Business Formation and Registration

Businesses in the U.S. can be formed using several different legal entity types. Corporations, partnerships, limited liability companies, or proprietorships are the most common. There are advantages and disadvantages to each type. Businesses looking to establish U.S. operations should consult with an accountant or attorney in the U.S. to determine the optimal legal and tax structure for the business. Businesses must also be registered in the various jurisdictions where business operations are located. A company selects a calendar (December 31) or fiscal reporting year as part of the formation process. Fiscal year reporting is not available for all types of entities.

Income Taxes

Income taxes are imposed by the Federal government, as well as by states and localities. Tax assessment and payment depend on the business’s legal structure. The U.S. holds tax treaties with many countries, which may impact the reporting and taxation of business income.

Sales and Use Taxes

In many parts of the world, Value Added Taxes (VAT) are imposed on transferring goods and services. In the United States, a system of sales tax is used instead. The rates and requirements vary by location. Each state has its own system for determining a transaction’s taxability and reporting and remitting the tax. In some situations, such as online purchases, transactions may be subject to sales tax, but the vendor does not collect the tax. In this case, the buyer is responsible for remitting “use tax” on their own.

Financial Statements

The U.S. government does not require financial statements prepared by an outside accountant; the tax return generally includes the information required to be reported to the government. Financial statements are required for a company whose stock is listed on an exchange and are frequently required by lenders as part of loan compliance. Outside accountants can issue financial statements under different levels of service: compilation, review, compilation, review, and audit. U.S.-based businesses typically report under U.S. generally accepted accounting principles, but International Financial Reporting Standards are becoming more common. Closely held businesses may also opt to report using the tax or cash basis of accounting.

Social Security Number

Many transactions with the government require a Social Security Number. This includes reporting wages earned while working in the United States, filing tax returns, and opening a U.S. bank account. To obtain a U.S. Social Security Number, an individual must be authorized by the Department of Homeland Security to work in the U.S. Click here to see the requirements and process for obtaining a Social Security Number furnished by the Social Security Administration. (For those not authorized to obtain a Social Security Number, we can assist with obtaining an Individual Taxpayer Identification Number from the Internal Revenue Service.)

Lack of Credit

Because expatriates to the U.S. may not have a U.S. employment history, it may be difficult to obtain the credit needed to buy a home or to lease a car. It may be possible for the employer to obtain credit and subsequently lease the property back to the executive or employee. Considering there may be tax consequences to this, always consult with an accountant before entering into this type of agreement.

Insurance

To operate a vehicle, and for many other purposes, insurance is required. This can be difficult for an expat to obtain. In particular, auto insurance is a challenge because most insurance providers will not recognize a foreign driving record. It may be possible to obtain a letter from a foreign insurance company to help facilitate acquiring a policy in the U.S.

Taxes

Taxes in the U.S. can be complicated! There are taxes at every level; Federal, State, and (sometimes) Local. Additionally, there are taxes imposed on the purchase of certain goods and services (sales tax), and the rate and applicability of these can vary by locality. Income taxes at the Federal level are based on worldwide income of U.S. citizens and residents. Generally, taxes are withheld from your paycheck by your employer to pay your taxes over a period of time, rather than making a large, lump sum payment.

Employment “At-Will”

In the U.S., contracts for employment are typically only for senior executives or others with special compensation agreements. Most employment arrangements are “At-Will”, meaning either the employee or employer can decide to terminate the employment without cause.

Employee Benefits

Many employers in the U.S. offer various benefits to their employees, such as paid time-off for vacation or illness, and various insurance programs such as health, dental, vision and life insurances. Employers often require employees to contribute to the cost of the insurance programs offered, and the rate of contribution varies from employer to employer. Many employers also offer some type of retirement savings program, which typically includes employee and employer contributions to fund for future retirement needs.