US

Guide to Starting a Corporation in California   Unless otherwise mentioned, the corporation mentioned in this quotation specifically refers to a company limited by shares registered in California, USA, in accordance with California General Corporation Law.   Introduction   In California, corporations and limited liability companies (LLCs) are the most prevalent business forms. Investors must consider each type of business form carefully because one business form may be an advantage to certain investors but not to others.   Due to the location advantage, California is one of the most popular options for both domestic and foreign investors. Investors can choose to establish a corporation or an LLC subsidiary in California. A corporation offers limited liability to its shareholder and has centralized governance structures. An LLC has the similar characteristics. While the corporation is the first choice for foreign investors, the LLC is an acceptable alternative. Whatever type of business is […]

United States Sales and Use Tax Guide   When it comes to United States sales and use tax, foreign investors are surprised by the differences between U.S. sales and use tax and Value Added Tax (VAT) in other countries. U.S. sales and use tax is similar to Valued Added Tax (VAT) as both are indirect taxes. However, U.S. sales and use tax are imposed on the sub-national level because U.S. does not have a national system for sales and use tax. Each state has its specific authority to impose the sales and use tax with subjection of U.S. constitutional restrictions. Some local jurisdictions (including cities and counties) may also impose sales and use tax for economic and social considerations.   This guide provides an overview of the key concepts of U.S. sales and use tax, including the definition as well as Nexus standards, registration, criteria for sales and use tax […]

Introduction to Corporate/LLC Income Tax in United States   According to 2017 Tax Cuts and Jobs Act, United States adopts combined worldwide taxation and new territorial-style tax system.   Worldwide taxation means income accruing in and outside of United States are subject to United State income tax. Under a worldwide tax system, secondary jurisdiction over foreign-source income exists. If the tax in the foreign country is lower than the tax rate in the residence country, residual tax will be imposed. If the tax rate in the foreign country is higher than the tax rate in the residence country, the corporate will pay the higher foreign tax rate and get a credit for foreign-source income in the future.   New territorial-style tax system means U.S. corporations that own 10% or more of a foreign corporation can take 100% dividend received deduction on dividends paid out of foreign-source earnings but cannot have […]

C Corporations vs. S Corporations   Many investors are interested in C Corporations and S Corporations. The following will discuss about the differences between them in terms of formation and taxation.   C Corporations vs. S Corporations: Formation   The C Corporation is the default corporation under Internal Revenue Service (IRS) rules. A C Corporation can elect to be taxed as an S Corporation by filing Form 2553 with the IRS. Please note while most states follow the federal S Corporations election, some jurisdictions do not recognize the S Corporations (e.g. New York City) or require separate state elections (e.g. New York State, State of New Jersey).   To obtain S Corporation tax status for a certain year, you should complete the Form 2553 no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during […]

Differences Between Corporation and LLC   Corporations and limited liability companies (LLCs) are the most prevalent business forms when foreign investors considering investment in U.S. Both corporations and LLCs have a statutory right to exist perpetually. The shareholders of a corporation and the members of an LLC are not personally liable for the debts, obligations and liabilities of the entity.   However, corporations and LLCs have specific characteristics that must be considered carefully because they may be an advantage to certain investors but not to others.   Management   Corporations have mandatory centralized management. Control of the business and affairs of the corporation is vested in the corporation’s board of directors, and the shareholders are generally not involved in the day-to-day management of the affairs of the corporation. However, shareholders’ approval is required for certain significant transactions such as mergers.   On the other hand, an LLC has a flexible […]

Required Business Insurances in New York State   Insurance is an essential tool of risk management and helps employers reduce the financial burdens of possible losses. The following will introduce three basic insurances in New York State for businesses.   Business Liability Insurance   Business liability insurance is not mandatory in New York State, but it can protect your business from financial losses resulting from various claims, including bodily injury, property damage, personal injury, advertising injury and others caused by your business operation. And landlords may require you to maintain a certain level of liability coverage as a condition of your lease.   The premiums are typically based on the level of the coverage, the nature of the business, the number of employees, the location of operation, etc.   Workers’ Compensation and Disability Insurance   In New York State, employers are required to obtain and keep in effect workers’ compensation […]

Taxation for LLC   A Limited Liability Company (LLC) is a business structure allowed by state statute, but IRS does not recognize LLC on tax purpose. The IRS treats an LLC as either a partnership, or a corporation depending on the number of members and elections made by the LLC.   For income tax purpose, a single member LLC is treated as a sole proprietor by default. In this case, the LLC does not need to pay income taxes or file a tax return with the IRS. The LLC’s net income, income, and expenses items are reported on the member’s personal tax return (assume the member is individual).   A domestic LLC with at least two members is classified as a partnership for federal income tax purposes by default. As a pass-through entity, an LLC needs to file tax return for the business, but does not pay entity-level taxes on its income; […]

FATCA Reporting for U.S. Taxpayers The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. Under FATCA, certain U.S. taxpayers, holding specific financial assets outside the United States and meeting the reporting threshold, must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets.   Definition of Certain U.S. Taxpayers   You are a U.S. taxpayers regulated by FATCA if you are one of the following:   Specified individuals include U.S citizens, resident aliens, and certain non-resident aliens. Specified domestic entities include certain domestic corporations, partnerships, and trusts.   Specific Foreign Financial Assets    Specified foreign financial assets include foreign financial accounts and foreign non-account assets held for investment (as opposed to held for use in a trade or business), such as foreign stock and securities, foreign […]

Representative Office and Wholly Foreign Owned Enterprise Compared Wholly Foreign Owned Company (WFOE) Representative Office (RO) 1. Status Such a company is independent legal entity registered with only foreign capital in China and under Chinese law. The managing director (if only one director is appointed) or Board of directors and legal representative are appointed by the foreign parent company. The WFOE abides by the Chinese company law and regulations like any other Chinese company. It is an office of a foreign company in China. As such it is not a Chinese company. It can be compared to the embassy or consulate of a company in China. It has no registered capital. 2. Legal Liability The WFOE is liable to its assets like a limited liability company in Western legal practice. The minimum capital to be registered is usually around USD120,000. In some cities and for some industries, however, the minimum […]

A Permanent Representative office of a foreign enterprise is a non-legal entity operating in China representing its parent company. A representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.   1.Legal status of a China Representative Office The Representative Office is a non-legal entity operating representing its parent company. A representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.   2.Life Span of a China Permanent Representative Office The validity of duration of the residence for the Permanent Representative Office (RO) is 1 year, […]