Nowadays, entrepreneurs in the crypto-industry have to be extra cautious when deciding on where they will legally incorporate their companies. If an entrepreneur sells a token in the wrong jurisdiction, this can lead to unforeseen tax and regulatory issues. FirmEU has assisted many clients with setting up corporate structures for their token generation events. But what is a token generation event?
A token generation event can also be called an ICO. In principle, a corporate structure in this context is utilized when companies are developing a new token and would like to bring this to the market. Typically, there are pre-sale and investment rounds, which are then followed up by placing the token on public markets such as Binance, Coinbase, Pancakeswap, and Uniswap. A token generating event through these platforms can be a great way to raise capital and grow as a firm.
The issue with a token generation event is capital gain. Tokens are not equity. This means that when the tokens are sold for a higher price than the cost of development, capital gain tax is due, or corporate income tax is due. This is especially inefficient since the idea is to raise funds by offering the token, not necessarily to make a profit. Besides that, there are some regulatory issues that should be considered before selling tokens. In essence, the token sold may not represent securities in any company.
This is why FirmEU is specialized in token generation structures. Let FirmEU draft a structure for you in which the capital gains tax or corporate income tax is mitigated, and in which there are minimal regulatory requirements. This will enable you to raise funds efficiently without having a large tax bill, amongst other benefits. Furthermore, FirmEU can assist in kick-starting your crypto project through our investor network.
If you are planning to raise funds by selling tokens in the future, please reach out to [email protected]. FirmEU is looking forward to being your partner for your token generating event!