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Looking for tax advice

Looking for tax advice

Old Jul 20th 2013, 8:49 pm
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Default Looking for tax advice

Hi all,
Can anyone point me in the direction of a site or has personal knowledge of the US corporation tax systems?
Making initial enquiries into whether I should set up as a US company or be employed from the UK.
Done the google thing but lacking clarity.
All thoughts/advice welcomed!
Cheers
Paul
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Old Jul 20th 2013, 9:12 pm
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Default Re: Looking for tax advice

Where will you be working from? (Actual location)
Where will your clients be?

If you are in the US working you will need to pay US taxes, and I am fairly certain that if you're in the US paying US taxes, what you need is a US LLC. For small businesses simpler is always better, so while major corporations can juggle taxes, for the sole businessman or small business you can easily end up spending more on corporation registration fees and the advice of tax accountants than you can save in taxes with a more complex billing and organizational structure.
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Old Jul 20th 2013, 9:25 pm
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Default Re: Looking for tax advice

In the US there are three types of limited liability companies, LLCs, S Corporations, and C Corporations. A LLC or S Corporation are normally for small businesses since there is not corporation taxes and all profits are taxed to the owners. A C Corporation has a corporate tax on profits but distributed dividends and salaries are taxed to the individuals but due to tax benefits, tax avoidance, accounting practices, and other laws allowed for C Corporations, large corporations usually chose this type of corporation.

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Old Jul 20th 2013, 9:32 pm
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Default Re: Looking for tax advice

Originally Posted by Pulaski View Post
Where will you be working from? (Actual location)
Where will your clients be?

If you are in the US working you will need to pay US taxes, and I am fairly certain that if you're in the US paying US taxes, what you need is a US LLC. For small businesses simpler is always better, so while major corporations can juggle taxes, for the sole businessman or small business you can easily end up spending more on corporation registration fees and the advice of tax accountants than you can save in taxes with a more complex billing and organizational structure.

Thanks for the reply.

I will be based in Florida for the first couple of years and plan to relocate further North after that.
My clients will all be in the US.
I will be working on my own in the US for a sizeable UK company but they are wondering if it would be better for them for me to set up a US business to save them corporation tax here in the UK.
I have read there are advantages to register in Delaware but the whole thing is pretty confusing.
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Old Jul 20th 2013, 9:33 pm
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Default Re: Looking for tax advice

Originally Posted by Michael View Post
In the US there are three types of limited liability companies, LLCs, S Corporations, and C Corporations. A LLC or S Corporation are normally for small businesses since there is not corporation taxes and all profits are taxed to the owners. A C Corporation has a corporate tax on profits but distributed dividends and salaries are taxed to the individuals but due to tax benefits allowed for C Corporations, tax avoidance, accounting practices, and other laws, large corporations usually chose this type of corporation.
Thanks - this gives me some more info to research - much appreciated!
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Old Jul 20th 2013, 9:43 pm
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Default Re: Looking for tax advice

Although private equity firms and hedge funds can be very large, usually they are not setup as C Corporations but as a limited partnership (probably a LLC or S Corporation). They have special tax benefits written into tax laws that only applies to private equity firms and hedge funds. By setting up the business this way they do not pay corporate taxes and have reduced individual income taxes for the owners/managers.

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Old Jul 20th 2013, 11:39 pm
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Default Re: Looking for tax advice

Wikepedia has loads of info on this but its so complex. I am not an accountant so it doesn't make a great deal of sense.

http://en.wikipedia.org/wiki/Corpora..._United_States

Was hoping someone on here might have gone through the process. I am not looking to avoid paying tax but to work out whats the most cost effective way to do it right. I need an idiots guide
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Old Jul 21st 2013, 12:13 am
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Default Re: Looking for tax advice

Originally Posted by watchcamFloridabound View Post
Wikepedia has loads of info on this but its so complex. I am not an accountant so it doesn't make a great deal of sense.

http://en.wikipedia.org/wiki/Corpora..._United_States

Was hoping someone on here might have gone through the process. I am not looking to avoid paying tax but to work out whats the most cost effective way to do it right. I need an idiots guide
Well there are apparently some business reasons to incorporate in Delaware, but it is mostly large corporations that choose to do so. If you register in Delaware you must also register in the state(s) where you operate, which immediately doubles your annual registration fees, so for small and medium sized businesses I don't think registration in Delaware is necessary or helpful.
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Old Jul 21st 2013, 12:19 am
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Default Re: Looking for tax advice

When you are referring to a C Corporation which is the only type of limited liability companies that pays corporate tax, you need a team of lawyers and accountants to understand how to get the greatest benefits of a C Corporation. So unless you are a billion dollar company or intend to have shares traded on an exchange, there is no sense looking at C Corporations or the link you posted to corporate taxes.

A LLC and S Corporation taxes you as if you were self employed paying normal individual income taxes after filing tax forms to declare income minus costs minus depreciation to determine taxable income.

Check the information under LCC and S Corporations in the following IRS tax link.

http://www.irs.gov/Businesses/Small-...Business-Taxes

The are small differences between a LLC and a S Corporation but before you decide which to form, you should consult a tax attorney and explain your situation in case one may be more suitable than the other.

If you are not interested in getting the protection of limited liability, you can setup your company as a sole proprietorship which is usually very inexpensive to setup (usually a license only required from local governments) and easy tax forms (form Schedule C in addition normal individual tax forms). For most people, from a tax standpoint there shouldn't be much difference between a sole proprietorship, LLC, or a S Corporation.

http://www.irs.gov/uac/Schedule-C-(F...-From-Business

A newly established LLC or S Corporation does not assist in getting credit over a sole proprietorship and all will normally require the owner personally back the credit (unlimited limited liability for the owner). Only when a LCC or a S Corporation establishes itself as a reliable debtor may creditors allow the LLC or the S Corporation to sign for the credit. However a LLC or a S Corporation protects the owner from personal lawsuits (excluding fraud and other illegal activities) but not the companies assets but a sole proprietorship doesn't protect the assets of the owner. So for a LLC or a S Corporation, any money paid to the owner is no longer part of the company and his assets are not available for bankruptcy (unless he personally signed for the credit) or lawsuits but for a sole proprietorship, those individual assets can be seized in bankruptcy or an awarded lawsuit.

Last edited by Michael; Jul 21st 2013 at 12:48 am.
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