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A Business On Paper

For A Price

The catch is the cost involved in establishing and maintaining an FSC. So make sure the tax benefits will be greater than those costs. For example, normal charges for a management firm and other administrative fees can cost from $5,000 to $20,000 or more per year depending on the size of your company and how much you export, Zukowski says. It's possible to set an office up yourself but that would only cost more.

As is often the case with tax benefits, a cloud looms over FSCs, Brenner says. The European Union has charged that FSCs provide unfair subsidies in violation of the rules established by the World Trade Organization. The EU feels FSCs are purely a bookkeeping arrangement with no substance, says Zukowski. As a result, the EU may seek sanctions of $2 billion against the United States.

Congress may eventually have to limit the use of FSCs. Until that happens, don't miss out on an opportunity to save on products heading overseas.

Contact Sources

David Berdon & Co., (212) 832-0400,

KPMG, (305) 913-2652,

PricewaterhouseCoopers, 1301 Aventue of the Americas, New York, NY 10019, (212) 596-7000

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This article was originally published in the February 2000 print edition of Entrepreneur with the headline: A Business On Paper.

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