Everything you need to know to set up an operating company with a bank account.
• There are penalties for disclosing customer bank details to third parties, but there are no prison terms.
• Banks are partially subject to strict customer due diligence regulations (old FATF recommendation 5 / new FATF recommendation 10).
• Banks are largely required to maintain sufficient records of their customer and transaction data for law enforcement (old FATF recommendation 10 / new FATF recommendation 11).
• Banks and / or other covered entities are required to report large transactions in currency or other monetary instruments to designated authorities.
• The national administration has sufficient powers to obtain and provide bank information on request without qualifications.
• There are undue notification and recourse rights against the exchange of banking information upon request, but with some problems
The LLC is the most flexible business structure under US corporate law.A US LLC has only one shareholder, who is usually the 'manager' of the business. LLCs are treated from many perspectives like partnerships in other jurisdictions, being managed by the members. However, members may appoint managers who act in a capacity similar to that of a director. Additionally, there are no minimum paid-up capital requirements for incorporation.
An LLC, due to its simple and flexible structure, is highly recommended for conducting business within the US Also, there are no restrictions on the type of business that a US LLC can conduct.
The primary document that governs the management of the LLC is the operating agreement, which is somewhat analogous to the bylaws. LLCs also use a document called 'articles of organization', which are more similar to the modern memorandum of association.
Prior to incorporation, an LLC must i) appoint a director and shareholder (member) ii) open a corporate bank account in the US with a balance of US $ 1 iii) appoint a registered agent in its incorporation status and, finally, iv) have a legal registered office in the country
This type of company is more similar in structure to companies seen elsewhere, typically Plc or SA.
The unique feature of S-Corp is that the owners make a choice so that the company does not suffer from federal corporation tax. Instead, profits and losses pass directly to shareholders, who pay taxes on their total income at the normal rate.
An S-Corp is ideal for small businesses as it eliminates double taxation on profits and dividends. Also, an S-Corp is not required to file corporate taxes.
By law, an S-Corp cannot have more than 100 shareholders. Additionally, all shareholders must be US citizens or residents in order to participate in the S-Corp election.
An S-Corp must have a board of directors, file annual reports, keep meeting minutes, and generally have more regulations than the LLC, which is typically run on the basis of a shareholders agreement.
This is the main type of corporation used by US companies with medium to large operations, which involve a large investment or capital raising.
C corporations pay taxes at the corporate level and shareholders pay taxes again on their dividend income. However, shareholders are not required to be US residents.
A C-Corp is ideal for those looking to sell shares to the public or obtain external risk financing, as there is no limit to the transfer of shares or ownership of shares.
Free zones in the United States are ideal for business enterprises because these zones in each state i) limit customs clearance time ii) reduce or eliminate state and local taxes, and iii) provide excellent transportation infrastructure.
In total, there are 293 free zones in the United States.
A free zone company can be any corporate entity, including LLC, S-Corporation, or C-Corporation.
In the United States, a branch can bill local customers and sign local sales contracts in any business sector in the United States.
A foreign branch will work within the scope established by the parent company. In case of dispute, the parent company will be legally responsible.
US companies that start operations in another state are often registered as 'foreign companies', which is the term used for branches. Foreign and domestic treatment for companies is often dealt with at the state level, so 'foreign' in this context only means foreign to that state.
Although a United States representative office is 100% foreign owned and controlled, direct sales within the United States are not permitted.
This office will only engage in activities such as i) promoting the business of the parent company and ii) market research
To minimize setup costs for American companies in the United States, entrepreneurs implement the following strategies:
Through a local agent or distributor, a foreign company can sell its goods / services directly to US customers.
Business owners can also sell their franchise to a commercial agent or distributor in the United States, eliminating the need to hire local staff and incorporate a local business.
Foster Swiss helps our Clients secure offices or we provide an office address. Most emerging markets require our Clients to have a 12-month office lease before company registration is approved.
We help our Clients overcome this challenge in the following ways:
DDepending on the country and city, the rates range from US $ 900 to US $ 2000 and the annual active virtual office services range from US $ 1500 to US $ 4000).
LThe one-time fee is US $ 850. Thereafter, our Client pays the monthly rent directly to the owner).
D Depending on the country and the city, the rates range from US $ 5.000 to US $ 8.000).
SAlthough the nominal federal corporate tax rate in the United States is 35%, there are numerous tax deductions and credits available to businesses that reduce the effective rate below 15%.
Taxable corporate income over US $ 335 is subject to a 000% tax rate. Below this threshold, taxes ranging from 34% to 15% are imposed.
State and local taxes range from 0% to 16%. These sub-federal taxes are tax deductible on the federal income tax return.
An entrepreneur i) who is not a US citizen, permanent resident or tax resident) ii) who lives outside the US iii) who only has a US company number iv) whose staff and directors have their Headquartered outside of the US AND v) whose business provides services or manufactures goods outside of the US, is legally exempt from US corporate and individual income tax.
While the above applies to most cases, it must be confirmed on a case-by-case basis.
Foreign corporate shareholders must register for the Employer Identification Number (EIN) tax at all times. The IRS will not share tax information with the Client's home country.
Corporations can choose their fiscal year. Generally, a fiscal year should be 12 months and does not need to be adjusted to the fiscal year, as long as books are kept for the selected fiscal year.
The tax year can be changed with the authorization of the IRS.
Businesses must file federal and state tax returns. Said declarations are self-assessed and the tax is paid in advance installments or estimated payments.
Most US states do not tax out-of-state businesses. Therefore, jurisdictions such as Delaware and Nevada are optimal states for conducting tax-free business across the country at the state level.
Foreign-source income tax deferrals can be indefinite.
The earnings of foreign subsidiaries from the formation of a US company will only incur US taxes when the money is returned to the country.
There is a complex and gradual dividend tax structure in the United States, however, most (qualified) dividends are taxed at 15%.
The withholding tax on transfers to non-U.S. Corporations is nominally 30%, but is reduced through double taxation agreements on dividends, capital gains, and royalties.
Capital gains tax is also a complex issue in the United States and varies by income level and type of capital gain. It's generally 15%, but it can be deferred or reduced on things like property and interest deductions.
Tax deductions are available for numerous expenses, the largest being the foreign federal tax credit. This credit is allowed for income taxes paid to foreign countries. It effectively serves as a comprehensive international double taxation agreement.
Other credits include credits for payment of wages, investments in motor vehicles, alternative fuels and use of vehicles off the road, depreciation of equipment, natural resources and others.
The Alternative Minimum Tax (AMT) is an alternative method of calculating personal and corporate taxes. Use a separate set of rules to calculate taxable income after allowable deductions.
City and state income taxes vary by state and apply if the corporation has a substantial connection ('nexus') to that state. Nevada, Texas, Washington, Wyoming, and South Dakota do not have state corporate taxes, even if there is a nexus. If there is no nexus, for example for foreign companies, no state and municipal taxes are incurred.
Unlike much of Europe, the US used a sales tax instead of VAT. This means that instead of being imposed at all stages of production and distribution, the tax is only applied at the commercial point of sale. Consequently, manufacturers and wholesalers retain a higher profit. Sales tax in the United States ranges from 0% in New Hampshire to 16% in Illinois.
Personal income is taxed in a tiered system ranging from 10% to 39,6%. All income over US $ 400.000 is taxed at 39,6%. On average, available deductions typically reduce effective rates to about 2/3 of nominal rates.
Company incorporation in the US requires all resident companies to submit annual data to update public records on company status, names and addresses of members.
The United States has double taxation agreements (DTAs) with 66 countries, including: Australia, Canada, China, France, Germany, India, Israel, Italy, Japan, South Korea, South Africa, and the United Kingdom.
The United States has free trade agreements with 20 countries such as Australia, Chile, Canada, Israel, and Singapore.
These agreements remove import and tariff restrictions and allow preferential rights for US citizens and businesses. In Bahrain and Oman, for example, these agreements allow 100% US ownership in all industries.
Free trade agreements are also planned between the US and the EU. The Trans-Pacific Partnership to integrate Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam is also in the works.
Lhe 50 states have adopted the Uniformed Commercial Code that establishes general guidelines for interstate commerce. We recommend our Clients to know this code.
Forming a typical US company requires only one shareholder and one director who can be of any age and reside anywhere.
The directors of the company are appointed, replaced and removed by the shareholders.
Only directors have the power to manage the day-to-day operations of the company. The identities of shareholders and directors may or may not be only public records depending on the state of incorporation.
The Memorandum of Association or Articles of Organization (depending on the state) is a contract between the shareholders and comprises i) activities of the company ii) registered office iii) details of the shareholder and director iv) share capital and v) method of distribution of profits.
Most statements require companies to submit annual financial accounts or reports confirming relevant details of the company for public record, including the names and addresses of all directors, the address of the principal place of business, the details of the shareholders and their interests and an estimate of the annual taxable profits. .
Some business activities, under the registration of a US company, require government approvals, permits and licenses. There is an obligation to register particular products with the government, including food, medical equipment, cosmetics, and drugs.
Government fees vary by product and country of origin.
Labor laws in the United States are quite strict and must comply with federal and state regulations. The three main labor laws are the Fair Labor Standards Act, the National Labor Relations Act, and the Occupational Safety and Health Act (OSHA). It is important to check all the necessary requirements before signing the employee contracts.
When employing local or foreign workers, incorporating a business in the U.S. requires compliance with the Immigration and Nationality Act, the main set of laws governing work in the United States, including filling out I-9 forms. to ensure that foreign workers are legal.
Employees with H1-B visas must receive wages similar to Americans under anti-discrimination laws. Setting up a US company you often have to pay thousands of dollars when hiring these H1-B skilled workers and sponsoring their visas.
Technically, there are no hiring quotes for companies, however there is a fixed number of H1-B visas granted by the government each year. Companies with more than 15% of employees on H1-B visas are considered "H1-B" dependents and must begin hiring US citizens "in good faith."
When hiring foreigners, incorporating a business in the US requires employers to provide a “labor certification” to show that US citizens were not denied the opportunity. This certification can be done electronically through Program Electronic
Review Management (PERM). One way around this difficult requirement is to write the job description for the specific qualifications of the desired foreigner and make potential American candidates virtually unqualified.
US company formation is required to contribute to your employees' social security contributions (6.2%), Medicare (1.2%), federal unemployment taxes, and state unemployment taxes.
By 2015, employers with 50 or more employees must provide full-time workers with health insurance (tax deductible). Businesses with fewer than 50 employees can get a tax credit / subsidy for providing health insurance through the Affordable Health Care Exchange website
CHiring workers in the US is costly for young companies because:
• The average monthly salary for highly skilled workers is $ 6.000, including health care and retirement benefits.
• There are also strict legal rules on hiring and firing workers. Consequently, China and Mexico, like the countries, have completely replaced the United States as the center of low-end manufacturing.
Setting up multi-state operations is complex because:
• Incorporation is handled at the state level, which means your business needs to make new registrations in each state you enter.
• Establishing operations in a new state requires incorporating a new company or registering a branch of your 'foreign company' in this new state and filing with each state's business registrar (usually the Secretary of State). .
Managing taxes for a US business is difficult and time consuming because:
• Taxes are applied at the federal, state, and even municipal levels, requiring knowledge of and compliance with many tax regulations.
• The federal tax code is huge, complex, and constantly changing, making it extremely difficult to know how to file what income and when.
• Businesses with multi-state income have a higher tax compliance burden due to the requirement to file tax returns in each state from which they earned income • US tax law has a large number of deductibles, which It means that companies should take the time to plan their expenses in a tax efficient way and then report that on their tax returns. The need to make use of these deductions is compounded by the high corporate tax rate of 35%.
• There is no participation exemption for income from foreign subsidiaries, which means that dividends are taxed at 35% when paid to the US parent company (with deductions for taxes already paid on that foreign income). ). Because the 35% rate is high compared to the rest of the world, this can mean an additional 15-20% tax on foreign income for US-based companies.
A US business setup can incur losses due to the high litigation rate because:
• Annually, 15 million civil lawsuits are filed in the United States at a cost of US $ 251 billion, which is the highest in the world.
• Even if our Clients successfully defend a lawsuit, the legal bills are likely to be high and unrecoverable, as the US legal system does not attribute the costs of litigation to the losing party.
Consequently, we encourage our Clients to plan for the cost of liability insurance, possible lawsuits, and injunctions.
There is a high cost of inefficient Congressional laws including:
• The calculation of tariffs and import duties is complicated because almost all products have their own tariff, which varies according to the country of origin. Additionally, going through US customs is also cumbersome given the modern fear of drug trafficking, hazardous materials, and terrorism.
• The federal-state system leads to extremely complex and irregular regulations. There are basically 50 unique jurisdictions within the US, being the states themselves, that can require extremely strange regulations like: blog licenses, raw milk licenses, interior design licenses, licenses to close deals, childcare and vending machine licenses.
The US market is a highly competitive market for young companies, with new businesses failing at a rate of 50% in the first 5 years. Additionally, there are several American industries that are impossible to enter as a young startup due to high entry costs and regulatory barriers. For example, agriculture and large manufacturing industries are dominated by large corporations, as the initial capital required is in the billions of dollars.
The country has a poor macroeconomic environment due to an unstable political environment which can be quite daunting for entrepreneurs to incorporate their business in the US.
The national business registry does not include the identity information of the legal owner.
Information on legal owners is not always available online (up to 10 EUR / GBP / USD).
Available companies where only some legal owners are registered.
Only names and countries of residence are always recorded.
Updating of the information on the identity of the legal owners is mandatory
Companies available without registered information on beneficial owners.
Real property is not always available online (up to 10 EUR / GBP / USD).
It is mandatory to carry accounting data.
There is an obligation to present annual accounts for all types of companies.
Business accounts are not always online (up to € 10 / US $)
No country-by-country public reporting at all.
The secondary mechanism is subject to the restrictions imposed by the OECD model legislation; or no secondary mechanism (only the ultimate national parent entity has to present the CbCR).
Unilateral cross-border tax rulings (eg advance tax rulings, advance tax rulings) are available in laws or regulations, or administrative practice.
• The use of an annually updated Legal Entity Identifier (LEI), developed under the guidance of the Financial Stability Board, FSB, is not mandatory.
• The use of a Legal Entity Identifier (LEI) updated annually, developed under the guidance of the Financial Stability Board, FSB, is mandatory but only for some operators of financial markets and / or asset classes beyond derivatives. ' Over the Counter '(OTC).
• The use of an annually updated LEI for the identification of reporting financial institutions (in accordance with the Common Reporting Standard (CRS) is not mandatory.
Dividend payments: Unilateral relief for double taxation through a tax credit system for a payment scenario (if the recipient is an independent or related legal person, or a natural person).
Interest payments: Unilateral relief for double taxation through a tax credit system for both payment scenarios (recipients always receive a unilateral tax credit, regardless of whether it is a legal person or a natural person).
None or restricted access to criminal / civil tax procedures.
None or restricted access to criminal / civil tax judgments / verdicts.
• The jurisdiction does not issue or accept the circulation of large notes / cash notes of its own currency (with a value greater than 200 EUR / GBP / USD).
• Bearer shares are not available / not circulated.
• Serial LLC / Shielded Cell Companies are available.
• Trusts with escape clauses are not prohibited
The United States is not on the FATF list of countries that have been identified with strategic AML deficiencies.
The last follow-up Mutual Evaluation Report related to the implementation of anti-money laundering and terrorist financing standards in the US was conducted in 2020. Based on that evaluation, the US was deemed to be 9th compliant and compliant. largely complies with 22 out of 40 FATF recommendations. It was also considered Highly Effective for 4 and Substantially Effective for 4 with respect to the 11 areas of Effectiveness of its AML / CFT Regime.
Overall Non-Compliance Score of FATF Standards in Percentage: 36,6% (100% = all indicators rated as not met / low level of effectiveness; 0% = all indicators rated as compliant or highly effective).
The automatic exchange of information is extremely secret in the United States.
The United States is not a signatory to the Multilateral Competent Authority Agreement (MCAA), which provides the multilateral legal framework to engage in Automatic Exchange of Information (AEOI) in accordance with the OECD Common Reporting Standard (CRS).
Each filtering bag international and digital banks They're available.
Real bank operations: 90%.
Visa type: US $, €
Remote management account: To consult.
Asset management Depending on the rating of the company.
Rates: It depends on the type of account.
Credit / debit cards in local currency
Foster Swiss is an international company registered in Switzerland aimed at providing financial and compliance advice on a variety of topics related to company formation
and commercial banking internationally. We are specialized in the implementation of businesses in different jurisdictions, which means that we offer value-added services helping our clients in their expansion abroad.
Some of these services include:
Advice and consultancy,
visas, offices, nominated director / shareholder / secretary,
accommodation if necessary… to name a few.
Check with your assigned consultant for more information.