International Joint Ventures: Partnerships and Corporations 
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Structuring The International Joint Venture Partnerships and Corporations 
The most basic – and most important decision that a U.S. partner in an International Joint Venture (IJV) will need to make is whether the foreign business entity is a partnership or corporation. As difficult as this decision often is, with respect to domestic businesses, it is infinitely more difficult with respect to foreign entities.
For starters, the foreign jurisdiction will likely not even have “corporations” or “partnerships” at all, but a potpourri of strange-sounding entities that may or may not correspond to what we understand in the U.S. to be corporations or partnerships. For example, if the IJV will be located in Germany, will it be an “Aktiengesellschaft” or a "Gesellschaft mit beschränkter" (“GmbH”), or something else? Needless to say, it is foolhardy to attempt to traverse this minefield without the assistance of knowledgeable local counsel. And let’s not forget that the decision whether or not the foreign entity will be a corporation or a partnership should be made from a U.S. not foreign point of view. 
  1. Partnerships or Corporation- General Tax Principles
An IJV that elects to be taxed as a partnership for U.S. tax purposes will be taxed in much the same fashion as a domestic partnership, i.e., the partnership will be a “pass-through” entity, with the partnership itself not subject to tax and the partners subject to tax on their allocable shares of partnership income and loss.

If, as is often the case, the venture expects to incur losses in the first year of years of operation, operating in partnership form will result in the U.S. being able to use the IJV’s losses against its U.S. or other foreign income. If the IJV is taxed as a corporation, the losses cannot be allocated to the U.S. parent. 

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Robert F. KluegerJD, LLM 
Robert F. Klueger (J.D.; LL.M) received his B.A. from the University of Pennsylvania (cum laude), his law degree from Fordham Law School, and his Master of Laws in Taxation from the University of Denver. He is a Certified Tax Law Specialist (State Bar Board of Legal Specialization) and is AV rated by Martindale-Hubbell (highest possible rating). 
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Jacob Stein, JD, LLM
Jacob Stein (J.D.; LL.M) received his law degree from the University of Southern California, and his Master’s of Law in Taxation from Georgetown University. He has been accredited by the State Bar of California as a Certified Tax Law Specialist, is AV-rated (highest possible rating) by Martindale-Hubbell and has been named “A Super Lawyer” by the Los Angeles Magazine.
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