Basic information about doing Business in USA - Federal and State Tax rate, Incorporation of the company, other Tax IDs and numbers for starting a Business in USA, Buying Business or real estate in USA
3. Introduction
Law Office of Prashant Ajmera & Associates
Prashant Ajmera, LLB
Institute of Chartered Secretary and
Administration (ICSA)
Bachelor of Law, Gujarat University
Bachelor of Science, Gujarat University
Experience in corporate law and international
trade
Member of International Bar Association
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4. Introduction
Law Office of Prashant Ajmera & Associates
Anahita Jagtiani, Esq.
Licensed to practice law in the US
Member of Pennsylvania Bar Association
Juris Doctor (JD), Pennsylvania State University
Bachelors in Accounting & Law, Drexel University
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5. Setting up a Business5
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6. Forms of Business
Organizations
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Corporation
Branch of a Foreign Corporation
Partnership
Limited Liability Company (LLC)
Joint Venture (JV)
7. Points to Consider prior to
Incorporation
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State of Incorporation
Name of the Corporation
Minimum Capital
Nationality or Residency Requirements
Tax Returns
Office Leases
Insurance
Corporate Bank Accounts
Repatriation of Capital
8. Taxation in the US8
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9. Taxpayer Identification
Numbers
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Social Security Number (SSN)
Employer Identification Number (EIN)
Individual Taxpayer Identification Number
(ITIN)
Preparer Taxpayer Identification Number
(PTIN)
10. Federal Corporate Tax Rates
(2014)
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Taxable Income Over Under Tax Rate
$0 $50,000 15%
$50,000 $75,000 25%
$75,000 $100,000 34%
$100,000 $335,000 39%
$335,000 $10,000,000 34%
$10,000,000 $15,000,000 35%
$15,000,000 $18,333,333 38%
$18,333,333 - 35%
11. State Income Tax Rates (2014)
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12. Combined State and Average
Local Sales Tax Rates (2014)
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13. Buying an Existing Business v.
Starting a New Business
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14. Buying an Existing Business
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In some cases, buying an existing business
represents less of a gamble than starting a
new business from scratch. However, you
must perform due diligence to ensure that you
are fully aware of the terms of the purchase.
If you have decided to buy an existing
business, you will want to be sure you are
making the right choice in your new venture.
15. Advantages of Buying an Existing
Business
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Reduction in startup costs
Availability of human resources
Possibility of jump starting cash flow due to
existing inventory or receivables
Better financing options due to cash flow
16. Points to Consider prior to
Purchasing an Existing Business
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There are many different types of businesses
to buy. Take the following steps to narrow
down the list of potential businesses you may
want to purchase:
Identify your interests
Consider your talents
List conditions for your business
Quantify your investment
17. Due Diligence to Buy an Existing
Business
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Business valuation
Obtain all licenses and permits
Zoning requirements
Environmental concerns
Outstanding dues/taxes background check
Compliance with Bulk Sale laws
18. Business Brokers
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Brokers can help find businesses for sale that
best suit your needs
Hotel
Convenient store
Car wash
Small, medium, or large size business
Brokers can provide database of businesses
for sale and franchise opportunities for a fee
19. Starting a New Business
Venture
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Business plan
Business assistance and training
Business location
Financing your business
Determine the legal structure of your business
Register a business name
20. Starting a New Business Venture
Contd.
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Get a tax identification number
Register for State and Local taxes
Obtain business licenses and permits
Understand employer responsibility
21. How can Ajmera Law help?
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Ajmera Law is affiliated with several economic
development government authorities of the
Mid-West Region of United States (eg. Illinois,
Missouri, Iowa, Kansas, Nebraska, Oklahoma,
Arkansas)
Scope out new and existing business
opportunities all over the United States
Association with business brokers and
professionals
Help find or establish business qualifying
under the EB5 category
22. Moberly Region (Missouri)
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Strengths in Manufacturing, Metal Fabrication,
Composite Fabrication, Logistics, Animal
Sciences, Energy, Call Center, Customer
Service/Fulfillment Services, Agriculture, Agri-
Services
Major employers in the Region pull from up to 60
miles
12 Universities & Colleges within 1 hour
23. Moberly Region (Missouri)
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Centralized location in the US offers superb
accessibility to vendors & customers
Ability to serve the entire US from one location
Efficient transportation and improved lead times
Within a 1 Day Drive of 52% of all US
Manufacturing
Proximity to all Major US markets
Major transportation arteries with access to all
Major US Ports to serve the Global
Marketplace
25. Real Estate Investment
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Severe downturn is US real estate market that
took place several years ago, combined with a
weak dollar, has produced some relatively
good bargains
Foreign non-resident real estate owners have
two taxation options based on whether the
property generates:
Passive income; or
Effectively connected income (ECI)
26. Passive Income v. Effectively
Connected Income
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Passive income is any fixed, determinable,
annual or periodic income derived by a foreign
investment or business activity, and is subject
to 30% tax withholding on a gross basis.
Effectively connected income is income that
can be shown to be connected to a trade or
business, and is taxed on a net basis at the
graduated tax rates that apply to any US
citizen, resident or entity.
27. Foreign Investment in Real
Property Tax Act (FIRPTA)
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This act applies on the sale of US real estate
by foreign owners
Under this law, any disposition of US real
property interests by foreign investors or their
corporations are subject to US tax.
29. Wages & Hours
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The Department of Labor administers and
enforces federal labor laws
The Fair Labor Standards Act
(FLSA) prescribes standards for wages and
overtime pay, which affect most private and
public employment
Current federal minimum wage rate is $7.25
per hour
Some states have implemented higher hourly
wage rates
30. Family and Medical Leave Act
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The Family and Medical Leave Act (FMLA)
requires employers of 50 or more employees
to give upto 12 weeks of unpaid, job-protected
leave to eligible employees for the birth or
adoption of a child or for the serious illness of
the employee or a spouse, child or parent.
31. Other Labor Laws
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Apart from the two major laws, employers also
need to comply with the following:
Workplace Safety & Health
Workers’ Compensation
Employment Retirement Income Security Act
Unions
Employee Health Insurance
Americans with Disabilities Law
33. Insurance Requirement for
Employers
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Businesses with employees are required by
law to pay for certain types of insurances:
Workers’ Compensation Insurance
Unemployment Insurance
Disability Insurance (in select states)
California
New Jersey
New York
Hawaii
35. Federal & State Licenses and
Permits
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You may need to obtain a federal license or
permit if your business is involved in activities
supervised and regulated by a federal agency,
such as:
Selling alcohol, tobacco, and lottery
Sale of firearms
Commercial fishing
Mining and drilling
Transportation and logistics
Sale or manufacturing of pharmaceutical products
36. U.S. Business Related Visas for
Foreign Nationals
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37. Business Visas
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Your U.S. visa requirements should be a part of
the planning process in structuring of your U.S.
operation
Temporary U.S. visas include:
B-1/B-2 visitors visa
L-1 intra-company transferee visa
EB-1(C) visa for executives and managers
transferred from a multinational
EB-1 Green Card for aliens of extraordinary
ability
EB-5 immigrant investor visa
H visas – temporary work permits
38. B-1 Visa
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With a B-1, a non-U.S. national cannot work
for and be paid by any U.S. source
A business owner can, with this visa:
Negotiate contracts
Consult with business associates
Litigate or arbitrate
Participate in conventions and seminars
Conduct research and engage in certain other
permitted activities in the States
39. L-1 Visa
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Requirements for eligibility:
Foreign national must be an “executive”,
“manager”, or “person of specialized knowledge”
Must have worked in a foreign enterprise for at
least one year within the past three years in one
of the above categories
The employee is being transferred to the foreign
enterprise’s U.S. subsidiary or branch office
temporarily
40. L-1 Visa Advantage
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No annual limits on the number of foreign
nationals who can qualify for this category
No prevailing wage standards
A foreign national can apply for permanent
residence without an adverse impact on the
nonimmigrant status
Employment authorization (EAD) for spouses
41. EB-1(C)
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An EB1C is an immigrant visa in
the EB1 category that is reserved for
executives and managers transferred from a
multinational corporation.
An individual is eligible to obtain an EB1C visa
if he or she is:
Employed as an executive or manager
By a qualified company
For at least 1 of the past 3 years
42. EB-1(A) Visa
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You may be eligible for an employment-based
visa if you have an extraordinary ability, are an
outstanding professor or researcher, or are a
multinational executive or manager.
Each occupational category has certain
requirements that must be met:
43. EB-5 Visa
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All EB-5 investors must invest in a new
commercial enterprise;
Create or preserve at least 10 full-time jobs for
qualifying U.S. workers within two years of the
immigrant investor’s admission to the United
States as a Conditional Permanent Resident;
and
Required minimum investments are:
$1 million for a general business
$500,000 for a high-unemployment area or
rural area in the United States
46. Contact
Law Office of Prashant Ajmera & Associates
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Law office of
Prashant
Ajmera &
Associates
www.ajmeralaw.com
prashant@ajmeralaw.com
Editor's Notes
Corporation - Here, we are dealing with setting up a wholly-owned U.S. company. There are many reasons to set up a wholly-owned U.S. company. You may want to have a presence in the market; to satisfy existing customers and prospects; to manufacture, process or assemble products in the States; to protect against liability claims; and to minimize certain tax or customs duty-related costs. A corporation is a separate legal entity usually created under the laws of one of the states or the District of Columbia. Each state enacts its own laws regarding the formation and operation of corporations. Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law.
Branch of a Foreign Corporation - A branch of a foreign company is just an extension of that company within the USA.
Partnership - For legal purposes, a partnership is defined as an association of two or more persons formed to carry on a business for profit as co-owners. Defined by U.S. tax law, a partnership includes a syndicate, pool, joint venture or other unincorporated organization by which any business is conducted ñ and which is not, for federal income tax purposes, a corporation, trust or estate.
Limited Liability Company - LLC is a pass-through entity, this means these entities are not subject to income tax. Rather, the owners are directly taxed individually on the income, taking into account their share of the profits and losses. LLC owner(s) must obtain a tax number, prepare and file tax returns and pay the resulting taxes due.
Joint Venture – Foreign and US parties form a corporation under US state laws, each owning a particular percent and yet retaining their individual identity. There are three types of U.S. JV’s
Distribution JV
Production JV
R&D JV
State of Incorporation - Under which U.S. state’s laws shall I form my corporation? The answer will vary depending on the particular company’s needs. In most cases, though, the choice comes down to Delaware because it has business friendly corporate laws and the Courts usually tend to rule in favor of businesses. Also, Delaware imposes no sales tax.
Name of the Corporation – The name of a corporation formed in one state is not protected in other states.
Minimum capital - In most states, there is none; and the minimum is very low in those states that specify one. That means that you are essentially free to decide on the amount of capital you want to contribute.
Nationality or Residency Requirements - All of the members of the U.S. corporation’s Board of Directors and all of its officers can, if so desired, be non-U.S. nationals and U.S. non-residents.
Tax returns – The corporation must file tax returns even if it is inactive.
Office leases – You can lease office space in many different ways: a lease of real office space in a building; leasing space from a business incubator or “baby-sitting” firm; leasing via an office-sharing arrangement; leasing a “virtual office”, etc.
Insurance - You will need certain types of insurance for the U.S. operations, and may wish to consider other types. Examples in the commercial insurance area are: general liability insurance; product liability insurance (which may or may not be part of the general liability insurance); business property insurance, covering your own goods and physical property; directors and officers liability, etc.
Corporate bank accounts – These are usually set up by an American lawyer because it is a lengthy and complex procedure.
Repatriation of capital – The process by which you can bring the $$ earned in the United States to India. You need to be aware of the foreign exchange risk and the tax implications of such repatriation
SSN - You will need to complete Form SS-5, Application for a Social Security Card. You also must submit evidence of your identity, age, and U.S. citizenship or lawful alien status.
EIN - An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity. Generally, all businesses need an EIN.
ITIN - An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN). To obtain an ITIN, documentation substantiating foreign/alien status and true identity for each individual are required.
PTIN - Beginning January 1, 2011, a paid tax preparer must use a valid Preparer Tax Identification Number (PTIN) on returns prepared.
Federal corporate income tax is imposed at graduated rates. The lower rate brackets apply to lower rates of income when compared to higher tax brackets that coincide with higher rates of taxable income.
The corporate income tax rate is approximately 40%. The marginal federal corporate income tax rate on the highest income bracket of corporations is 35%.
State and local governments may also impose income taxes ranging from 0% to 13%, the top marginal rates averaging approximately 7.5%.
The effective rate may vary significantly depending on the locality in which a corporation conducts business.
The U.S. does not levy a Value Added Tax (VAT) or Goods & Services Tax (GST). Instead there is a sales tax. This is a transactional tax imposed by state and local jurisdictions on sellers/consumers related to the sale/purchase of tangible personal property (TPP) and certain services. There is no federally imposed sales tax. Sales tax is generally collected at the point of purchase of taxable goods and services by end users.
Disadvantages to Choosing an Existing Business
There are also some downsides to buying an existing business. Purchasing cost may be much higher than the cost of starting a new business because of the initial business concept, customer base, brand and other fundamental work that has already been done. Also, be aware of hidden problems associated with the business like debts the business is owed that you may not be able to collect.
Hiring an experienced business broker can help you navigate complicated issues like business valuation. We recommend that you hire a certified business broker.
Starting a new business in US also includes starting a marketing, sales or branch office (eg. Subsidiary)
Regional centers – Area in US where populations in less than 20,000 or unemployment is time and a half of the national average.
In either case, you will need a real estate agent
Passive income - The property treated as an investment property and subject to a flat 30% tax. Most income received by foreign persons from U.S. investments, including, rent, is taxed at a flat 30%, and the foreign person is permitted no deductions related to the operations of the property. That means that if there is a mortgage on the property, the interest payments are not deductible. However, many countries have entered into income tax treaties with the U.S. reducing the 30% rate to a lesser amount.
ECI - Income from real estate that is "effectively connected" with a U.S. trade or business is taxed to the owner of the real estate at the same rates that apply to U.S. individuals and corporations. In addition, the owner can claim deductions that arise from the operation of the property.
Employers need to comply with the higher of the two, i.e. if federal minimum wage is $7.25 and state minimum wage is $8.25, then employers must pay at $8.25/hour
Workers’ compensation insurance - Businesses with employees are required to carry workers' compensation insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program.
Unemployment Insurance - Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes, you must register your business with your state's workforce agency.
Disability Insurance - Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury.
For agricultural activities, you will need a permit from USDA (US Department of Agriculture)
If you manufacture, wholesale, import, or sell alcoholic beverages at a retail location, you will need to register your business and obtain certain federal permits (for tax purposes) with the U.S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB).
If you operate an oversize or overweight vehicle, you’ll need to abide by the U.S. Department of Transportation’s guidelines on maximum weight. Permits for oversize / overweight vehicles are issued by state government.
Specialized knowledge - means knowledge possessed by an individual whose advanced level of expertise and proprietary knowledge of the organization’s product, service, research, equipment, techniques, management, or other interests of the employer are not readily available in the United States labor market. This definition does not apply to persons who have general knowledge or expertise, which enables them merely to produce a product or provide a service.
The L-1 is tied to the particular U.S. employer (subsidiary, branch or affiliate of the foreign company), meaning that the holder cannot work for another U.S. employer. By filing a special application, the spouse of L-1 visa holder can receive a visa permitting the spouse to work in the USA.
Unlike other employment based categories, the quota for EB1 class petitions generally is never met, therefore, a visa or change of status to EB1 can be obtained as soon as the petition is approved. EB1 cases do not require any test of the US job market either. The process can be completed in a matter of months. An organization is qualified if it is either a US affiliate, parent or subsidiary of a foreign business entity. The terms “affiliate,” “parent,” and “subsidiary” are defined by immigration regulations.
* Criteria for Demonstrating Extraordinary AbilityYou must meet 3 out of the 10 listed criteria below to prove extraordinary ability in your field:
Evidence of receipt of lesser nationally or internationally recognized prizes or awards for excellence
Evidence of your membership in associations in the field which demand outstanding achievement of their members
Evidence of published material about you in professional or major trade publications or other major media
Evidence that you have been asked to judge the work of others, either individually or on a panel
Evidence of your original scientific, scholarly, artistic, athletic, or business-related contributions of major significance to the field
Evidence of your authorship of scholarly articles in professional or major trade publications or other major media
Evidence that your work has been displayed at artistic exhibitions or showcases
Evidence of your performance of a leading or critical role in distinguished organizations
Evidence that you command a high salary or other significantly high remuneration in relation to others in the field
Evidence of your commercial successes in the performing arts
This visa category was created to stimulate the U.S. economy through job creation and capital investment by foreign investors.
Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business
Our experience in foreign education has motivated us to meet our social responsibility by providing ethical and unbiased information to parents and students which empowers them to envision their life abroad. We conduct seminars and provide counselling services to students and parents in schools and colleges, thereby allowing students to pave their path to success internationally by making informed decisions.