Intercompany agreements are more than internal paperwork. They do four jobs:

• They defend your pricing. When tax authorities tighten transfer pricing rules, written terms show your internal pricing reflects market conditions.
• They give related entities a clear framework for resolving disputes before they become internal litigation.
• They keep your financial records transparent, which makes tax reporting and audits easier.
• They cut confusion about who provides what and who pays for it.

Startups often skip this step in the rush to scale. Then an investor, an acquirer, or a tax authority takes a closer look, and gaps in documentation create friction.

That is the worst time to be writing agreements. Terms that were in place from the start are easier to defend than terms written after the fact.

If you are preparing for a financing round or building your first international subsidiary, document the structure before diligence starts.

• Parties: every subsidiary or affiliate that participates
• Nature of the transaction: services, product sales, a loan, or a license
• Pricing terms that follow arm’s length principles and transfer pricing rules
• Payment terms: schedule, method, and currency
• Duration and termination conditions
• A dispute resolution mechanism for conflicts inside the group
• Compliance clauses covering tax and regulatory laws
• Confidentiality and data protection terms

We worked with a startup that had a Delaware parent, a California subsidiary, and a development team abroad. The parent paid for the offshore team and licensed its software to the subsidiary, but none of it was in writing. When investors began asking about the structure, we put service and IP license agreements in place.

The agreements gave the company a documented, defensible account of how its entities deal with each other.

• Relying on Handshake Arrangements: Founders assume that because they own every entity, they do not need contracts between them. Then a tax authority or investor asks for the paperwork, and there is none.
• Setting Prices Without a Documented Basis: Picking a number that feels fair is not arm’s length pricing. Without a record of how the price was set, you have nothing to show an auditor.
• Moving Cash With No Loan Terms: An advance between entities with no repayment terms, interest rate, or collateral can be reclassified as a disguised equity transfer.
• Signing Once and Never Updating: Your structure changes as you hire, raise, and enter new markets. Agreements that never change drift out of line with how the entities actually operate.
• Skipping the Tax Review: Legal drafting alone is not enough. Terms that differ from one jurisdiction to the next, or that no tax professional has checked, create exposure you will not see until an audit.

• Can you list every entity in your corporate group and what each one does?
• Do you know which entities provide services, IP, or funding to which?
• Is every one of those relationships covered by a written agreement?
• Can you show how each price or fee was set?
• Do your prices reflect what unrelated parties would agree to?
• Are internal loans documented with repayment terms and interest?

If you cannot answer yes to most of these, your structure needs documentation before someone else asks for it.

Intercompany agreements are the legal backbone of a multi-entity startup. They support tax compliance, financial transparency, and day-to-day operations across every jurisdiction you operate in.

Put them in place early, keep them current as your structure changes, and have legal and tax advisors sign off.

Primum Law Group drafts, reviews, and updates intercompany agreements for international startups. Learn more about our services.

Schedule a free 30-minute call with our team to discuss your questions and concerns.