Incorporation
Sarah Tanembaum
form of corporate entity should a friend of mine create(C Corporation or
LLC) and where, considering the following:
He's VA residence, but his thinking in conducting business in all state
and perhaps overseas. Initially, he will conduct the domestic business
in VA, FL, and, OR, and for the overseas branch will be in India.
a)He has both domestics and overseas investors for this startup, b)would
like to pay taxes no more than the tax code required, c)that is business
friendly, d)have better business owner protection.
In addition, should he create a holding company with has subsidiary in
each states and overseas, create each of them as separate corporation,
or make the domestic as branches but the overseas as subsidiary of a
parent company.
Thanks
McGyver
news:34hd1eF...@individual.net...
An S corporation is out because of the foreign owners. A C
corporation has a double taxation problem, but that may be your best
choice if one or more of the investors cannot bear being taxed as a
U.S. taxpayer on company income which may or may not be distributed.
If that's not a problem, an LLC would be a good choice. But if the
company will eventually have too many investors for an LLC, or if a
public offering is in the plans, it might be best to start with a C
corporation from the start, rather than convert to one later.
He is free to form the business in any state. He will be required to
qualify as a foreign (out or state) corporation in any state in which
he does business. Each state will be entitled to corporate income tax
on their share. Still, it would save some money to form the business
in a state which doesn't have a corporate income tax. I don't know
which ones they are, but I'm sure it's an easy look-up on the
internet.
As for business friendly, you can't beat Delaware. Other states are
catching up. New Jersey and Nevada claim to have caught up. But
there is no way anyone can match Delaware in the degree to which the
courts understand business law. Business friendly becomes a major
consideration when the company is about to do a public offering. And
remember, you can always switch later.
For liability limitation reasons is would be great to have separate
corporations for different operations and different locations. That's
expensive, but worth it, IF the parent really will be able to keep the
parental nose out of subsidiary management.
Finally, on the holding company idea. If there will be a significant
foreign income and/or importing of good for sale in the U.S. it's
important to get some good advice on free enterprise zones and the
like. There are ways to establish a holding company to handle all
foreign trade so that U.S. taxes are minimized. That subject is over
my head, so I can't advise on that. He needs to consult an attorney
with experience in those matters. The biggest and maybe the most
business sophisticated law firm is Baker Mackenzie. They have offices
everywhere.
McGyver