Author: Mike Hanes

How to decide the best business type for your company?

Mike Hanes USA Business 1 Comment

One of the key questions at the time of opening new company in USA is the selection of the type to form. The decision is a crucial one and goes a long way in determining the tax purposes and help the entrepreneur to plan for the future expansion of the business.

Factors determining the type of business:

Generally, the following points are considered to be the most important in the decision-making process, when starting a business or considering a business type change:

  • Control of the ownership and the level of trade-off between control and profit/loss
  • Cost and complexity of operation of the business including legal and retainer fees, cost of operation
  • Choice of the state and the Taxes on the business which determines how the business or owner pays the taxes
  • Liability of business owners as in the way they share debts of the business

Forms of Business Entities

  1. Sole Proprietorship

The simplest of all, this is a business venture solely owned and controlled exclusively by a single individual. This means the same person is liable for the business and is accountable for all profits and losses.

Features:

  • Inexpensive to form
  • Easy to dissolve
  • Total control over Profit/loss
  • Basic Bookkeeping is required

On the pro side, the proprietor has full control over decision making and does not have to answer to the board or other partners. Tax is fairly simple which can be handled with a Schedule C form included in owner’s personal tax return. The con means the owner has to take all the liability for any losses or legal issues.

  1. Partnership

As the name suggests, it includes two or more individuals who share both the risks and the benefits. To initiate it, they simply need to register with a state and create a partnership agreement to start with. Although they need to maintain some record keeping, but not as complicated as corporations.

Features:

  • Relatively inexpensive to incorporate
  • Taxation is a bit complex
  • Each partner has joint and several liability

Partnership Options Available: Depending upon the amount of liability each partner is ready to undertake, there are two options available:

General Partnership: The basic of the both, it entails equal partnership and hence equal accountability and ownership. All decision making, profits and losses are equally shared, until specified otherwise.

Limited Liability Partnership (LLP): A limited partnership (LP) has both general partners who are involved in the daily operations of the company and the Limited partners who invest in business but don’t participate in daily operations. GPs have liability for company debts and actions, but the LPs are shielded for any such liability as long as they don’t become involved in the decision-making process.

Partnerships has to pay their taxes and report business tax liability to IRS by filing an information return. The income and loss is divided as per the agreement. Each partner gets their share of tax through Schedule K-1 form.

  1. Limited Liability Company

LLCs are extremely flexible and combines the features of both corporation (in order to limit personal liability) and partnership (with an ability to assess profits and losses). They can be incorporated in any state by registering article of organization with the state and creating an operating agreement.

Features:

  • Flexible to operate
  • Despite the fact that they provide similar protection against liabilities, they are an easier option to corporations.

One of the benefits of incorporating an LLC is the options for taxes available under different circumstances. A single member LLC can pay taxes on its personal returns through Schedule C as Sole Proprietorship whereas a multiple LLC pays like Partnership and both LLCs can elect to be taxed as Corporation.

  1. Business Corporation

A Corporation is a separate entity and can be formed with articles of incorporation under the state laws in which it is being incorporated.

Features:

  • Expensive to form- In addition to state registration, they have to keep board of directors, maintain regular meeting and report to shareholders
  • Corporation pays its own tax- owners pay taxes on dividends
  • Low Corporate tax rates
  • Ease of funds from investors

 

Professional Corporations (PCs): Specific type of corporation for licensed professionals like attorneys, doctors, accountants. Each professional can still be held liable for any wrongful professional action.

Professional Service Corporations (PSCs): Generally, they are limited to provide personal services. To get the status, the PSC has to adhere to a list of IRS requirements.

S corporations (S Corps): S Corp has the limited Liability benefit of a corporation but enjoys the taxation as a pass-through business, as partnership. It has a list of restrictions including a limit of 100 shareholders and only one class stock.

In order to incorporate S Corp, you need to fist set up a corporation in your state and then elect S Corporation status with IRS (Internal Revenue Services) within a specific period of time.

Taxes are fairly complex for S Corps as they must file a federal tax return and have separate schedules of tax due from owners. Some states also tax S Corps.

OCPBIZ helps you with the legal expertise to make the right choice if planning to open company in USA from India.

 

 

Why An Amazon Seller Should Incorporate In US?

Mike Hanes USA Business 0 Comment

Can I sell Product on Amazon USA from India? If this question is popping up continuously, read further.

The answer to your question is YES.

If you think that you need to be in USA for selling your product on Amazon US, get ready for a surprise. As per the estimates, out of 2 million third-party global sellers on Amazon, 83% sell in US marketplace with more than 50% located outside U.S.

Regardless of the location of your business, it is highly recommended to register your business as a legal business unit in US if you are eyeing to sell more than handful items on Amazon per month. Apart for making it a smoother process, it will also provide various tax benefits.

Incorporating a business and that too in a foreign country may seem to be a daunting task. Here are some compelling reasons why it is the important step to not lose precious lucrative opportunities for your business.

Getting Started with Amazon

To get started with your business on Amazon, you need to set up an Amazon account or use their warehouse facility through FBA program. In case you are going to sell as merchant, there are few other legal requirements which you will be made aware of.

Normally a non-citizen of US will have similar requirements to fulfil as the residents or citizens of the country if you are planning to sell through Amazon. Following is the list of requirements:

  • A home / business address for correspondence
  • Email Address which can be used for communication
  • A valid phone number is required for identification during registration process
  • An international chargeable credit card with a valid billing address
  • A Bank Account that can accept payment from Amazon
  • United States Tax ID: FEIN number or social security number (in case of individual)

It is always beneficial to get the FEIN number and sell as a merchant, which becomes a lot easier when the company is registered. You can also take benefit from tax advantages of being a business. Additionally, registering a business means protection of the personal assets. Consequently, it also smoothens the whole process if you are going to use FBA.

Opening Bank Account

Opening the Bank account is the first and foremost step for any business endeavour. For instance, you won’t be able to receive any payments if you don’t have registered your bank account details with Amazon.

Apart from the fact that being a non-resident is in itself a hindrance to the process, American Banks just as any other bank would require company registration documents, as a part of their bank compliance policies, to get ahead with corporate accounts.

Access to Loan/Investments

If you want to upscale your business, you might need investment, if not now then may be in future. US is the most attractive market to find genuine investors for your business and for that you need a company registered in US.

This is due to the fact that the US investors are often reluctant to finance businesses that are foreign.

Also borrowing from any US bank will require your US business credit history. If you don’t have a US company, there will be no credit history hence chances of securing loan become slim. Incorporating the business in US will provide that edge and authenticity to your business not only in the US but globally.

At the same time, an American company would likely to do the business with a company registered in US as it would be easier to tackle legal issues here at home than anywhere else. It has also been seen that the businesses in US can affect due diligence on their counterparts in a state registrar of companies online.

Incorporate your company Today!

You can get started with incorporating your business today and start reaping the benefits instantly through Amazon. Although the process needs crucial planning and several other aspects like- selecting the company type, selecting the state, registering for the FEIN number for starters- where the professionals at OCP can prove to be resourceful.

 

Legal Obligation For A Overseas Amazon Seller In USA

Mike Hanes Uncategorized 0 Comment

Amazon FBA

Know your legal obligations while selling over third party plate-form (e.g. Amazon, Wayfair)

The United States taxation system can be difficult to understand, especially for foreign nationals doing business in USA. A foreign national may be subject to one of two drastically different systems of taxation by the United States depending on whether he/she is classified as a resident or a non-resident alien of the United States. The determination of residency status is critical.Normally foreigner are considered as non-resident due to physical non presence in USA but that doesn’t exempt them from complying with local tax laws

How do you know you are liable for US tax laws: 

In general, to determine how your U.S. earned income should be taxed, you will need to determine your company’s involvement in the U.S. by checking if any of the followings apply to you:-

Level 1. Your company does have any connections to any of the U.S. suppliers/vendors, Customers or having any offices and any employees on the U.S. soil.

Level 2. Your company is using U.S. suppliers and logistics (i.e., Fulfilled by Amazon or other 3rd Party Logistics) to produce revenue, but does not have employees, office or warehouses in the U.S. In that case, your company is deemed to be “engaged in a trade or business in the United States (ETBUS)” and have generated “Effectively Connected Income (ECI)”.

Level 3. Your company has an office or employees in the U.S. (i.e., fixed place of business). You regularly conduct business with U.S. companies. You have continuous projects (over 12 months) or you provide services for 183 days or more in the U.S. In those cases, you will be deemed to have an Effectively Connected Income (ECI) and a Permanent Establishment (PE) in the U.S.

What constitutes an Effectively Connected Income (ECI) for Canadian Amazon Sellers?

In order to have ECI in the U.S., you need to have business activity in USA. Examples of that activity include:

  • Using 3rd Party Logistics (3PL) like Amazon FBA, Wayfair
  • Use of U.S. facilities (warehouses, storage, display)
  • Passing the title of imported goods in the U.S. (if you are importing from another country)
  • Using dependent agents (like employees or salespersons) to conduct business in the U.S.
  • Having a US-based bank account. 

Legal Obligation and Requirements for a seller selling product over Amazon/Wayfair or similar service provider:

Non-resident aliens are normally taxed only on income derived from US sources. US-source income that is considered “effectively connected” with a US trade or business. If you are one of those matches with any of the above classification for business doing in USA, you are liable for the followings as per Federal and State Income Tax Laws-

  • Register your business in USA
  • Apply for EIN/Federal Tax ID number for the business
  • Register your business for sales/use taxes in particular state/s
  • File your Sales and Income Tax Returns to IRS and particular state/s periodically 

Consequences for the non-compliance: 

  • Penalties and Interest on taxes due shall be imposed and keep building up over the period and that could lead to file for bankruptcy in USA
  • Any such non-compliance could lead to freezing business and/or bank accounts for the businesses till all dues are paid
  • In case of intentional non-compliances or omission assuming other factors involved personal liability could come on person-in-charge of the company (e.g. foreign national)
  • Practically such business and beneficiary/person-in-charge could fall in so call, black or observation list maintain and followed by Treasury department and FBI
  • Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined up to $100,000 ($500,000 in the case of a corporation), or imprisoned up to 5 years, or both, together with the costs of prosecution
  • In addition any such handling of the government notices and cases would incur lots of fees charge by the Accountant and Lawyers.

 

 

 

 

Opening A Company In The USA

Mike Hanes USA Business 0 Comment

Building a company of your own is not an easy task, specifically if it’s abroad. The US is a busy country and has so many races surviving there because of its acceptance towards young companies and startups. If you are living outside the US and wish to start a company in the US (either to open a US bank account and/or merchant account, open a physical US branch or any other thing), then this article has created this step-by-step resource to explain this process accurately, show you exactly what you need and how this article can assist you. You might want to learn that the term Incorporate Means to form a Corporation While the term Form an LLC means to form a Limited Liability Company(LLC) which is further explained below. Business entities are asked to get an Employer Identification Number (EIN)

 

To create a Corporation (Inc) in the United States, we will firstly file documents called Articles of Incorporation or Certificate of Incorporation as a legality. If you’re looking for an LLC version of these documents, they are called Articles of Organization or Certificate of Organization (these documents may have different names depending upon whatever state you select). Also, the term entity is picked to describe a business that is not an individual and can apply either to a Corporation or an LLC both. You can be opening your company in the US from India as well.

If you’re wondering how to start a business in California then you may search for the appropriate idea first by looking into the area’s most sold stuff, have constructive plans and register your business. To Register a business name in Texas hire a professional Registered Agent for this and File the Articles of Organization with the Texas Division of Corporations.

 

Here are the steps you may require to set up in any city of the US.

Choose Which Type of Business Entity you want to Form: Corporation or LLC

Pick the State to Form Your Corporation or LLC

Fill the Requirements to Form a Corporation or LLC in the USA

After Forming a US Corporation or US LLC

Maintaining Your US Corporation or US LLC

 

  1. Choose Which Type of Business Entity you want to Form: Corporation or LLC

 

If any of the owners of the company (known as Shareholders of Corporations and Members Of LLCs) are not officially US Citizens, then there are options for you to form either a Corporation (also called a C-Corporation Or Regular Corporation) or an LLC. There’s one more entity type known as S-Corporation but that entity requires all shareholders to be US Citizens.

 

  1. Pick the State to Form Your Corporation or LLC

 

In the US, Corporation or LLC can be formed in any of the 50 States of the country or Washington DC. Whatever state you choose will be depending upon why you are forming the company. Some of the US states are more business-friendly or international-friendly than others, specifically Delaware, Nevada and Wyoming. Registering a company in Delaware is comparatively more feasible than other states.

 

  1. Requirements to Form a Corporation or LLC in the USA

Once you’ve concluded what type of company you’d like to form and which state you will be forming the company in, there are only a few basic requirements you might need.

These include:

  1. Choose your Company a Name
  2. Get a Registered Agent
  3. Arrange Names and Addresses of the People/Companies Involved (Officers, Directors, Members, etc.).
  4. Federal Employer Identification Number (not necessary)
  5. Apostille or Certificate of Authentication (not necessary)

 

  1. After Forming a US Corporation or US LLC

 

After your Corporation or LLC has been filed, there are other tasks you might want to do typically depending upon your requirements and the purposes of your US company.

  1. Arrange a US Physical Business location or Virtual Office address
  2. Get a US Bank Account for non resident
  3. Get a Bank Account in Your Home Country as well
  4. Get a US telephone Number
  5. Construct a Website and Company Logo
  6. Get a US Merchant Account (to Accept Credit Cards)

 

  1. Maintaining Your US Corporation or US LLC

 

Maintaining your Corporation or LLC in the US is fairly easy, you might only need to:

  1. File an Annual Report.
  2. Maintain a Registered Agent.
  3. Meet Your Home Country Requirements punctually
  4. Pay US Taxes following legal requirements (if required).

 

  1. International Tax Planning – to ensure all domestic and overseas tax and legal compliances related to disclosure and tax filing/payments are done properly with prior planning under FATCA, FEMA, IRS/RBI, DTA treaties, Transfer Pricing etc

The United States has a complex system of federal, state, and local levels of taxation. And when surveyed it looks the Organization for International Investment, CFOs of US subsidiaries of foreign businesses agreed that improving the tax system is the number-one action that would strengthen the United States as an investment location. So we think we can comfortably say that the US tax system is one aspect of doing business in the United States that requires careful navigation. Further, current debates regarding US tax policy and reform and ever-evolving legislative activity combine to create a challenging environment for companies doing business in the United States¾but also unique opportunities. We have experienced in taxes for non US Companies with Substantial US operation,  particular challenges and opportunities . It is often frustrating, but always rewarding, to overcome the confusion and complexity, and identify the critical insights that will enhance business performance and effectively manage risk. OCP Biz has extensive experience in regard to US operations of foreign businesses to provide a broad understanding of the basic tax implications of business operations in the United States, as well as to offer helpful observations into the tax consequences for foreign companies.  We believe we can serve you better and save lot of hassle to do proper tax planning.

Doing business is foreign company can become a piece of cake, if you comply with all legal compliances. As professional services, we provide you A to Z service from Opening a company in USA to filling all your taxes. We give you advices as and when required. Need a tax expert advice please contact us info@ocpbiz.com

 

 

Start a business in USA as a Non-Resident

Mike Hanes USA Business 0 Comment

Starting a business in a foreign country might be easier than you think, when you have proper knowledge of industry, market, economic situation.
Long ago, taking advantage of market anomalies in distant parts of the globe usually involved lot of hassles like lack of knowledge for economic situation, personal knowledge of specific industry, market research from distant place but these days, starting a business overseas might actually be much easier, less risky, and more economically sound than setting up a business in your home country. There are ample opportunities in emerging markets for entrepreneurs and small (or large) business owners with a skill set that is distinct from that of the local population.
So, now question arise where to register Company. Accessing the Western marketplace is the key to success for many businesses around the world. The Most effective and reliable way to enter global market is with a US company, to take advantage of the world’s largest, best integrated national market at the lowest tax rate. Even your company will be considered as MNC and will be easier to get brand associated with US Company.

CAN YOU SETUP COMPANY IN USA, BEING FOREIGN NATIONAL

“Yes, You Can!” Every day, foreign nationals are setting up US businesses, from major enterprises to small shops. Setting up a company in the US as a non-resident is simple when you have the help of team Skilled in Business Setups like Company formation, Obtain EIN for foreign entity, Bank Account setup, international taxes etc. Here, we help from A to Z for your company, you just focus on market and expanding the business.
So let’s discuss what are advantages for foreign national with a US Company
• Seek higher profit margins on same product or services
• Faster collection and higher liquidity in western market
• Business name, products, Intellectual properties are much secured
• Easier to enter in the global market and sell in the US market, from a customs and tax point of view
• Access the capital markets in the US for venture capital, angel investors and public markets
• Enhance the reputation of your company, both to US customers and many markets overseas
• Easier to get a visa to work in the US (though acceptance is NOT guaranteed)
• Possibly you can reduce your taxes on US-source income with proper tax planning

Incorporating a business is a smart way to reduce individual liability by creating a separate business entity. There are different types of Company incorporations. Each one of these options has its own set of benefits and drawbacks. Once you’ve decided on the structure that most benefits your organization, you still have to decide where to incorporate your business.

Incorporation laws are state-level legislation, which means that each state can make its own laws about the requirements, fees, and tax responsibilities for businesses incorporated within that state. Your experience will vary depending on the state you choose to incorporate in.
Incorporating your business creates a separate business entity from you or your partners. Even though there are costs associated with incorporating in different state, if the other factors are favorable to your business, you might make out better in the end.
How to determine which state to incorporate the business, there are a number of factors that are going to determine whether you have a smooth or bumpy ride. The best state to incorporate in is determined by the formation fees, annual filing fees, taxes, and legal structure, privacy protection and business laws. We’ll go through each one of these paying special attention to which states rank high for each category and which ones bring up the rear.

  • Legal System

Best Legal System for Corporations: Delaware, Nevada, and Wyoming
Worst Legal System for Corporations: Mississippi and New Mexico
The corporate laws in a state can affect the experience of owning a business there. Delaware, for example, is known for having the best business laws in the country. The state has a Court of Chancery, which hears corporate case laws instead of a jury of citizens. This is completely unique to Delaware. Corporate cases are handled more quickly and more efficiently there. You will be dealing with a court that is only handling business manners instead of waiting for your case to be seen on a general docket. You will also be in courtrooms with judges who are well-versed in business law and procedures. The result is that legal costs can be much lower in Delaware than in a state with less business-friendly laws.
Since Delaware has become known as the most corporate-friendly state in the country, it has become one of the most desirable states to incorporate in. In fact, the Delaware Division of Corporations claims to be home to 66 percent of the country’s Fortune 500 companies. Many serial investors will insist that a business is incorporated there before cutting you a check. The reason is that the overall risk is much less where the business laws are predictable and favorable.
Delaware has some competition, though. Both Nevada and, more recently, Wyoming are becoming well known for the same legal benefits for corporations. On the opposite side of the fence are those states that aren’t quite as business-friendly in their legal structure. According to a 2017 CNBC roundup of best and worst states for businesses, New Mexico and Mississippi both ranked very low on the list for business friendliness.

  • Formation Fees

Best States for Formation Fees: Arkansas, Colorado, Hawaii, Iowa, and Mississippi
Worst States for Formation Fees: Connecticut, Texas, and Massachusetts
Let’s start with the first costs associated with incorporating a business: the formation fees. These are the one-time fees you pay to the state when you apply to incorporate your business there. Filing fees vary by state and you can find the most current requirements on each state’s Secretary of State website. Keep in mind that these are in addition to any fees charged by professional companies.
How much the formation fees factor in your decision to incorporate in a state depends on how much you can contribute for start up cost. If you’re counting every penny during start up, the formation fee may be a very big deal. But, it’s also only a one-time fee, so the long-term effects on your bottom line are minimal. In most cases, formation fees are less of a factor than filing fees.
Formation fees can range from $50 to $455. The states with the lowest formation fees are Arkansas, Colorado, Hawaii, Iowa, and Mississippi. The ones with the highest fees are Connecticut at $455, Texas at $310, and Massachusetts at $295.

  • Annual Filing Fees

Best States for Annual Filing Fees: Alabama and Ohio
Worst States for Annual Filing Fees: Nevada, District of Columbia, and Maryland
The formation fees are just the beginning of costs required to incorporate your business. Each year you will also be required to file a one-page report with a filing fee, which will vary depending on the state. (In some states, it’s actually required every two years and is therefore called a biennial report.) This report is to keep the state informed about any changes in your business, including the principal address, authorized signatories, and the number of stocks issued by the business.
Currently, the only states that don’t require regular filings are Alabama and Ohio. Over the course of the life of your business, you can save a lot in terms of money and time from not having this yearly obligation. On the other end of the spectrum, Nevada has the highest annual filing fee, topping out at $325. The District of Columbia has a $300 fee. Maryland’s filing fee is based on business income but the minimum is $300.

  • Taxes

Best States for Corporate Taxes: Nevada, Wyoming, and South Dakota
Worst States for Corporate Taxes: District of Columbia, New Jersey, California, Minnesota, and Rhode Island
Taxes are a huge factor in determining the best state to incorporate in. The less you pay in taxes, the more your business can keep for running costs and profit. There are different types of taxes to consider—state income taxes, corporation taxes, and franchise taxes. Corporation taxes are levied on C-corp. LLCs might be affected by either type of taxes. Franchise taxes are for the privilege of operating and existing within a state that recognizes these types of taxes. You can find more information on taxes.
Nevada, Wyoming, and South Dakota all rank high for best tax laws because they do not have state income tax or corporate taxes. However, keep in mind that this only works for businesses that operate within those states. While you might incorporate there, if you operate your business in another state you will still be subject to that state’s tax laws. On the other hand, the District of Columbia has some of the highest personal and corporate income taxes in the country. New Jersey, California, Minnesota, and Rhode Island are not far behind.

The Bottom Line
These factors can all have long-term effects on the success of your business so it is important to at least consider them when making the decision on where to incorporate. But ultimately, the best state to incorporate in depends on where your priorities lie. If you are courting investors or considering your legal options, the legal structure is the most important factor. Are you worried about the potential costs associated with yearly obligations of filing in a certain state? Then the annual reports and filing fees will be your priority.
No matter what your perspective might be, do your due diligence on the state you are considering for your corporation. As always, it’s a good idea to get the advice of a professional advice who can guide you in making the right decisions for your business.