What Businesses and Individuals Should Expect When In the U.S.
Are you considering coming to the United States to work or start a business? Or, have you recently arrived in the United States and are unsure of what to do next? Click below to explore some ideas about how your work and business life might be different in the United States than what you are used to in your home country.
Business Financial Matters
- Business Formation and Registration – Businesses in the U.S. can be formed using several different legal entity types. The most common are: corporations, partnerships, limited liability companies or proprietorships. 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 are also required to be registered in the various jurisdictions where business operations are located. As part of the formation process, a company selects a calendar (December 31) or fiscal reporting year. 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. The assessment and payment of tax is dependent on the legal structure the business. 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 the transfer of 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 the taxability of a transaction, and for reporting and remitting the tax. In some situations, such as online purchases, transaction 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 the loan compliance. Outside accountants can issue financial statements under different levels of service; 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 business may also opt to report using the tax or cash basis of accounting.
Individual Financial Matters
- Social Security Number – Many transactions with the government require use of a Social Security Number. This includes the reporting of wages earned while working in the United States and 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. To see the requirements and process for obtaining a Social Security Number furnished by the Social Security Administration, click here. (For those who are not authorized to obtain a Social Security Number, we can assist the process of 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, subsequently leasing the property back to the executive or employee. Keeping in mind 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.