ICO has become one of the fastest and most effective methods for a startup company to raise funds and start business globally. Given the rise of ICO in the recent years, it is of extreme importance to understand what helps companies to ensure the ultimate success of their ICOs. And the answer is simple as legal advice and professional lawyer. Apart from the innovative business idea and its effective implementation, legal support does matter.
Lawyers Are Your Friends
Usually, there are two main aspects for which the help of a professional lawyer is required when preparing for ICO: security and taxes. According to Howey Test in the USA and the Pacific Coin Test in Canada, ICOs can become a security. If it is considered as such, ICO turns to be an Initial Public Offering instead, which is not what one may aim for. Not to let this happen and save a company from going public unintendedly, one requires a lawyer.
When you collect money for the ICO, remember that the state has its own tasks. It is important for them to make sure that you do not launder money and do not finance terrorists, they need to collect taxes to the budget and see that you comply with the law. Therefore, it is important to find answers to the following questions with the help of the qualified lawyer: in which jurisdiction can I legally conduct my ICO?
Taxes matter for ICOs in countries like the US, where the tax rate is exceedingly high. Once you raised $100 million in the US, you are to recognize that as revenue and pay approximately $40 million. However, not every jurisdiction has such high tax rates and a good lawyer can be the one who opens your eyes on this issue and saves millions of dollars in taxes. In Switzerland, for example, the tax rate is only 14% but how could you know it without a help of a professional lawyer?
The documentation developed by a lawyer for ICO includes:
- Public offer,
- Agreement on the sale of a token,
- Recommendations on the White Paper from the perspective of legislation in force.
To accompany the ICO, a lawyer will help to register the company, deal with transaction support, close questions on the legal status of the token, develop an investment allocation mechanism, as well as find an escrow or become one. Determining the legal status of the token is very important, because it will depend on the jurisdiction chosen for ICO, and thus on the investors, one can attract. The attraction of serious players will definitely require certain legal guarantees which may be developed by a lawyer.