On 12 July 2023, the hall at İTÜ Magnet filled with founders carrying a single question: “How do I expand to the US?” Our Managing Partner Erdem Mümtaz Hacıpaşaoğlu and Clemta COO İlayda Şencan took on both sides of that question in a seminar titled “The Legal and Financial Dimensions of the US Flip-Up”: the legal structure on one hand, the financial and operational reality on the other. Contracts and tax on one side; bank accounts, accounting and cash on the other — put on the same table, the picture got a lot clearer.
First, the Basics: How Do You Incorporate in the US?
The first half started where founders get stuck most: the mechanics of setting up a US company. The structure almost every tech startup gravitates to is the Delaware C-Corporation — because investors (US funds and accelerators especially) recognize it, its case law is settled, and the share/option architecture is built around it. The practical follow-on steps came up too: the EIN (tax ID), the registered agent, a US bank account, and setting up Stripe/payment rails. Mümtaz’s summary was crisp: opening the company is easy; building the legal skeleton that makes it fundable is the craft.
What Is a Flip-Up, and What Types Are There?
This is where the core topic opened up. A flip-up is, in short, placing your existing Turkish company under a US holding company (usually a Delaware C-Corp) — moving the “top” of the company to the US. What the room most wanted to know: there isn’t just one way to do it.
- The classic flip via a share-for-share swap — the Turkish company’s shareholders exchange their shares for shares in the US holdco; the Turkish company becomes a subsidiary.
- Incorporating directly in the US and making Türkiye a subsidiary — especially early on, setting up in the US from day one with an R&D/operations subsidiary in Türkiye.
- The reverse flip — turning the structure back toward Türkiye when circumstances change; its own discipline and the subject of a separate piece.
İlayda Şencan underscored that these choices have not only legal but financial and operational consequences: which structure, at which stage, at what cost, is sustainable?
How Is It Done? The Anatomy of the Steps
A flip-up is a process, not a signature. The seminar laid out the steps from the field: the company’s valuation, the swap/transfer of shares, the clean migration of the cap table to the US holdco, the 83(b) election on founder shares (and its unforgiving 30-day window), the correct assignment of intellectual property to the holdco, and the renewal of key contracts under the new structure. We cover the logic of planning that chain in our anatomy of a flip-up.
The Most Common Problems
This was the most note-taken part — because mistakes in a flip-up are expensive:
- Valuation and tax surprises — failing to model the gain/tax consequences a share swap can trigger on the Turkish side.
- Missing the 83(b) election — once the 30-day window passes, the tax cost is irreversible.
- A messy cap table — informal equity promises, incomplete vesting, disputed shares; the flip brings them all to the surface.
- A broken IP chain — if founder/contractor IP assignments aren’t complete, the holdco inherits an asset it doesn’t actually own.
- Bank accounts and operations — underestimating US account opening, accounting and compliance burdens.
- CFC and double taxation — foreign-income and double-tax questions for a Turkish founder with a US holdco.
The Right Time, the Right Structure
The closing message was shared: a flip-up is not a trend but, more often, a requirement brought by investors and the market — yet done at the wrong time or with a messy structure, it turns from an accelerant into a risk multiplier. With law and finance on the same table, founders left with answers to both “why” and “how.” You can find the five essentials of a flip-up alongside our C-Corp vs LLC guide.
Our thanks to İTÜ Magnet and to our co-speaker İlayda Şencan and the Clemta team.
Considering expanding to the US? Let’s build the flip-up structure right from the start. Schedule a call →
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August 7, 2024Related Practice Areas
US Company Formations & Flip-Ups
Delaware C-Corp, flip-up structures, SAFE/convertible notes, 83(b).
View service →Startup Law
Incorporation, founder agreements, ESOP, term sheets, regulatory matters.
View service →Corporate Law
Share transfers, capital increases, board structuring, governance.
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