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Opportunities for your U.S. Corporation

Opportunities for your U.S. Corporation

With low taxes, access to a strong economy, and a fast start-up process, your US C-Corporation is the ideal vehicle for business success in America.

This page will focus on the establishment and management of your U.S. corporation and the opportunities that presents.

There are many great opportunities for your U.S. Corporation that we will highlight on this page.

For a start, taxation for a U.S. Corporation is much lower today than it has been in previous years. This has created additional benefits. Even so, not even taking taxation into consideration, there are many great opportunities for your company in the US.

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Book an Expert Consultation on Building Your Business in the US, US Taxes and Moving to the US

Become Active in the American Market with Your U.S. Corporation

When applying for your C-Corporation, it is more than likely that you intend to use it as a regular company in the United States.

However, you could establish your US Corporation as a subsidiary of your already existing European company. The U.S. has tax treaties with a number of countries, including Germany. They mimic the EU “parent-subsidiary” directive so, as usual, any withholding tax is waived if there is no subsequent taxation of profits at the home of any parent company.

You should carefully consider your tax planning through this scenario. Mount Bonnell advise you to take advantage of the many legal possibilities around current US tax legislation to minimize any tax burdens there.

Often offsetting between group companies is possible as long as they withstand a third-party comparison. In this case, a sale of goods can be established by the European company to the U.S. company.

Any consulting and management services to the U.S. company by and to related companies is also conceivably an offset of taxes if this is properly undertaken.

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Your U.S. Corporation as a Settlement Company with Customers Outside the U.S.

A U.S. corporation is a great way to bill customers outside of the U.S. It involves a quick establishment and bank account opening, plus a high degree of confidentiality allied to a good banking infrastructure. These are just some of the advantages of a U.S. corporation.

Additionally, there is no VAT in the U.S. This shrinks the administrative burden on your US company. In regards to taxation, the use of a U.S. company means profits not generated from U.S. customers are only subject to a 13.125% corporation tax.

When making deliveries to the EU, however, you must follow a number of VAT rules. This is particularly so in regard to the delivery thresholds through the post, and the laws surrounding selling digital goods to the end user. Unfortunately U.S. companies are inundated with regulations pertaining to this have no choice other than to deal with them.

It is worth noting that if you live in an unusually high-tax jurisdiction, often you will not be allowed to choose the tax location for your company.

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Raising Capital with Your U.S. Corporation

As a stock corporation, your company is ideally suited to raising capital among investors. Because the pure acquisition of capital generates no sales and no profit, there are no tax considerations.

You must be aware though that you can only raise capital through public advertising (e.g. the company’s website or an intermediary), and only if the relevant application has been filed as a private placement  with the U.S. Securities and Exchange Commission (SEC). Mount Bonnell will be happy to complete this for you.

When capital is publicly advertised in Europe, then various permits may be required. For example, in Germany, such a permit comes from BaFin. If you are unsure about these permits, you will need to talk to an experienced lawyer as you will need specialist advice on this topic.

There are several different ways in which capital can be raised. The most common is through a company issuing shares. Under certain circumstances, different share classes are designed for this purpose, for example, founder shares and non-voting shares.

The nominal value per share is often set low (e.g. $0.10 per share), but the price paid by the investor per share is often higher (e.g. $1 per share).

Shareholders receive classic share certificates and these are included in the register of shareholders thereby making it able for them to participate in the future success of the company.

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Using Your U.S. Corporation as a Sponsor for Your Green Card or U.S. Visa

It is not normally the tax benefits that are one’s top priorities when establishing a company. Your C-Corporation is also well suited for sponsoring any future U.S. green card or visa (L-1 or E-1/E-2) application.

In regards to any visa application, it is beneficial to be the president or CEO of a US Corporation with plans to build a management team for your company in the U.S. This latter element is especially required if making a visa application but as an entrepreneur and owner of a US company you have the ability to implement the appropriate management structure needed for this within the company.

When creating a C-Corporation, the founder must show they have a plan to create a viable business that will generate jobs, ensuring that any resultant C-Corporation isn’t seen as some sort of a pretense.

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Investing in the Real Estate Market with Your U.S. Corporation

Most U.S. tax advisors will violently shake their heads when you talk about using your C-Corporation as a real estate company. They are likely to never recommend such an arrangement for you in the U.S., but, instead, recommend a partnership because it’s a more tax favorable solution and makes more sense for any U.S. citizen or green card holder.

If you do not live in the U.S., you should take a closer look at a C-Corporation if you want to invest in real estate in the U.S. The reason is simple: the tax treatment of U.S. partnerships in your country of residence can become complicated, especially if the partnership is not completely clear. Because of all this, a C-Corporation is a relatively easy alternative that is both reliable and legal.

The choice of legal form is not just about getting the lowest tax rates. For international clients, the confidentiality on offer and the ability to not pay profits makes a C-Corporation makes it all the more advantageous as a viable alternative.

With a corporate tax rate at 21%, in regard to taxation this starts to look like an attractive possibility.

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Your U.S. Corporation as a Holding Company

Until recently, it could be said that a U.S. corporation is limited in its ability to perform as a holding company. However, since the latest Trump tax reform, this situation has been turned on its head. Today we strongly recommend using your C-Corporation as a holding company.

Foreign-taxation on the profits of subsidiaries abroad is now invalid when distributed to the C-Corporation (similar to the EU parent-subsidiary directive). Profits from investment sales are also tax-free in the U.S. holding company.

Subsidiaries in Low and Zero Tax Countries

If a U.S. company has its subsidiaries in low-tax countries that generate profits with non-U.S. clients, they must be taxed at the parent company at a maximum of around 10%, with 80% of taxes paid abroad being credited.

For example, a U.S. corporation that has a subsidiary on the Isle of Man must be taxed at around 10%, as the Isle of Man is completely tax-free.

All foreign profits are used in this calculation. So, for example, if the corporation owns subsidiaries in both high and low tax countries, positive windfall profits may occur.

Another example, a U.S. corporation has a subsidiary on the Isle of Man whose profits are completely tax-free. The company generates €100,000 in profits. The U.S. Corporation also has another subsidiary in Germany and pays around 25% of corporate and business tax on its profits. That subsidiary also generates €100,000 in profits and this pays €25,000 in taxes – 80% of which can be claimed in the Corporation (€20,000).

This means that the U.S. company has no other taxes to pay in the U.S. on its foreign profits of €200,000 since the total foreign profit has already been taxed at a rate of at least 10% (€20,000).

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Using Intellectual Property (IP) with Your U.S. Corporation

In recent years, several countries have tried to implement an IP box or patent box for tax purposes. The UK, Ireland, and Luxembourg are just a few examples of this. This concept would limit income from any use of intellectual property.

For an IP box to be legal, the Organization for Economic Co-operation and Development (OECD) regulations are demanding. For a start the intellectual property must be locally developed. Some countries state that only patented intellectual property can be incorporated into the IP box.

The new U.S. IP box (Innovation box), which U.S. corporations can now benefit from, is a much more flexible entity. The US law prescribes a corporation tax rate of 13.125% on foreign IP. This IP doesn’t need to be developed in the U.S., nor is it required that the IP be patented.

For example, Mr. Michel lives in Würzburg and owns a C-Corporation in Jackson, WY that turns a profit of $100,000 each year. His company sells an app through the Apple App Store and the Google play store in Europe, but does not yet sell in the U.S. Based on the company profits, $13,125 of corporate income tax are due in the U.S. Therefore, the net profits are $86,875. Depending on whether Mr. Michel distributes the profits in a whole or partial manner, another 26.4% withholding tax is applied in Germany and will be taken from the distribution of profits.

Remember the term “IP” is very broad and covers such things as branding, software, goodwill, and other intangibles.

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Your C-Corporation as a Provisional Company

There is no company structure that can be considered ideal. Remember that as a budget can be burned through by unexpected time and cost commitments especially so in regard to that initial phase of setting up a company.

Take, for example, there was a client who was a very talented software developer. He created a Fintec app that needed to be integrated into existing company structures where the external investors are. The client wanted to avoid this as he calculated that it would increase the value of the company significantly if he made the app operational. By then he would have been able to convince investors that the app is up and running and customers are actually using the service.

For “proof of concept”, the client chose a C-Corporation. He began selling the app in Apple’s U.S. app store, and with some success. The client knew that when the company was founded, however, it would only be a temporary solution. You could say they were wasting money since he was planning to close the C-corporation after only a few months or years.

Luckily, it turned out to be a great success. So after 18 months after its establishment, investors came to the company impressed with how much the client and his partners had achieved with so few resources.

Then, as initially planned, the C-Corporation was closed, and the app was transferred to its final legal form.

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Your C-Corporation as an Imprint Company

The idea of an imprint obligation is legally anchored in only a few countries, specifically Germany. In most European countries, there is no such thing as an imprint obligation, this is so in the U.S.

What can you do if you don’t want to appear in the imprint?

Maybe you don’t live in Germany or any other country that has an imprint obligation, but you have a German website that is aimed at German customers and you want to voluntarily opt out of the imprint. Or, you’re in an industry that is known for its rivalries and competition. What do you do?

To remain anonymous on this always consult with your lawyer but you could establish a C-Corporation and list that in the imprint. This means that your name will not appear in the Register of Companies or in the imprint.

However, this may have its disadvantages. Will customers buy your product if your U.S. company appears on the imprint? There is no simple answer to this question. It may be that establishing a C-Corporation is not the best solution for this.

This may not work for you in Europe either. When doing business in Europe it’s almost impossible to set up a company with the owner hidden from public view. The details of all persons involved, and the shareholders of a corporation or partnership, are always published in a Commercial Register.

The idea of a transparency “register” is on the rise, already legally binding companies in countries such as the U.K. Even trustee relationships must be publicly revealed in the Commercial Register.

U.S. companies in general, and C-Corporations in particular, offer much more privacy. Shareholders will not be listed in the Register of Companies and only one member of the executive committee needs to be listed (typically the C-Corporations CEO we appoint).

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A C-Corporation Is a Solution If You Need a Company Fast (With or Without a Company Account)

Some things have to be done fast. Sometimes, a deal can only be made if you can sign the contract within 3 days, with the first payment to be made just one week later.

So what do you do?

Where do you go to establish a corporation within three days that can write an invoice and accept a payment in just one week?

European companies are used to companies being established in a short period of time. For example, it takes approximately four hours to do so in the U.K. But then it takes two weeks to open a bank account in England. And after that you need to obtain a VAT number.

So the solution may be a US C-Corporation. Establishment is not as fast as in the U.K., but the account opening is quicker and smoother. Moreover, you are not required to be present in the U.S. when so doing. Once you receive the US bank account number, you can also receive your first payments on the same day.

Furthermore, VAT does not exist in the U.S. So all that is required is to write the net bill and not worry about having a VAT number.

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Your C-Corporation Can Act as a Recovery Company in the Event of Insolvency

Just to clarify, if in the event of imminent insolvency, any assets are moved abroad to avoid creditors, it will leave you liable to prosecution. We have been servicing clients in England and Ireland on EU insolvency proceedings since 2007, and we would like to assure you that this is never a good idea.

We would rather you use your C-Corporation as a rescue company through which you can charge for new sales while still preserving your ability to act.

In the event of bankruptcy, you cannot be the owner or beneficiary of your C-Corporation. You need a confidant such as a brother, friend, son, or uncle to look after the establishment of your C-corporation and its shareholders. Under no circumstances, however, should you have a trust agreement with this person. It is imperative that the C-Corporation does not belong to you.

Once a C-Corporation is established, your customers can pay for the business and your trusted person can manage the company funds.

If for example, you don’t have a confidant to hand or you cannot be the CEO of a local company, then you will have to resort to an alternate solution. This is where a C-Corporation comes in.

The C-Corporation with the U.S. business account can be established quickly and is characterized by its confidentiality – there is no exchange of information according to the OECD CRS. Shareholders are not published. Under the right circumstances, a C-Corporation can be the ideal solution during a difficult time.

This may not always be possible and so it is advisable to discuss this with your lawyer. We have a number of clients who have been able to overcome a difficult business situation by establishing a C-Corporation and have gone on to successfully come out the other side.

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Your C-Corporation as Asset Protection in a Separation and Divorce Case

In no way are we suggesting that in the case of Judicial divorce proceedings you could conceal assets from the court in order to prevent your ex-spouse from being paid a settlement.

You agreed to the marriage, as per your agreement, you must take responsibility and share any assets with your ex-spouse – an acceptance of this is an important step in the healing process, we understand that.

However, we have talked to multiple clients in situations of separation and divorce where their ex is so hateful and aggressive that it is just not right for them to have a share in your wealth.

If your angry ex informs you that you need to implement a new business plan after the divorce, then this means that they want to make your life difficult. You should call a lawyer immediately and fully disclose the company finances to them. This is because your ex is entitled to something. However, in situations like these it can be extremely helpful to establish a new business overseas for a fresh start. By now, you may have guessed that we’re talking about a U.S. C-Corporation, not least because with a C-Corporation you get a high degree of confidentiality. For example, your name does not appear in Register of Companies.

As previously mentioned, even in the most extreme situations of a marital break-up, it is important to behave both properly and appropriately. For a start, during divorce proceedings, you can’t simply transfer your assets to your C-Corporation so as to protect them from your ex. Alternatively though, you can establish new assets keeping them from the inevitable lawyers and civil courts during a divorce.

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Your C-Corporation as a Solution If the Tax Office Blocks or Freezes Your Accounts

It is known, especially in Germany, that the tax authorities like to flex their muscles and freeze a blameless citizen’s accounts on a suspicion of tax offenses.

The situation may arise when the tax office accuses you of not properly declaring taxes and, in addition, they are now making high demands for retrospective taxes. As an entrepreneur, no doubt you’ll be able to deal with this and work with your lawyer towards a solution as long as you can prepare and plan for it.

If your accounts are frozen, you will lose the ability to act, however, and may panic because you suddenly can’t pay rent, salaries, your car, or even your phone bill.

Your C-Corporation in the U.S. may be the ideal solution to this scenario, at least as a temporary emergency measure. A C-Corporation is ideal for this because it has a high degree of confidentiality and a relatively short start-up period.

Nevertheless, you must meet certain requirements. You must have customers who accept invoices from your U.S. C-Corporation, or you can write an invoice from the company of a friend or a family-affiliated entrepreneur. In such matters, you need to be able to redirect your sales income to your C-Corporation.

This solution is not always possible though, and we don’t always advise this. Ideally, this matter should be discussed with your lawyer. We’ve had a number of clients who have been able to overcome a difficult situation like this by establishing a temporary C-Corporation.

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Using Your C-Corporation to Deal with the Competition Ban

If you leave an important position in a company or sell your company, you are often banned from competing in that arena for a few years. This is to prevent your personal contacts and expertise from competing with your former employer or the buyer of your company.

These competition bans aren’t always compatible with “early retirement”, however. Not everyone who leaves a successful job or sells their business wants to spend the rest of their life playing golf. Often, you will get offers to go into business with others, but you can’t pursue these possibilities due to the restrictions on competition even if you do not see a possible new venture as a form of competition for your former company or employer. However, the law often sees things simply in black and white. So even though you wish to start up a new business, suddenly your application is denied.

What do you do next?

You’ve probably guessed right by now: you should start a U.S. C-Corporation.

For a start, your name won’t appear in the Register of Companies. There will be nothing to connect you with the company. U.S. corporations in general and particularly C-Corporations continue to offer a high degree of confidentiality much more than in most European countries. Shareholders don’t need to be listed in the Register, only a member of the Executive committee will be listed. If Mount Bonnell establish the C-Corporation, the CEO we appoint will be listed there.

Through this new C-Corporation, you can form contracts, write invoices, and quietly wait until, publicly at least, you’re free from the competition ban.

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Establishing Your C-Corporation Discreetly Among the Competition

Often, as an entrepreneur, you want to avoid the prying eyes of your competitors. For example, if you may want to experiment with a new product, enter a new market, or even wave goodbye to your business and begin a new life.

It is well known in European business that it is almost impossible to operate a company anonymously as the details of all involved, including shareholders and partners are published in the Commercial Register.

The idea of transparency in company registration is on the rise and has already become part and parcel of the business environment in countries such as the U.K. There, even trustee relationships must be publicly noted.

In the U.S., companies in general and particularly C-Corporations offer much more privacy and thus personal protection. This is because shareholders are not listed in the Register of Companies and only one member of the executive committee is ever listed. If Mount Bonnell establish the C-Corporation for you, that member name will be the CEO we appoint for you.

Because of this, entrepreneurs can discreetly establish a new company without having to worry about any potential competition being able to find out who owns the company in the Register of Companies, or more importantly what you are up to.

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Establishing Your C-Corporation Discreetly Among Customers

We once had a client from the U.K. who was a successful wholesaler selling plumbing supplies and installation equipment. They sold their products to customers in the U.S as well as the UK. The company’s total customer base was around 10,000.

The client then planned to move into the home improvement industry and, in particular, target U.S. customers directly by selling their goods through Amazon and on eBay. They chose these platforms because they wanted to sell at cheaper prices than the existing competition.

To avoid jeopardizing their relationship with existing customers, they needed to ensure they weren’t giving the impression that they were now competing with them.

Therefore, to avoid this, the client set up a U.S. C-Corporation with a different name and company address, and, proceeded to sell to the US end-customers through that new C-Corporation.

As a C-Corporation has a high level of confidentiality, the identity of the owners and traders with this new C-Corporation are concealed. Even if someone is curious and looks in the Register of Companies, they will not be able to find any information.

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FREQUENTLY ASKED QUESTIONS ABOUT TAXES, COMPANY FORMATION AND RESIDENCY IN THE USA (FAQS)

We’ve compiled over 150 of the most frequent questions and answers (FAQs) on tax, company formation, and residency in the U.S. in our knowledge base. You can visit our knowledge base here.

If you find that your personal questions have not been answered, book a telephone consultation here.

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Get Advice on Taxation, Company Formation, and Residency in the U.S.

If you already have a project that you want to implement in the U.S., you will most likely have already dealt with the intense framework conditions in the U.S. Online, you can find a wealth of information on almost every subject. Though all this information is available, it is common for one to reach a point of confusion. There are too many aspects to consider simultaneously and the starting position can be complex.

To solve this mental knot and pave your way to success, jump on a 1-hour telephone counselling session based on taxation, incorporation, and residency in the U.S. In this conversation, we will discuss specific technical issues such as tax, U.S. corporations or LLCs. Or we can discuss any strategic options you are considering.

Moving to the States – lock, stock and business – is not simple, but it doesn’t have to be hard either. We have a lot of information on line for you, but the Mount Bonnell ethos is that personal touch so lacking in so many of today’s businesses.

Like the Texas of old, we are true to our word. And like the founders of the Lone Star State we intend to make things as easy as possible for the people we work with so give us a call. We’re waiting – expecting even – that call about a question or questions you feel embarrassed to ask.  Whether technical, financial or personal, don’t be shy. We have heard them all before, and, what’s more we enjoy answering them.

So what are you waiting for, book a consultation and let’s get started.

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