The Small Business Tax Help Blog

Posts Tagged ‘llc’

The basic requirements to set up a company, incorporation procedure, time-line and statutory compliance are some of the factors that need to be taken into account while determining the ease of setting up a company in a given jurisdiction. This article presented by www.guidemesingapore.com contrasts the company registration and related statutory requirements for two of the major countries in Asia namely Singapore and India.

FOREIGN OWNERSHIP
Singapore does not impose any restrictions on foreigners who wish to do business in the country. It allows 100% foreign ownership (i.e. shareholding) of a Singapore private limited company. Any foreign individual or a foreign entity can register a company in Singapore. No special approvals or formalities are required and the new entity can engage in any lawful business activity.
In India, foreign entrepreneurs can set up a foreign direct investment company with 100% ownership only in certain business sectors. Some sectors are subject to caps on investment limits and require prior approval from the Indian government, while certain other sectors prohibit foreign investment.

MINIMUM INCORPORATION REQUIREMENTS
In Singapore, the minimum incorporation requirements include: a local registered address; at least 1 local resident director (a Singapore Citizen, a Singapore PR, or a foreigner holding an Employment Pass, Entrepreneur Pass or Dependent Pass); a local resident and qualified company secretary (must be a natural person); a minimum of 1 and maximum of 50 shareholders (natural persons or corporates); and a minimum paid up capital of SGD 1.
To set up a company in India, foreigners must comply with the following requirements: a local registered address; at least 2 directors (need not be local residents); minimum of 2 and maximum of 50 shareholders (natural persons or corporates); and a minimum paid up capital of INR 100,000.
INCORPORATION PROCEDURE
Company registration in Singapore is fully-computerized and can be completed within 1 day via electronic means. There are only two major steps involved in company formation – name approval and filing incorporation documents.
On the other hand, incorporating a company in India involves several steps and is not only tedious but also time-consuming. It can take up to few months to complete all formalities. You must first seek government approval for setting up a foreign direct investment company in India. Directors must obtain a ‘Director Identification Number’ and ‘Digital Signature Certificate’ prior to company incorporation. Upon company name approval and filing incorporation documents, the Certificate of Incorporation will be issued.

INCORPORATION TIMELINE
Company incorporation in Singapore can be completed in a record time of less than 24 hours, with minimal formalities. By contrast, in India it can take anywhere between 2-3 months to incorporate a company.
ANNUAL FILING REQUIREMENTS
In Singapore, an Annual Return must be filed with Companies Registrar and Income Tax Return with the Singapore tax department each year. Small companies with revenue less than SGD 5 million and no corporate shareholders are exempt from filing audited accounts with the returns.
In India, companies must submit Annual Return along with audited annual accounts to the Registrar of Companies. No company is exempt from the audit requirement. Income Tax Return along with audited accounts must be filed with the Indian tax authority each year. Companies whose annual turnover is less than INR 4 million are exempt from the tax audit requirement.
CORPORATE TAXES

The corporate tax rate in India is 30.9% for taxable income up to INR 10 million and 33.9% for taxable income above INR 10 million. Companies are also subject to dividend distribution tax of 16.995% and capital gains tax of 10%, 15% or 20%. Services tax stands at 10.3%. The state level VAT ranges from 1%, 4%, 12.5% to 20%, while the central level sales tax stands at 2%.
Taxes in Singapore are significantly lower than India. Singapore charges a corporate tax rate of approximately 8.5% for profits up to S$300K and a flat 17% for profits above S$300K. There is neither a separate dividend distribution tax nor any capital gains tax. GST stands at 7%.
According to a recent tax comparison report issued by GuideMeSingapore.com that considers the case of a hypothetical start-up firm expecting to make an annual income of US$300k, the firm will have a total tax bill of only US$34k in Singapore while it would face an approximate tax bill of US$102k in India.
ON A FINAL NOTE
Based on the comparative analysis it is clear that Singapore offers a better business environment for foreign entrepreneurs, as compared to India. Some of the distinct characteristics of company formation in Singapore include: easy incorporation procedure which can be completed in less than 24 hours; liberal foreign ownership policy; minimal statutory requirements and an attractive tax regime.

Obama On Small Business: A Year Later

Dire predictions ring true. Too bad.

IRS Resources for Small Business Owners

The IRS initiated a new National Research Program Initiative in November 2009 simply known as the Initiative: an industry wide detailed audit of employment taxes for 6,000 randomly selected businesses for the duration of the next three years. The intent of the Initiative has two aspects: ONE: assess systemic Employment Tax Compliance; and TWO: collect assessments from delinquent employers.

With tax revenues dwindling from the recession, the U.S. Treasury Department is stepping up efforts to close the tax gap the difference between overall tax liabilities and taxes paid to the IRS. Auditing employment taxes is seen by the IRS as a crucial means of closing the tax gap. For tax year 2001 for example, the gross tax gap was estimated by the IRS at around $345 billion, with underreporting of employment taxes accounting for around 17% of the tax gap.

The IRS will audit businesses to ensure that Federal withholding taxes are deducted and paid over to the government from employees wages for Social Security and Medicare as well as Federal Unemployment taxes. An business owner found to be in noncompliance could face harsh civil penalties and interest on unpaid taxes. These penalties could have a particularly severe impact on small business owners.

The IRS has identified four areas to focus their auditing efforts under the Initiative, including:

Worker Classification: i.e. whether an employer properly classifies an employee as an employee or independent contractor for tax purposes. Determining which depends on the behavioral, financial and type of relationship the company has with the person performing the work.

Employee Fringe Benefits: A fringe benefit is a form of pay for the performance of services. i.e. benefits such as insurance coverage, company car or child care, etc. that are provided by employers tax free to employees but not to independent contractors.

Reimbursed Business Expenses: e.g. reimbursement for taking a client to lunch, purchasing office supplies: which requires a written business expense plan. I.E. You must have paid or incurred expenses that are deductible while performing services as an employee. You must adequately account to your employer for these expenses within a reasonable time period, and you must return any excess reimbursement or allowance within a reasonable time period.

Compensation of Owners: who are also employees of the company, whereby unpaid taxes may result in personal liability for the employer.

Harsh penalties can occur for employers that are in noncompliance with employment tax lawaE¦and now that the employment tax audit Initiative is upon us the IRS has been reported to have already begun the process of selecting businesses for audit of their employment taxes. In order to ensure that these procedures are in compliance with applicable tax law is critical and can save time, money and heartache in the event of an audit.

For example, the Internal Revenue Code has specific requirements for taxing the Compensation of Owners depending on business structure set forth in its operating agreement and what classification the owner has elected. Employers should consider consulting with experienced counsel in preparation for the Initiative and in the event of an audit of their compensation methods to its owners is in question.

Seacoast area Chamber leaders band against new tax on some LLCs

PORTSMOUTH — The leaders of numerous Seacoast area chambers of commerce have banded together to express frustration with a new tax law they say was passed without proper public input and could deeply impact small businesses.

Never miss another business deduction – Tracking expenses; free with Outright.com

Question: I just set up my LLC myself. Do I need to apply for an EIN?

My company is a one person multimedia company. Do I still need an EIN?

Answer: If you are a single member LLC and have no employees the IRS does not require you to have a EIN. You will need to use your social security number as your tax id number.

Some people prefer not to use their SS number so the go ahead and request the EIN by filing a SS-4 form or by going to the IRS website www.irs.gov It doesn't cost anything to get the EIN so it is up to you.

BrainStorm Retains Life Sciences Advisory Firm

NEW YORK & PETACH TIKVAH, Israel----BrainStorm Cell Therapeutics Inc. , a leading developer of adult stem cell technologies and therapeutics, today announced that it has retained MD Becker Partners LLC, a boutique management and strategy consulting firm focusing on both public and private companies in the life sciences industry.

Credit & Personal Finance : How to Apply for a Business Credit Card

LLC tax sparks lawsuit

A suit filed this week claims the state’s controversial expansion of the 5 percent interest and dividends tax to limited liability companies violates New Hampshire’s Constitution.

Success Is For Losers #34: How To Be A Corporation

Question: Tax Question > 1099-int?

Situation:

I have a company ABC LLC in the USA
I borrow money from Lenders(persons NOT corporations) located in Canada, and issue them promissory notes with a return of 3% monthly for one year term.
I then take the money and lend it to another company XYZ in the USA who invests it for themselves, providing me with a promissory note with a return of 4% monthly for one year term.
After the calender year, XYZ issues me a 1099 form for the interest 4% earned on the money I lent them.

Question:

What form do I provide the lenders who lent me money? is is 1099-int?
Would i write that they earned 3% return? What about the fact they live in Canada? Do they report it 1099 form to the CRA in Canada?
Am I only responsible to pay taxes for ABC of 1% only?
Or is there something else I need to do? Withhold taxes? etc….

Can someone please advise what is the best course of action?

Thank you

Balloon_Guy

Answer: Gosh, I hope you haven't done this already.

The interest that you paid to the Canadians is subject to NRA withholding. You ask them to give you a completed W-8BEN, they may need proof of the loan to get an ITIN using form W-7, and at the end of the year you issue them a form 1042-S at the end of the year.

IRS publication 515.

Cottonwood Hills faces state suits

The Kansas Department of Revenue has lodged lawsuits in Reno County District Court and Shawnee Count ...

Money Management & Credit : How to Change Your Withholding to Provide More Monthly Cash