Q&As

Frequently Asked Questions?

  • Why am I starting a business?
  • What kind of business do I want?
  • Who is my ideal customer?
  • What products or services will my business provide?
  • Am I prepared to spend the time and money needed to get my business started?
  • What differentiates my business idea and the products or services I will provide from others in the market?
  • Where will my business be located?
  • How many employees will I need?
  • What types of suppliers do I need?
  • How much money do I need to get started?
  • Will i need a loan?
  • How soon will it take before my products or services are available?
  • How long do i have until i start making profit?
  • Who are my competitors?
  • How will I price my product compared to my competitors?
  • How will I set up the legal structure of my business?
  • What taxes do I need to pay? What kind of insurance do I need?
  • How will I manage my business?
  • How will I advertise my business?
Some people know from an early age they were meant to own their own business. Others find themselves starting a business due to life changes (parenthood, retirement, losing a job, etc). Others may be employed, but are wondering whether the role of business owner/entrepreneur is right for them. There are a number of benefits of starting a business, but there are also risks that should be evaluated. There can be many benefits of starting your own business which includes:
  • Rewards. Not everyone defines reward the same way. For some it might be seeing a new venture grow and succeed. For others it may be conquering the unknown and striking out on their own. However you define reward, starting a new company might hold that promise for you.
  • Being your own boss. When you start a business and are self-employed, you are your own boss and ultimately control your own destiny.
  • Income. Whether you view starting a business as an economic necessity or a way to make some additional income, you might find it generates a new source of income.
  • Flexible hours. Owning your own business is hard work and often requires long, odd hours. In some cases, having your own business may allow you to have more flexible hours. Many stay-at-home Parents, for example, choose to become entrepreneurs.
  • Purchasing an existing business. While it may not be viewed as “starting” a business, purchasing an existing business has proven beneficial for many business owners—but it undoubtedly requires both financial and time investments. For businesses that are already profitable, these new business owners jump past the true start-up phase into running a mature business. Flip Side is that starting your own business can have many benefits, but keep in mind that not all new businesses succeed. As you consider whether to start a business, you should:
  • Assess your strengths and weaknesses. Is self-employment right for you?
  • Determine startup costs. Can you meet these on your own or would need to secure a loan or other type financial backup?
  • Research the marketplace. Have you evaluated the competition and considered how your particular business will succeed?
  • Outline your business goals. What do you want to accomplish and what will you consider a success?
  • USA – Delaware, Nevada, Florida, New York, California
  • CANADA – Ontario (Toronto), British Columbia (Vancouver)
  • DUBAI – RAK (For Offshore companies, and Foreign Nationals)
  • INDIA – Maharashtra (Mumbai, Pune), Gujarat (Ahmedabad), Karnataka (Bengaluru), New Delhi & NCR
It depends upon the country and specific state where it is set up. Such as setting a normal Delaware incorporation just takes 2 working days; while incorporating in India (Maharashtra & most of the other states) it may take between 15- 45 days.
Consider below points:
  1. Annual Minimum Cost of Corporate Maintenance- such Annual Corporate Filing, Minimum Taxes
  2. State Law and relevant laws – e.g. Delaware and Nevada offers attractive tax advantages. The Delaware Court of Chancery is often considered an advantageous venue for shareholder lawsuits
  3. Place of Business – It is always recommended to incorporate entity in the state where business will be conducted
An Employer Identification Number (EIN), also known as a federal tax identification number or FEIN or FEI, is a nine-digit number that the IRS assigns to business entities.
  • This number is used to identify a business entity and to identify taxpayers that are required to file various business tax returns.
  • A business will need to apply for a new EIN if the business is sold or is otherwise transferred.
  • You will need an EIN if you have employees in your new business.
  • Banks will require an EIN to open an account for all corporations.
Accommodation & food services – providing customers with lodging, meal preparation, snacks, or beverages for immediate consumption.

Construction – erecting buildings or other structures, (e.g. streets, highways, bridges, tunnels). The term construction also includes special trade contractors (e.g. plumbing, HVAC, electrical, carpentry, concrete, excavation, etc.)

Finance & insurance – in transactions involving the creation, liquidation, or change of ownership of financial assets and/or facilitating such financial transactions; underwriting annuities/insurance policies, facilitating such underwriting by selling insurance policies, or by providing other insurance or employee-benefit related services.

Health care and social assistance – providing physical, medical, or psychiatric care using licensed health care professionals or providing social assistance activities such as youth centers, adoption agencies, individual/family services, temporary shelters, etc.

Manufacturing – the mechanical, physical, or chemical transformation of materials, substances, or components into new products. The assembling of component parts of manufactured products is also considered to be manufacturing.

Real estate – renting or leasing real estate to others; managing, selling, buying or renting real estate to others, or providing related real estate services (e.g. appraisal services)

Rental and Leasing – providing tangible goods such as autos, computers, consumer goods, or industrial machinery and equipment to customers in return for a periodic rental or lease payment.

Retail – selling merchandise to general public from a fixed store, by direct, mail-order or electronic sales or by using vending machines.

Transportation and warehousing – transportation of passengers or cargo, warehousing or storage of goods, scenic or sight-seeing transportation, or supporting activities related to these modes of transportation.

Wholesale-agent/broker – arranging for the purchase or sale of goods owned by others or purchasing goods on a commission basis for goods traded in the wholesale market, usually between businesses.

Wholesale-other – selling goods in the wholesale market generally to other businesses for resale on their own account.

Other – activity not described above. Describe the applicant’s principal business activity in the space provided.
A limited liability company is a type of business structure that offers personal liability protections and a few tax advantages to boot. The "LL" in LLC is what protects your personal assets in the event of a judgment against your company. Corporations offer limited liability as well, so we're going to focus on the structural and taxation differences in the chart below.

Corporation:

Despite the ease of administration of an LLC, there are significant advantages to using a corporate legal structure. Two types of corporations can be formed. An S corporation is a passthrough entity for tax purposes. A C corporation is taxed at the corporate level and files a corporate tax return.

Corporations offer more flexibility when it comes to their excess profits. Whereas all income in an LLC flows through to the members, an S corporation can pay its employees a reasonable salary while deducting expenses such as federal taxes. The remaining profits can be distributed as dividends from the corporation. As of 2015, dividends have a lower tax rate when compared to gross income. C corporations have the advantage of allowing profits to remain with the corporation. Thus, the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. Also, for businesses that eventually seek to issue stock, the corporation can easily issue shares, while an LLC cannot issue shares.

LLC:

The IRS does not treat LLCs as a distinct entity for tax purposes by default, which offers greater flexibility. An LLC with a single member can be taxed and treated like a sole proprietorship. Thus, profits and losses are taxed on the individual’s personal federal tax return.

There are two options for an LLC with more than one member. The first option is to treat the members as partners. The members are taxed the same as the partners in a partnership. The other option is to tax the LLC as a corporation.

One potential drawback to using an LLC is that members may have to pay self-employment taxes on their profits and any salaries. For an LLC, the profits flow through to the members who deal with them on their federal tax returns. For a corporation, profits are taxed at the corporate level. The individual members usually have to pay for federal items such as Medicare and Social Security. There are other drawbacks as well. There can be an automatic termination of an LLC that is treated like a partnership for federal tax purposes. The automatic termination is triggered if there is a sale or exchange of 50% or more of an LLC’s total interest within a 12- month period. This is called a technical termination. When this occurs, the assets are considered to have been contributed tax-free to a new LLC. The membership interests in the new LLC are then treated as having been distributed to the members of the old LLC. Also, there must be at least two members for an LLC to be treated as a partnership for tax purposes. In contrast, there can be a C corporation or S corporation, which only has one shareholder.

Another major disadvantage is the differences among states in the statutes that govern LLCs. This can lead to uncertainty for LLCs that operate in multiple states. The differences in rules and regulations can result in additional paperwork and inconsistent treatment across different jurisdictions.
Federal Corporate Tax Rate (IRS):
Tax Rate Range (15%-35%)
Net Income Over But not over Tax is Of amount over
$0 $50,000 15% $0
50,000 75,000 $7,500 + 25% 50,000
75,000 100,000 13,750 + 34% 75,000
100,000 335,000 22,250 + 39% 100,000
335,000 10,000,000 113,900 + 34% 335,000
10,000,000 15,000,000 3,400,000 + 35% 10,000,000
15,000,000 18,333,333 5,150,000 + 38% 15,000,000
18,333,33335%0
Delaware State Corporate Tax Rate (DE):
Pay a tax of 8.7% on its federal taxable income allocated and apportioned to Delaware.
Florida State Corporate Tax Rate (FL):
Compute Tax by multiplying Florida net income by 5.5%.
    Estimated Tax Payments
Federal:
For Corporations
If you are filing a tax return for a corporation, you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file the corporate return.
How Do I Know If I Must Make Estimated Tax Payments?
As you and your tax preparer work on your business tax return, keep the above numbers in mind. If you are a corporation, use form 1120-W to estimate the taxes you owe.
What are the Due Dates for Estimated Tax Payments?
Due dates for estimated taxes are based on when income was received:
  • For income received for the period January 1 through March 31, the due date is April 15.
  • For income received for the period April 1 through May 31, the due date is June 15.
  • For income received for the period June 1 through August 31, the due date is September 15.
  • For income received for the period September 1 through Dec 31, the due date is January 15 of the next year.
How Much Must I Pay in Estimated Taxes?
The IRS general rule is that you must pay the smaller of:
  • 90% of your total expected tax for this year, or
  • 100% of the total tax shown on your last year's return. Your last year tax return must cover all 12 months.
How Do I Make These Estimated Tax Payments?
Make an estimated payment for your corporation using form 1120-W. You can pay your estimated taxes in any of the usual ways:
    Delaware State:
Estimated Tax Payment Due Dates:
  • April 01 – 50%
  • June 15 – 20%
  • Sept 15 – 20%
  • Dec 15 – 10%
  • April 01 – Balance if any
    Florida State:
Every taxpayer is required to make estimated tax payments if the taxpayer can reasonably expect the corporate income tax liability to exceed $2,500. The general rule provides that estimated tax payments be made in four equal installments totaling 90% of the current year's corporate tax liability. The exception to the general rule is that four equal installments totaling the tax due for the previous tax year may be made as long as the previous year was a 12-month period.
Due Dates:
Installment 1 –05/31/17 Installment 2 - 06/30/17 Installment 3 - 10/02/17 Installment 4 - 01/02/18
 
SINGAPORE
HONG KONG
Advantages
  • Business-friendly schemes and incentives such as PIC, Global Trader, Start-up Exemption Scheme.
  • Extensive network of cross border tax treaties.
  • Lower effective corporate tax rate.
  • Exemption from audit requirements in most cases
  • Safe harbor (gains from the disposal of equity investments by companies are not taxed if certain qualifying conditions are met)
  • Purely territorial system of taxation.
  • Though the treaty network is not as extensive as Singapore, but some treaties such as with Indonesia are better suited for businesses.
  • Case law (sourcing rules)
  • No Goods & Services tax.
  • Low or no Withholding taxes
  • No resident director requirement for incorporating a company.
Disadvantages
  • Taxation on certain kinds of remittances.
  • Withholding taxes for some situations.
  • Political unrest in recent years.
  • Lack of incentives for businesses.
  • After it became a part of China, there is a slowdown in signing up new cross-border tax treaties.

Incorporation Requirements

 
SINGAPORE
HONG KONG
Requirements for incorporating a private limited (in Singapore) and a limited company (in Hong Kong).
  • At least one shareholder.
  • At least one director that is a ordinarily resident in Singapore.
  • Company secretary who is a Singapore resident.
  • Paid-up capital of S$1
  • Registered office address in Singapore (no PO box)
  • No restriction on foreign ownership.
  • To be eligible for Singapore tax residency, the management and control of the company must b done from Singapore.
  • At least one director (can be non-resident) and one local company secretary.
  • At least one registered shareholder.
  • One corporate director is mandatory.
  • If limited by shares, at least one founder member should hold one share
  • Authorized capital is HK$10,000
  • Minimum share capital is HK$1
  • Registered office situated in Hong Kong (no PO box)
  • No definition of tax residency so it depends on the respective DTA.
Incorporation procedure
  • Company name approval
  • Company registration
  • Choose company name
  • Complete company incorporation and business registration
  • Receive certificates
Time to incorporate
  • Just few hours if all the paperwork is in order
  • Seven Days
Exchange control
  • None
  • None
Bank account location
  • Anywhere
  • Anywhere
Annual compliance requirements
  • Annual general meeting
  • Filing of annual returns
  • Annual audit is required if it’s not an Exempt Private Company (non-corporate shareholder and annual revenue is less than S$5 million)
  • Annual general meeting.
  • Filing of annual returns
  • Audit is mandatory.
Double Taxation Agreement (DTA) with China
  • China-Singapore DTA entered into force on 18, September 007.
  • Concept of Residence an “Permanent Establishment” in DTA.
  • Main revenues covered by the DTA.
  • China-Hong Kong DTA entered into force on 8 December 2006.
  • Concept of Residence and “Permanent Establishment” in DTA
  • Main revenues covered by the DTA

Taxation Differences:

2
 
SINGAPORE
HONG KONG
Tax System
  • Territorial + tax on some types of remittances
  • Purely territorial
Legal regime
  • English common law
  • English common law
Tax exchange information
  • Yes if the request is specific an reasonable
  • Yes and no court order is required
No. of tax treaties
  • 76
  • 30
Corporate income tax rate
  • Up to 17%, but effective rate a lot less if companies take advantage of schemes such as Start-up Tax Exemption, Partial Exemption, Corporate Tax Rebate etc.
  • Flat rate of 16.5% for corporations
Goods & Services Tax
  • 7%
  • None
Capital Gains Tax None  
Withholding Tax None on dividend distribution
  • 15%  on gross interest paid to non-resident with no business operation in Singapore.
  • None
  • 10% on gross royalty paid to non-resident with no business operation in Singapore.
  • 16.5% tax on either 30% or 100% of the gross royalty depending on qualifying conditions.
Avoidance of double taxation
  • Ordinary credit method with Foreign Tax Credit (FTC) pooling allowed.
  • Ordinary credit method with no pooling allowed.
Tax incentives
  • Productivity and Innovation Credit
  • Foreign Tax Credit Pooling
  • Global Trader Programme
  • Corporate Tax Rebate
  • Start-up Tax Exemption Scheme.
  • Partial Exemption Scheme
  • Fund management activities (5% or 10% corporate income tax rates)
  • None

OCP BUSINESS INFO LIBRARY