Ans. Generally, there are no restrictions on foreign ownership in a US-based LLC or a Corporation. The procedure for a foreign citizen to form a company or become a partner in a US-based firm is the same as for a US resident. It is not necessary to be a US citizen or to have a green card to own a corporation or LLC. However, to add a foreign-resident partner with a US company, the requirements are a) two picture IDs (e.g. Driving License, passport copy), & b) the percentage of ownership to make such changes with the state and the federal government.

 

 

 

Ans. All goods imported into the United States are subject to customs entry and import duty. However, if you sell goods in the US, you need to pay state sales tax at the rate applicable to the state where the company is located.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q31. What types of insurance coverage are necessary for US operations?

Ans. Out of the 11 types of insurance needed for small businesses, essential coverage includes general liability, professional liability, and workers’ compensation. Coverage requirements vary depending on business activities and state regulations

 

 

Ans. It all depends if the SSN is active or not, as long as the SSN is active, it wouldn't matter, as we don't need to know where you stay as of now, although you need to provide a valid US Address. As the Business start-up service requires the name, address, SSN, and most importantly an ID, as long as the SSN is still valid we should be able to start the business.

We can start the business under your SSN number and hypothetically if our SSN is not Valid/active in that case, we have to register the business as a foreign entity or as a Foreign-Owned entity which may take some time. You can also call the SSN administration to find out if the SSN is Active or not. You can also send us the details for a business start-up, and we will, as part of the due diligence process, use the SSN to start the business and also determine if the SSN is active or not.

 

Q33. I am ready to be a registered agent (RA) in the US but I am working on H1B visa. So, can I be the RA?

Ans. Anyone who has any sort of Visa in the US, who is legally here in the country is considered as a resident of this country. Residency is not defined by the Visa type, but it is defined by being in this country for more than 183 days. People who file 1040 and return as 1040 are allowed to be registered agents for any business.

So, to summarize anyone who is on an H1B Visa can be the registered agent, and people who are saying I used to be on an H1B Visa or I used to have an F1 Visa and are now in India cannot be considered as a Registered agent. So, to be a Registered Agent you have to have a valid US address, there is no requirement for an SSN for a Registered Agent, the requirement is to be a resident of this country and to have a valid US Address.

 

Q34. If I am already paying 21% of the profit for my company, would there be State Tax also? If yes, then how would it be calculated?

Ans. 21 % federal tax rate is only for the IRS (the federal government). Each state will have a different tax rate. The state tax rate can vary from 5% to 9% depending on which state you're working with.

 

Q35. Let's say a company from a State with no Sales tax, Delaware, has a client for its SAAS model in NJ (State with Sales tax). Now the company wants to pay sales tax to NJ. So, does the Delaware company has to take the sales tax registration in the NJ State?

Ans. Yes! Sales tax registration is more like getting a unique ID from that state.  Let’s say when you register your business in Delaware, you get the federal registration number, the state registration and other documents. But when you are making a sales tax payment in New Jersey, the state doesn’t know who you are, so you need an ID, specifically for New Jersey.  It is a one-time process to get the State ID. It is not uncommon for the companies to have sales tax in multiple states but the registration part is very easy.

 

Q36. I was a student in the US on an F1 Visa. Now I am back in India. Can I use my SS number to form my company in the US?

Ans. It's the same situation with L1, H1 or F1. If you have a social security number you can try to use that SSN as long as it is active in the IRS Federal System. If it is not active we let the client know and in that case, they have to either register as a foreign entity or find somebody who has a social security number and can be their partner.

 

Q37. I opened up a company in the State of California but it is coming out to be expensive for me. May I change my business State from CA to NJ which will be my new headquarters?

Ans. Yes, you can easily do that.

 

Q38. If I need a warehouse for my business in the US, what are the advantages and disadvantages of having my company and warehouse in a) the same state, and b) the different states?

Ans. Whichever state you register your business in, you must file taxes in that state. For ex- if you have company registered in NJ and have warehouse in NC then whatever the formalities are, you must fulfill them from the compliance perspective for both NJ and NC.

One potential benefit of having everything, let us say your company’s registered office and warehouse, in the same state is that you will not be exposed to the tax filings, compliance formalities of any other state.

Subsequent question: When you say formalities, do you mean just reporting is to be done or do we have to pay additional taxes in NJ as well as in NC?

Ans: No, not only reporting but in fact, there can be additional taxes. For ex- there is a minimum tax of $500 in NJ and this means that even if you have no activity performed in NJ, you will still pay $500 as minimum tax to NJ and similarly NC will charge you $800.  So, let's say a) you register the company in NJ and have a warehouse in NC, and b) let's assume you did not have made any profit in either of the states. Now, in this case, you still will pay $500 to the State of NJ and $800 to the State of NC.

 

Q39. When the company is operational and has revenue then how will we be taxed if we have business operations in 2 different States, let us say NJ and NC? Will there be double taxation?

Ans. Not necessarily, but there could be additional taxes in this scenario. For example, if you make $100 in net profit then we'll try to divide how much of this amount was from NJ and how much was NC based. Now, let us say that NJ has no activity except that you have the business registered in NJ and all of $100 was made in NC then you'll pay the taxes in NC and also the minimum tax in NJ i.e. $500.

If you make $50 from NJ and $50 from NC, then you'll pay the computed tax in both states. Now, if the computed tax is less than the minimum tax value (of the State), then also you'll pay the minimum tax value. So there is not necessarily double taxation between the states but some additional taxes depending on how much profit you made from each State.

 

Q40. If we plan to register our company in the state of Delaware then what are the advantages or benefits when compared with registering the company in other states of the US? Also share the disadvantages of registering a company in the State of Delaware.

Ans. Delaware is one state where the owner's (directors, officers) privacy is protected and that means that the owner’s information is not disclosed. Another benefit of Delaware is that if you want to go public then Delaware provides better protection under chapter seven, under bankruptcy liquidation.

As a disadvantage of doing business in Delaware, doing business in the state is more expensive than in most states. Filing is more expensive in Delaware and also there is a higher franchise tax that you pay yearly to the state of Delaware. If there is a legal dispute then since your case must be heard in the court in Delaware, you will have to travel to Delaware to handle the dispute.

So, once again, to register your business in Delaware you must have a good reason for why you're doing it since the minimum tax, tax formalities, compliances and the asset tax are more than in any other state in the US.

 

Q41. We have customers who are based in various states in the US. So, how do VAT charges work if we invoice a customer who’s in the same state or a customer who’s in another state?

Ans. We have to look at it separately state by state. Some state has a sales tax, VAT tax based on the destination means where the customer is located, and some states have a tax based on the source means from where you’re supplying from. Some states do not charge tax if the shipment is out of state and they expect the source state to be charging and remitting directly.

 

Q42. What are the Statutory fillings in the US? (For e.g., VAT, sales declaration)

Ans. Depending on what you’re trying to achieve, all companies must have an annual filing which is a sort of license renewal in that state that cost a couple of hundred dollars depending on which state you have and then annual income tax filing with the Federal govt. and the State govt. These are the two basic requirements that are applicable in all states.

Then comes the other compliance like payroll. In this case, if you have employees in your company then there are certain filings on a monthly, quarterly or annual basis related to payroll. If you have VAT, there are certain monthly, quarterly or annual filings.

 

Q43. Is a Statutory audit required in the US?

Ans. The audit is not a mandatory requirement in the US for privately held companies.

 

Q44. Are there any limitations on repatriating profits from a US business to India?

Ans. Yes, the US imposes withholding tax on certain types of income, such as dividends and interest, when paid to foreign entities like Indian residents.

 

Q45. If we have our company registered in NJ and warehouse in a neighboring state and we earn $500,000 in profit, then how much income tax we’re supposed to be pay?

Ans. The federal income tax is flat at 21% and the state tax varies between 6% to 9%. For the rough estimation, you should assume the minimum tax will be 25% and the max tax will be 30% of the profit irrespective of whichever State your business is exposed to.

 

Q46. Which software is popularly used in the US to maintain inventory, bookkeeping, prepare sales invoices etc.?

Ans. You can use any software. QuickBooks is typically used by a lot of US companies.

 

Q47. If I open a company in Delaware state but rent a space in a warehouse in New Jersey state, then do I have to pay more in taxes?

Ans. Yes, you will have to pay more taxes because each state has its own minimum tax requirements, and you will have to file taxes in both states, which will raise your taxes in the long run.

 

Q48. Is VAT and Sales tax the same thing? In terms of being a reseller, how does VAT or Sales tax work?

Ans. VAT is calculated at each stage of the sale of goods and is distinct from sales tax in that VAT is collected from both the producer and the consumer, whereas sales tax is paid only by the consumer.

Resellers are exempt from paying sales tax or VAT if they sell the product to the end user or another vendor in the same region. US tax system doesn't have VAT.

 

Q49. Is there a concept of opening a Branch Office in the US? How is it different from opening LLC or C-Corp?

Ans. Yes, establishing a branch office in the United States means establishing a company in the United States that is owned by the company in India, which can be an LLC or a C-corp. The main distinction between the two is how operations can be funded and the ownership structure. A subsidiary is a separate legal entity, whereas a branch is a division of the parent company. A branch office concept is applicable only when you already have a company in US in one state, and then you want to have the same company having a branch in the other state, then you are allowed to use the same EIN that you have received with the company incorporation in the first state.

 

Q50. If I, with ITIN, file tax returns in the US, would my Indian income be taken into account?

Ans. Yes, but it also depends on how the business is structured, even if you include your Indian income, you may receive a potential tax credit for all taxes paid in India. As a result, you avoid paying double taxes. However, depending on how the business is structured, you may not need an ITIN number. For example, if you have a C corporation and are not making any money or have any distribution, you are not required to file taxes.

 

Q51. What is the cost involved when we want to close an entity in the US? How long does it take?

Ans. The cost is somewhere within the range of $500-$900 depending on the structure of the company - LLC or C Corp - and the state in which the company is registered.

For LLC it will take 1-3 days and for C Corp it can take up to 4 weeks.

 

Q52. If I open a company on Nov 30^th, 2022, then is it mandatory for me to follow the US calendar year and file my business tax returns in March/April 2023?

Ans. For filing a company’s tax returns in the US, it is not necessary you have to follow the calendar year. It means that if you open your company in November 2022 with only 1 month left before the year-end, then it is not necessary to file your business tax returns in March or April 2023.

Business tax filing is in fact done 3.5 months after the end of the 1^st year of your company formation. This means that if you open the company on 30th November 2022, then your company’s tax returns will be due on March 15^th, 2024. This applies to only a) C-Corp and b) Single member LLC filing as C-Corp or S-Corp.

For a) a Single-member LLC (which has to go with personal tax returns) and b) an LLC filing as a partnership, you have to follow the calendar year for their tax returns.

You must inform the CPA about what year-end date you want to choose for your business at the time of company formation.

So, based on your business needs, you are free to select the year-end of your business.

 

Q53. Why is Delaware considered a Tax Haven?

Ans. No, Delaware is not a tax haven. Delaware does not charter secret corporations exempt from public knowledge and inquiry, and Delaware is usually not the cheapest option for incorporation.

 

Q54. When does it make sense to open a company in Delaware?

Ans. Delaware is a popular choice mainly among the companies that want to raise money or go public due to its favorable business statutes, and strong court system. It offers tax advantages like exemption from sales tax and state corporate income tax for out-of-state activities. Furthermore, DE allows the company owners to remain shielded from public disclosure.

 

Q55. What is a DUNS number?

Ans. The D-U-N-S Number, managed by a company known as D&B (Dun & Bradstreet), stands for the Data Universal Numbering System. This unique identifier is utilized worldwide to distinguish businesses. Think of it as an international trade registration number. It plays a crucial role in establishing a Dun & Bradstreet business credit profile, frequently employed by vendors and potential business associates to assess the reliability and financial stability of a company. Obtaining a D-U-N-S Number for your business's physical location is a prerequisite if you intend to participate in government contract bids. Currently, D-U-N-S is employed by 330 million businesses worldwide.

Necessary Documentation:

• Certificate of Formation
• Tax Registration
• List of Authorized Signatories

 

Q56. Difference between Business, Mailing, and Registered Agent address?