Understanding Shared Foreign Sales Corporation: A Guide for Exporters
Definition & Meaning
A Shared Foreign Sales Corporation (SFSC) is a type of corporation that allows multiple unrelated exporters to come together to make export sales. This arrangement can provide favorable tax treatment for the income generated from those sales. An SFSC can include between two and twenty-four businesses, which may even be competitors, allowing them to combine resources and expertise while sharing the costs associated with operating the corporation.
Legal Use & context
The concept of a Shared Foreign Sales Corporation is primarily used in tax law and international trade. It is relevant for businesses looking to optimize their tax liabilities while engaging in export activities. Companies can benefit from the streamlined organizational guidelines of an SFSC compared to other foreign sales corporations. Users can manage the formation and operation of an SFSC with the help of legal templates provided by services like US Legal Forms.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A group of five technology companies decides to form an SFSC to export their software products together. By pooling their resources, they reduce costs related to marketing and distribution while benefiting from tax advantages.
Example 2: A clothing manufacturer and several independent retailers form an SFSC to export their goods to international markets, allowing them to share expertise in logistics and compliance with foreign regulations. (hypothetical example)