The consultants at Gillon Tax Advisors regularly guide companies through the process of establishing and expanding operations in the United States. We work extensively with inbound investors and are adept at navigating the technical, regulatory, and practical challenges of entering the U.S. market. For companies planning to begin operations in the United States, careful planning is essential well before the business opens its doors. The U.S. tax and legal environment is complex, highly jurisdictional, and fact-specific. Early decisions regarding entity structure, tax compliance, and operational footprint can have long-term financial and regulatory implications.

Outlined below are several key considerations for companies making inbound investments into the United States:

Choice of Entity

In the United States, a company can be formed as a sole proprietorship, partnership, limited liability company, or corporation. The type of entity depends on a number of factors, including: parent company considerations, flow-through of income, legal liability, and other business considerations. The choice is highly fact-specific.

Employer Identification Number

Once the entity type has been established, the company can apply for an Employer Identification Number (EIN). This identifying number is used for tax filings, setting up bank accounts, financing, etc.

Articles of Incorporation/LLC Membership Agreement

These articles determine the way in which the entity will operate and establishes legal and binding procedures for the company.

Where to Incorporate and Register to do Business?

In the United States, business is largely determined on a state-by-state basis. Some states are more business friendly than others, and states have varying levels and rates of tax. The determination of where to incorporate and where to register to do business are some of the most important decisions the new company will make.

How is Income Taxed?

Business income is taxed both at the Federal and state/local level. A company is required to file annual income tax returns to the Internal Revenue Service and state taxing authorities. Federal taxable income is a combination of taxable income, expenses, deductions, and credits. State taxable income is computed based on the company’s economic presence in a particular state (generally determined by the level of sales, property, and payroll in a given state).

Non-Income Taxes

In addition to the income tax, companies doing business in the United States may be subject to the following non-income based taxes: payroll tax, property tax, commercial rent tax, sales tax (similar to VAT), and other non-income taxes.

Home Country Issues

The new business will need to take into account the goals and plans of its parent/home country in establishing operations in the United States. For instance, issues such as transfer pricing and permanent establishment will need to be addressed. Our experts work with companies to identify and quantify the risks and responsibilities of each entity within the global group, establishing a foundational transfer pricing methodology that properly allocates profits and costs to each country and documenting that methodology for presentation to various country tax authorities.