With a robust economy and diverse consumer base, the USA presents immense business opportunities. Understanding the intricate tax regulations, compliance standards, and market dynamics is crucial. Staying updated on local laws and leveraging strategic partnerships can enhance the prospects of a successful business venture. To read more, click on M2K’s Doing Business in the USA guide.
The United States is a constitution-based federal republic. Geographically, the United States is divided into 50 states and one federal district, Washington, DC, the capital city. All the levels of government, from federal to state to municipality, have authority to tax, legislate, and regulate. A complex system determines which has primary authority over an issue.
At the moment, non-citizens can open two types of corporate entities in the United States
S-Corporation is yet another frequently advised options to foreigners. However, while they are highly appealing, it is vital to understand that they are only available to citizens and permanent residents.
While it is common for foreigners to be advised to create a C-Corp, there are certain significant advantages to incorporate an LLC. The most apparent benefit is limited liability, which means members are shielded from personal accountability for corporate choices or activities, and personal assets are safeguarded if the company incurs debt or is sued. LLCs are also exempt from the onerous recordkeeping requirements of C and S-Corps, and there are few limits on profit sharing among members.
Having said that, many new firms opt for the C-Corp corporate form. The benefits of incorporating in this approach are substantial, with the most frequently mentioned reason being the opportunity to expand by providing unlimited stock: a characteristic that is typically appealing to investors.
Foreign owners find refuge in the C-Corporation form since it shields from close I.R.S. participation. That shield, of course, comes at the cost of double taxation—but that financial harm is frequently averted by clever tax planning, which may be arranged to cancel out the majority of the double taxation.
M2K Advisors provides business incorporation services in USA. Our services include
Companies in the United States are obliged by law to appoint registered
agents and offices in each state where they do business in order to receive
and respond to sensitive legal papers (statutory notification), tax
information, compliance communications, and other communications.
A qualified registered agent in the United States ensures that all legal
documents are processed swiftly and in line with the regulations in all
states where the business is conducted. The registered agent must be a
resident of the state where the business is conducted, or a corporation
authorized to conduct business in that state.
We could provide our place of business as address to meet the aforesaid
requirement. We could also receive documents on your behalf which are
addressed to the registered office and send the scanned copy to you as and
when received which would help you avoid having a full time staff just for
receiving the documents.
LLC and corporations are required to have a US Bank account to carry out business financial transactions in the US. This is by far one of the most challenging hurdle as the US banks are compelled by there laws to have a better understanding of their customers and this may require visits to the bank in order to get an bank account opened. We can assist in the said process and make it less tedious. M2K Advisors could assist the company in the bank account opening starting from preparing the necessary documents, fixing up meeting with the bank manager, addressing the queries raised by bankers and getting the bank account opened.
Accounting techniques: The accrual basis and cash basis methods are the two
most used accounting procedures. Corporates that are not a tax shelter with
a turnover of less than USD 25 million for the 3 prior tax years might use
the cash basis technique. The method must be used consistently.
The Securities and Exchange Commission of the United States acknowledges
that the Financial Accounting Standards Board establishes the accounting
standard for publicly traded corporations in the United States. Every
individual who is compelled to pay a tax must have adequate and accurate
accounting records. The same shall be needed to be supplied to the tax
authorities if requested.
By law, public corporations must have their yearly financial statements
audited by independent auditors, such as a CPA or a firm of CPAs.
US corporate taxpayers are taxed on an annual basis and the US tax system is
based on the principle of self-assessment and voluntary reporting. A
corporate taxpayer is required to file an annual tax return (Form 1120) and
pay tax depending on the fiscal tax year adopted by it, the most common
being the calendar year, having last date to file tax returns on or before
15th day of the fourth month following the close of the calendar year.
Sales and use tax is a state-level indirect tax law which requires an entity to undertake a detailed nexus study to determine whether the entity needs to be registered in the concerned state or not. The study involves understanding the nature of business undertaken by the entity (such as sale of tangible property or provision of services or sale of software), the value and volume of transactions undertaken in a respective state, etc. to determine whether the entity creates a nexus in the respective state or not.
Sales and use tax returns must be filed in each of the states where the entity creates a nexus, either annually, semi-annually,
quarterly, monthly, or semi-monthly, depending on the respective state
requirement. Filing frequency is commonly based on the taxpayer’s sales
volume and the amount of tax that the taxpayer collects during the period.
Monthly filing is most frequently required.
M2K Advisors can assist your company in preparation of return of income and
other relevant Tax Return Forms in accordance with the Income tax and Sales and Use Tax law in USA
and the respective state of incorporation/presence.
| Corporate income tax (CIT) rates | |
| Headline CIT rate (%) | Federal CIT: 21%. State CITs range from 1% to 12% (although some states impose no CIT) and are deductible expenses for federal CIT purposes. |
| Corporate income tax (CIT) due dates | CIT due dates (If Calendar year is adopted) |
| CIT return due date | 15-Apr |
| CIT final payment due date | 15-Dec |
| CIT estimated payment due dates | Four equal estimated payments are due throughout the year, on the 15th day of the Apr, June, Sept, and Dec |
| Personal income tax (PIT) rates | |
| Headline PIT rate (%) | 37 |
| Personal income tax (PIT) due dates | |
| PIT return due date | 15-Apr |
| PIT final payment due date | 15-Jan of the following year |
| PIT estimated payment due dates | Quarterly payments (15 April, 15 June, 15 September, and 15 January) |
| Withholding tax (WHT) rates | |
| WHT rates (%) (Dividends/Interest/Royalties) | Resident: NA; |
| Non-resident: 30 / 30 / 30 | |
| Capital gains tax (CGT) rates | |
| Headline corporate capital gains tax rate (%) | 21 |
| Headline individual Long term capital gains tax rate (%) | 20 |
| Headline individual Short term capital gains tax rate (%) | 37 |
| Net wealth/worth tax rates | |
| Headline net wealth/worth tax rate (%) | NA |
| Inheritance and gift tax rates | |
| Headline inheritance tax rate (%) | There is no inheritance tax. However, there is an estate tax with a top rate of 40%. |
| Headline gift tax rate (%) | 40 |
US corporate taxpayers are taxed on an annual basis. Corporate taxpayers may choose a tax year that is different from the calendar year. New corporations may use a short tax year for their first tax period, and corporations may also use a short tax year when changing tax years.
The US tax system is based on the principle of self-assessment and voluntary reporting. A corporate taxpayer is required to file an annual tax return (generally Form 1120) by the 15th day of the fourth month following the close of its tax year. A taxpayer can obtain an additional six-month extension of time to file its tax return. Failure to timely file a return may result in penalties. Additional penalties may be applicable for a late return for certain information returns that are required to be filed with a timely return
A taxpayer's tax liability generally is required to be prepaid throughout the year in four equal estimated payments and fully paid by the original due date of the tax return. However, because a corporation that expects its tax liability for the tax year to exceed the small sum of USD 500 is required to make estimated tax payments, almost all corporations are required to pay their full estimated tax liability for the year in four estimated tax payments
The US tax system is mostly based on voluntary self-assessment; nevertheless, many big and mid-sized enterprises are constantly audited by the IRS and state tax authorities. Audits may involve a review of the whole list of taxes for which the company is responsible. Smaller organisations and individuals with smaller incomes are often subject to audits that are more selective and random, as well as audits that focus on only a section of the concerns on the return.
We excel in the strategic structuring of the transaction which includes identifying the type of entity to be setup (C-Corp or LLC or partnership firm etc.), the state of incorporation, list of compliances to be undertaken, to optimize the tax efficiency and alignment with the broader financial objectives of our clients.
During the intricate process of acquiring or divesting a business, our proficient team is poised to provide comprehensive support by meticulously quantifying the tax ramifications inherent to the transaction.
Our team is here to offer assistance to our clients when it comes to responding to official notices issued by Tax Authorities
We assist clients in withholding tax compliance which includes identifying the rate, list of forms to be filed, documents to be maintained by the Company etc. as per the USA Income tax law.
Advising on the registrations to be obtained by the entity in order to comply with the local labour law requirements including the Social Security Schemes applicable to employees in the USA.
Undertaking the nexus study and advising clients on the requirement of obtaining the Sales and Use tax registration, rate at which the tax needs to be collected, the frequency at which the taxes needs to be deposited, etc.
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