internet business - legal and tax questions
azzuri
I am getting ready to form an service related internet business, which could
not be profitable in the first year or 2. The revenue will most likely be
coming from US businesses. I reside and work in New Jersey, although I am
non-resident alien authorized to work for my employer only. Therefore there
will be 1-2 partners extra in the business that are US citizens/residents.
There will be no employees until the business is profitable. I would
appreciate your opinion on several basic questions:
1/ which entity to choose - because of my immigration status, the best
entity for a service related business - S-corp is out of question -
therefore LLC or C-corp are the only options (I only consider asset
protecting entities and I want to take US tax advantages for myself)
2/ which state should I register this company ? does it make sense to
register company off-state while living in New Jersey ? does it make sense
to register the company off-shore ?
3/ will I have to pay NJ tax on the business income in case most of the
business will be done out of state ?
4/ which company registration service do you recommend ?
5/ what are best newsgroups to post these type of questions ?
Thank you very much for any help.
Azzuri
Maren Purves
azzuri wrote:
> I am getting ready to form an service related internet business, which could
> not be profitable in the first year or 2. The revenue will most likely be
> coming from US businesses. I reside and work in New Jersey, although I am
> non-resident alien authorized to work for my employer only. Therefore there
> will be 1-2 partners extra in the business that are US citizens/residents.
> There will be no employees until the business is profitable. I would
> appreciate your opinion on several basic questions:
I have always wondered about that, having been a non-resident alien once
myself:
- If you're in business for yourself (self employed or owning a business),
meaning you're not employed by somebody else, is that legal with a social
security card marked "not valid for employment"? (Not that mine ever was)
- and: if you write a book, can you be paid royalties in spite of not being
allowed to work? Where is the boundary? I know there are lots of foreign
non-resident investors who own real estate (certainly with the purpose
of making money, not losing money) or US stocks.
Maren
Dave Miller
In article <bn1hb...@enews3.newsguy.com>, le...@softhome.net says...
If, when you say "my employer" you mean that you are in the US under an
H1B, there is no way to do what you intend legally. If when you said "my
employer" you meant "an employer", the following might answer your
questions:
1. You will be an employee of the business. Other than out of the
ordinary areas such as grants of certain stock options and the like, all
of the money paid to you can be claimed as an expense no matter which
legal entity that you choose. In other words, there are virtually no tax
ramifications to you as to the legal form of the business. No form of
incorporate will allow before tax profit to flow to passive participants
(the company will pay taxes before it yields anything to the owners of
the company - your "1-2 partners") so again, no difference.
2. You may read on the internet about "incorporate here" (or there). The
truth is that legally you will owe taxes to any state in which you have
a physical presence. If you are operating from NJ, you owe NJ. You can
incorporate in Nevada to try to claim a Nevada only presence and avoid
taxes. You can incorporate in Delaware (like much of the Fortune 500) to
gain the benefit of corporation friendly laws and Chancery Court. None
of these gambits are worthwhile to anything other than very large
corporations with massive potential tax liabilities and legions of
lawyers to argue their cases. If you incorporate, do it in your home
state.
3. See #2
4. I don't know what you mean by "company registration". If you mean
"incorporate', you can learn how on the NJ State web site. If you need
help, contact a lawyer.
5. If you get answers, it's a good group. If you don't want to wade
through spam, choose moderated groups.
Dave Miller
Strategic Services Group, Inc.
creators of FundablePlans.com
http://www.fundableplans.com
A commercial online tool for the creation of business plans.
azzuri
Folks, thanks for replies.
Maren - you can start a business as a non-resident alien (except an S-Corp,
where all shareholders must be min. US residents) but you are not allowed to
work in your business unless you have a work authorization. If you run your
business with partners which are authorized to work in US, you're fine.
Dave - I think all your answers refer to a C-Corp, right ?. I have been
thinking about LLC, which is a flaw through taxation entity with asset
protection and has more simplified maintenence than a C corp. There are
internet services like www.mycorporation.com where you can register a
company. As far as which state, I think you are right. Do you know how easy
it is to move the business to Nevada or Delaware in a year or 2 if state
taxes become big enough to make a move worthwhile ?
Cheers,
Leszek
"azzuri" <le...@softhome.net> wrote in message
news:bn1hb...@enews3.newsguy.com...
Paul Robinson
Maren Purves wrote:
> azzuri wrote:
> > I am getting ready to form an service related internet business, which could
> > not be profitable in the first year or 2. The revenue will most likely be
> > coming from US businesses. I reside and work in New Jersey, although I am
> > non-resident alien authorized to work for my employer only. Therefore there
> > will be 1-2 partners extra in the business that are US citizens/residents.
> > There will be no employees until the business is profitable. I would
> > appreciate your opinion on several basic questions:
>
> I have always wondered about that, having been a non-resident alien once
> myself:
>
> - If you're in business for yourself (self employed or owning a business),
> meaning you're not employed by somebody else, is that legal with a social
> security card marked "not valid for employment"? (Not that mine ever was)
I'm not a lawyer so some of what I suspect about how one gets around the rules
may
not be correct, or may have been changed, but here's my opinion on how they get
away with this.
If you don't hire yourself then you're not working for wages. If you are an
owner
of the company, supposedly you would get either dividends or the remaining
profits
through pass through as an S corporation or directly as (one of) the owner(s) of
an LLC. Since you're not working for wages the rules against employment don't
apply.
> - and: if you write a book, can you be paid royalties in spite of not being
> allowed to work?
Yes.
> Where is the boundary?
Receiving wages as an employee of an American company. If you are provably an
independent contractor you're a private business and are not an "employee" of
the
other company.
Now if it's not an American company then the rules don't apply.
If someone was a citizen of, say, Mexico, snuck into the U.S., came to
Washington,
D.C. and got a job at the Australian Embassy it wouldn't matter whether they
were
authorized to work in the U.S. because they are {de jure} working in Australia
even though the building is physically inside the united states, it is as a
matter
of law Australian soil.
It's only if you become an employee of an American company - or a foreign
company
that has an office in the U.S. - that the issue of illegally working if you're
not
authorized to do so.
This is one of the reasons why it's kind of unfair, because those who are
non-resident aliens without authorization to work would otherwise work low-level
jobs (cooks, dishwashers, cleaning people, farm workers) but are in a position
where it is illegal for them to do so and thus are mercilessly exploited.
On the other hand, those who are at the higher end can set up their own
corporations, have the corporation contract with the other party and then work
for
their own corporation as an independent contractor. Or incorporate in their
country, be a legitimate employee of that company and then do work here as an
employee of the other company which has contracted with the local company.
(That,
however might not be legal, I'm not sure, but if there's no paperwork filed the
federales won't know about it.)
> I know there are lots of foreign non-resident investors who own real estate
> (certainly with the purpose
> of making money, not losing money) or US stocks.
They again, are not working for wages. The system is rigged to make it illegal
for the little guy (who isn't a citizen) to make money but the big boys who
collect rents ("rents" meaning unearned income) and royalties win big time.
--
Paul Robinson "Above all else... We shall go on..."
"...And continue!"
"If the lessons of history teach us anything it is
that nobody learns the lessons that history teaches us."
Dave Miller
In article <bn3ml...@enews2.newsguy.com>, le...@softhome.net says...
>
> Folks, thanks for replies.
>
> Maren - you can start a business as a non-resident alien (except an S-Corp,
> where all shareholders must be min. US residents) but you are not allowed to
> work in your business unless you have a work authorization. If you run your
> business with partners which are authorized to work in US, you're fine.
>
> Dave - I think all your answers refer to a C-Corp, right ?. I have been
> thinking about LLC, which is a flaw through taxation entity with asset
> protection and has more simplified maintenence than a C corp. There are
> internet services like www.mycorporation.com where you can register a
> company. As far as which state, I think you are right. Do you know how easy
> it is to move the business to Nevada or Delaware in a year or 2 if state
> taxes become big enough to make a move worthwhile ?
I may have misunderstood you. If you want to own a portion of the
business *and* be an employee, the only option is to incorporate. As to
"simplified maintenance" yes to LLC, "easiest transfer" goes to
corporation (just sign over the shares).
The registration services are lay people (perhaps qausi para legals) who
fill out forms. You can get the instructions and fill out forms just as
easily.
I have never been involved with moving a corporation from one state to
another - sorry I can't help you there.
Regards,
Dave Miller
Strategic Services Group, Inc.
creators of FundablePlans.com
http://www.fundableplans.com
A commercial online tool for the creation of business plans.
> Cheers,