U.S. Company Formation FAQs

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When you are forming a U.S. company there are some important FAQs (frequently asked questions) you should be asking before you get started:

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• Which entity is best to operate in the U.S.? Is it an LLC (limited liability company). If so, do you know how it is taxed? There are three options for you if outside the U.S. There are several factors that must be discussed including your gross revenue and net profits, goals with those profits, are partners involved, tax treaty with your country…

• Should you ever consider doing business in your own name? Operating a business as a sole proprietorship in your name is an option, it is low cost and in some situations a good starting point to “test” if your U.S. business will get off the ground. Long term there is too much risk with this business structure and for some industries too much risk even as a starting point.

• Which state is best for your situation (Nevada, Wyoming or Delaware)? What are the factors to consider besides state filing fees or state tax rates? Do you know any court history and which one will offer the best liability protection? Which one has the best U.S. economic benefit to your business?

• What are the U.S. tax rules for a corporation vs an LLC? A C corporation may have lower tax rates but it may not be best for your overall situation. On the other hand, an LLC taxed as a partnership will trigger three U.S. tax returns, which may not be bad overall, but it is something to consider.

• What are the U.S. tax treaties with your home country? Even if there is a tax treaty with your country is there a type of U.S. entity that may not be recognized in your home country?

• With a U.S. company will you need a work VISA?  Planning to come to the U.S. and now you have a U.S. company the key is not to mess up at the U.S. boarders! If you are planning to secure a work VISA in the future do you know which are the best options at the lowest cost?

The goods news is when you work with NCP as a client we will address all these FAQs plus you will have access to our professional resources as needed.

Take the next step to form a U.S. company with NCP and send us an email at support@launchwithconfidence.com or call us at 001-702-367-7373.

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How to Establish a U.S. Company & Bank Account (without coming to the U.S.)

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In the past you have contacted us about forming a U.S. company. Perhaps that was to open a U.S. merchant account, invest in U.S. tax liens or deeds, or perhaps you are selling on Amazon FBA to the MASSIVE $183 BILLION spent by U.S. consumers online this year.

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If you still have a need or if you have already forming a U.S. company (and want to know if things were established properly) I have a brand new free report that will walk you through all the steps to PROPERLY form a U.S. company AND bank account (which is very difficult as you probably know …and a real bank account).

Go ahead and grab my BRAND NEW REPORT (it’s free and you will have immediate access to the download).

How to Establish a U.S. Company & Bank Account (without having to travel to the U.S.)

To download your free copy now, go to http://budurl.com/USEntityLaunch 

After you download this free report today you will learn how to establish a COMPLETE U.S. Company & U.S. Bank Account quickly. This information-packed 17 page report tells you everything you need to know to launch your U.S. business with confidence.

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How to Establish a U.S. Company & Bank Account (without coming to the U.S.)

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Are you outside the U.S. looking to form a U.S. company?

Perhaps you are looking to open a U.S. merchant account, invest in U.S. tax liens or
deeds, or perhaps you wanted to market your online business to the MASSIVE
$183 BILLION spent by U.S. consumers online this year.

If you still looking to establish a U.S. company I have a brand new free
report that will walk you through all the steps to PROPERLY form a U.S.
company AND bank account (which is very difficult as you probably know …and
a real bank account).

Go ahead and grab my BRAND NEW REPORT (it’s free and you will have
immediate access to the download).

 How to Establish a U.S. Company & Bank Account (without having to travel to
the U.S.)

After you download this free report today you will learn how to establish a
COMPLETE U.S. Company & U.S. Bank Account quickly. This information-packed
17 page report tells you everything you need to know to launch your U.S.
business with confidence.

Need support with the formation of a U.S. company? Send me an email at
support@launchwithconfidence.com.

To download your free copy now, go to http://budurl.com/USEntityLaunch

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You have an 87% Chance of Forming the WRONG ENTITY…

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Which entity type gives you the BEST protection for your business and personal assets? Which one helps you pay the lowest legal taxes now and later? Here are the most common options:

1. Sole Proprietorship

2. C Corporation

3. S Corporation

4. Limited Partnership

5. LLC Taxed as a disregarded entity

6. LLC Taxed as an S corporation

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The Top 5 Mistakes to Avoid when Establishing a U.S. Company

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Forming a U.S. company will help you develop trust with the $163.8 Billion online market.
The challenge is that you MUST properly establish a U.S. company to take advantage of this
huge opportunity.

Let me share with you The Top 5 Mistakes to Avoid when Establishing
a U.S. Company:

1. 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? Did you also consider which state provides
the 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.

2. 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 even 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).

3. 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.

4. 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 through 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.

5. Not working with a company with the best 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.

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Startups – How To Get Partners On The Same Page

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History is filled with inspiring stories about many successful business partnerships including Apple, Google and Facebook. Having a business partner gives you a great sounding board to help you make the best decisions to grow your business. When partnerships work at their best, they can help you see through your own blind spots and capture ideas you may have missed on your own.

Ideally, if you and your partner are on the same page you can help each other stay on the path to growth and success. On the downside of that equation, my observation over the years is that the businesses with the most issues and lawsuits are the ones involving partners. There are endless stories about one partner blaming the other for a business failure, or taking off with the money from a successful business or charging huge personal bills on the company credit card.

Here are the top 6 areas of agreement to get partners on the same page:

  1. The vision. You must agree on the vision of the company and what your short and long terms goals will be. You may not agree on how you will get there, but a common understanding of the vision is essential. If both partners have a different vision from the start, that usually creates problems, unless one partner is the majority owner and has final say. This is especially important when the business partners are husband and wife. The short term vision may be “just to pay the bills” which should be replaced by something more compelling for the long term. If you’re not clear on your business vision, take 1-2 hours to brainstorm together about where you want to take the company. You may be surprised at the input from your partner and what they really have in mind.
  2. Capitalization. When partners start up a company there’s often a lot of confusion over the money used to capitalized it. Many times when I’ve met with partners in my conference room and asked them how they were going to divide the responsibility for capital, they ended up abandoning their business plans. In the end it was for the best because the business was likely to go nowhere without clear agreement on how much money each partner expected to put in and take out over the life of the business. Here’s the common miscommunication: One partner may say, “I will put in $20K into the company and you do the work.” What does “I will put $20K” into the company really mean? Is that capitalization which means NONE of the $20K will be paid back? Or is it mostly a loan that has to be paid back when the company generates profits? What typically happens is a few months into the business, the partner who put in the $20K will expect part of that “loan” to be paid back, and there’s the beginning of the conflict. “What do you mean pay back the loan? That was your investment into the company!” In another scenario, let’s say the company is failing a year down the road. The partner who kicked in the $20K may say, “we need to pay back my $20K loan before we go under.” The other partner may have assumed that the $20K was capitalization. I’ve also seen it work the other way, where one partner puts in $20K and the company takes off and is bought out for millions. The second partner may say, “Here’s your $20K loan back plus interest.” The first partner might ask, “Are you crazy? That was my capitalization for 50% of this company – NOT a loan!”  Another frequent disconnect is between a financial partner and the one that provides “sweat equity” or services for their percentage ownership of the company. Usually at some point the “sweat equity” partner regrets the amount of work they’re doing compared to the effort put in by the financial partner unless they were extra clear about ownership value from the beginning.
  3. Roles, responsibilities and time commitment. Partners must also be on the same page about their roles in the company. It sounds easy to throw titles around like President and CEO, or Managers of the LLC, but have you really defined the responsibilities of those roles and have you taken the time to discuss them? Do you have an organization chart for your company? If it’s just your spouse and you do you have roles clearly defined and a way to measure them to determine each other’s effectiveness? What about the amount of time that each person is able to commit to the company? Does one partner have a family and the other partner is single? Are you both expected to work 70 hours per week? If you agree upon certain roles and one role takes a lot less time because your partner has a skill set in a certain area, you can’t get upset if you’re working more than that the other partner if those are the roles you agreed on. It’s important to have realistic metrics in place so that both partners can fairly measure progress and make proportional improvements.
  4. Compensation. A vital question is when and how much will each partner be paid from the business. This is a special concern if one partner has a tighter personal budget than the other. The partner that does not need the income is more likely to want to reinvest all the money into the business to grow it faster. The other partner that needs to make some money from the business is going to be more likely to want to take money out of the business for income purposes You need to be clear from the beginning how each partner will be compensation. This assumes that you’ve agreed on a budget with real numbers on it as part of your business plan. If one partner has loaned the company money, the repayment terms must also be spelled out. Is that money coming out of profits first before the partners are paid? This must be worked out in advance.
  5. Buy-sell agreement. This allows you or your partner to gracefully sell their ownership in the company and exit when desired on agreeable terms versus ending up in a legal battle. This agreement sets forth an agreed upon accounting formula to evaluate the value of the company before you sell and take your share. As you can imagine, the selling partner’s CPA will evaluate high, and the buying partner’s CPA will evaluate low. This also handles the process if one partner wants to sell their shares and the other partner does not want to buy them. Now the selling partner has the option to go out to the open market. The buy-sell agreement also outlines the payment arrangement for the partner that is selling their ownership stake back to the other partner or the company. Typically, the payment may be 20% paid out up front and the other 80% over a 4 year period of time. Not many companies have enough cash lying around to pay out 100% of your ownership stake when you leave the company. It is also important to have a term life insurance policy on each partner so if one passes away. The surviving partner will need the insurance proceeds to be able to pay off the deceased partner’s estate and move forward with the business. A buy-sell agreement through a law firm may cost about $2500. A standard buy-sell agreement legal form costs under $50 and you can save a lot of money by taking it to a law firm and having them customize it for you. Should you set up a buy-sell agreement from the start of your business? Yes, but in most cases it doesn’t happen this way because owners wait to see if the business is successful before spending money on additional legal services. Revisit the buy-sell agreement during the first year to make sure it’s in place and current for year two!
  6. Exit strategy. Do you have an end in mind? Do you know from the start whether you want your company to be acquired or do you plan stick with it and make it grow bigger and bigger? It’s important for you and your partners to talk about your goals in the beginning. If your goal is to sell the business, you’ll also want to talk with your CPA firm about the tax ramifications. The buy-sell agreement will be an invaluable tool if you can’t decide on an exit strategy right now but want a mechanism in place to facilitate things fairly should one partner decides to exit earlier than the other.

In conclusion, having a business partner can take a lot of the burden of running a business off your shoulders and offer welcome inspiration and encouragement during tough times. Partnership also provides extra growth opportunities for a business, especially when the partners have complementary skill sets. Unfortunately, partnerships also happen to have the highest level of legal issues that I’ve seen over the years. This means it’s especially important to get on the same page at the start and during the first year to commit to long term success!

 

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