5 Costly Mistakes to Avoid when Establishing a U.S. Company
- Selecting the wrong state for their entity. You may know that the big three are Delaware, Wyoming and Nevada. But what is best for your business from a state tax point of view and overall best liability protection for you as a manager of an LLC or the director or officer of a corporation? Nevada is by far the best and offers the best value. Yes, Wyoming may be $400 less on the front end but with less protection is that worth it? If your U.S. business is raising capital or going public Delaware may not be a bad option.
- Selecting the wrong type of entity for their business. If you go online and invest $99 for a formation and guess as an LLC and don’t understand the tax ramification or the U.S. tax treaties with your home country you may end up paying thousands in unnecessary taxes! An LLC may be taxed in four different methods (even most American don’t know that). Each one has its own pluses and minuses. A corporation may be an option only if you manage the taxes on an annual basis and don’t do something that will trigger an audit (like a big year end expense back to your home country to reduce your U.S. profits).
- Not having a complete formation. Filing articles, obtaining an EIN and having a U.S. mail address may get you started but by no means is that a complete formation. If that entity was attacked by the IRS or a lawsuit it would not hold up for 15 minutes, according to U.S. attorney, Lee Phillips. You must have a complete formation along a legitimate U.S. business address that sends the proper business message.
- Not having tax support for their U.S. entity. Not taking into consider what type of entity and who should be the owner in the U.S. only means you are going to be disappointed when you realize how much extra taxes you may be paying that was unnecessary. We have had clients who have saved $10K, $20K or $50K or more by working with NCP and our CPA recommendations to operate their U.S. business properly. Some countries like Canada, don’t even have a tax treaty for a U.S. LLC and you may be double taxed. There is a strategy around that but you must know it up front.
- Not having working with a company with resources to operate a U.S. business. Never underestimate the power of working with a company like NCP with great resources and connections when it comes to U.S. banking, legal, taxes, merchant accounts, immigration and top business connection to help your U.S. business succeed! Recently with one legal connection we saved a client over $20K in legal fees (from the other U.S. attorney who was going to take advantage of his situation). That type of resource will add up quickly to your bottom line.
Doing business in the U.S. is one of the best opportunities to grow, especially if you are operating online. The U.S. has the largest online consumer market in the world! The key is to develop trust with a legitimate U.S. company.
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