliance) and the social-first path (Agora communities) have different liability profiles that push toward different structures:
Enterprise compliance: Higher liability per contract. A single compliance engagement gone wrong could be a $1M+ claim. The IP separation in Phase 1 is more urgent for the Logos revenue stream.
Agora network: Lower liability per user but higher aggregate surface. Payment processing regulations, content liability, data protection. The series LLC separation becomes relevant when users cross 10K.
The combined strategy (both engines) makes the Phase 1 structure (Delaware OpCo + BVI IP Co) more important rather than less — the diversification of revenue streams also diversifies liability sources, and the IP needs to be protected from both.
References
This is preliminary research. Specific recommendations require a US corporate lawyer (incorporation), an international tax lawyer (offshore structure), and an asset protection specialist (trust/AP structure). The right order: incorporate in Delaware when ready, then hire a lawyer to plan the offshore structure before significant revenue or users accumulate.