Post by sinthiya007 on Nov 5, 2024 4:32:05 GMT
When opening a business abroad, you should always pay attention to two components: the tax resident of which country the business will be, and the tax resident of which country the owner will be. Understanding these things makes it possible to avoid tax complications, overpayments, fines, and therefore fully use your “hard-earned” money.
Let us consider in more detail the issues of taxation of companies in the USA and income from such companies by non-residents.
The US Tax System: A Brief Primer
Federal;
Regional (state level);
Local.
income tax
sales tax.
Only a few states do not charge sales tax (shown in gray on page seo service
on the map). The darker the color of the state, the larger the combination of local sales tax and state sales tax.
Basic sales tax rates vary by state. They range from 0% to 7.25% and can reach a maximum of 13.5% with additional taxes. Sales Tax is collected from the buyer, but the seller is generally responsible for collecting it.
The good news is that the sales tax collection model has changed significantly in the last few years, with major US marketplaces starting to collect the tax themselves.
Thus, today the online giant Amazon collects sales tax independently in 41 states out of 45 possible (in which this tax exists).
For Amazon entrepreneurs, this is very convenient: there is no need to administer sales tax, collect it, pay an accountant – the marketplace will take care of everything.
Now, regarding the profit tax, or income tax. This tax is levied on net profit (profit is the final object of taxation). Its size will depend on the type of company and the form of taxation.
“Offshore” states for doing business
When contacting us for services to open a company in the USA , clients often ask about which states are offshore. Here it is necessary to explain that offshore or completely tax-free states are a myth.
Where does this common misconception come from? Where does it come from? The thing is that there are a number of states in the United States, namely Alaska, Florida, South Dakota, Texas, Washington, Wyoming, Nevada, Delaware, which do not levy income tax at the state level.
But even if there are no taxes at the state level, they are present at the federal or local level (and this is a good time to remember the three-tiered tax system in the United States).
In addition, some states may have some other tax instead of income tax. For example, Delaware has this trick: they once made a “knight’s move” – they removed the income tax at the state level, and they essentially don’t have one. But instead, they introduced another tax, which is called “franchise tax”. It is fixed – $300 is paid annually.
Offshore states in the USA are a myth. Even if a state does not levy income tax at the state level, it means that it is present at the federal level or has been replaced by another tax.
Types of US Companies Available for Registration by Non-Residents
There are two types of companies available to non-residents in the United States. The first is an LLC, and the second is a C corporation, or C-corp for short.
С-corporation
A C-corporation is a legal entity that pays state and federal income taxes. The corporation first pays corporate income tax on its profits, and then its shareholders also pay income tax at both levels.
Most often, this type of company is chosen by large businesses or IT startups. Almost all large American corporations, including Google and Apple, are C-corp. And even if your business is still far from Apple, it is still worth considering organizing a business as a C-Corporation.
Why? The answer is simple: money. If at any stage of the company's development you need additional financing, you need to remember that investors are more willing to work with C-corp than LLC or other types of business.
Let us consider in more detail the issues of taxation of companies in the USA and income from such companies by non-residents.
The US Tax System: A Brief Primer
Federal;
Regional (state level);
Local.
income tax
sales tax.
Only a few states do not charge sales tax (shown in gray on page seo service
on the map). The darker the color of the state, the larger the combination of local sales tax and state sales tax.
Basic sales tax rates vary by state. They range from 0% to 7.25% and can reach a maximum of 13.5% with additional taxes. Sales Tax is collected from the buyer, but the seller is generally responsible for collecting it.
The good news is that the sales tax collection model has changed significantly in the last few years, with major US marketplaces starting to collect the tax themselves.
Thus, today the online giant Amazon collects sales tax independently in 41 states out of 45 possible (in which this tax exists).
For Amazon entrepreneurs, this is very convenient: there is no need to administer sales tax, collect it, pay an accountant – the marketplace will take care of everything.
Now, regarding the profit tax, or income tax. This tax is levied on net profit (profit is the final object of taxation). Its size will depend on the type of company and the form of taxation.
“Offshore” states for doing business
When contacting us for services to open a company in the USA , clients often ask about which states are offshore. Here it is necessary to explain that offshore or completely tax-free states are a myth.
Where does this common misconception come from? Where does it come from? The thing is that there are a number of states in the United States, namely Alaska, Florida, South Dakota, Texas, Washington, Wyoming, Nevada, Delaware, which do not levy income tax at the state level.
But even if there are no taxes at the state level, they are present at the federal or local level (and this is a good time to remember the three-tiered tax system in the United States).
In addition, some states may have some other tax instead of income tax. For example, Delaware has this trick: they once made a “knight’s move” – they removed the income tax at the state level, and they essentially don’t have one. But instead, they introduced another tax, which is called “franchise tax”. It is fixed – $300 is paid annually.
Offshore states in the USA are a myth. Even if a state does not levy income tax at the state level, it means that it is present at the federal level or has been replaced by another tax.
Types of US Companies Available for Registration by Non-Residents
There are two types of companies available to non-residents in the United States. The first is an LLC, and the second is a C corporation, or C-corp for short.
С-corporation
A C-corporation is a legal entity that pays state and federal income taxes. The corporation first pays corporate income tax on its profits, and then its shareholders also pay income tax at both levels.
Most often, this type of company is chosen by large businesses or IT startups. Almost all large American corporations, including Google and Apple, are C-corp. And even if your business is still far from Apple, it is still worth considering organizing a business as a C-Corporation.
Why? The answer is simple: money. If at any stage of the company's development you need additional financing, you need to remember that investors are more willing to work with C-corp than LLC or other types of business.