DOING BUSINESS IN AMERICA

There is an old corporate slogan in America that says: “The business of America is business.”  Foreign citizens starting a business in the United States have some of the least restrictions and “red tape” of all of the countries in the world.  Lack of restrictions and regulations, or the near lack of it, does not mean that good planning is not essential.

While some businesses are registered under Federal laws, most businesses are registered under State laws.  Therefore, the rules that do regulate businesses come in 50 different varieties – one for each State.  However, at the same time these rules and regulations generally follow the same pattern.  If you want to do business in the State of California, you can register your business in any State in the United States.  However, you will still have to register your foreign corporation – those corporations begun in other States than California, and you will be taxed as if your business is in California.

Business entities format depends on the complexity desired.  You may start a business as a sole proprietorship; as a partnership; as a corporation; or as a limited liability company.  Each different entity has its own strengths and weaknesses. 

Sole Proprietorship

A sole proprietorship is a way of forming a business without any specific type of entity. The individual owner has all rights, responsibilities and liabilities of the business. The tax liabilities are due to the individual.  If you are forming a sole proprietorship and acting individually, you must realize that this simple structure makes it more difficult to adjust and make future changes to your business..

Partnership

Simply stated, a partnership is based on an agreement between a number of individuals or entities to run their business on a generally equal level. Based on a written agreement all members or entities will be equally responsible for the profits and losses.  A partnership usually has no limited liability, as corporations or limited liability companies do have, but often the liability issues can be dealt with by insurance.  In addition, there are more specialized types of partnerships that include general partnerships and limited partnerships.

Corporation

A corporation is a business legal entity which has a legal personality, distinct from those of its members, namely shareholders.  Unlike in a partnership or sole proprietorship, shareholders of a corporation have “limited” liability for the corporation’s debts and obligations.  As a result, their potential losses cannot exceed the amount which they contributed to the corporation as dues or paid for shares.  Besides shareholders, individuals involved in a corporation include directors who oversee the activities of the corporation, and officers who run the day-to-day business.

The formation of a California corporation is generally inexpensive, quick, and has the benefit of the ability to do business immediately after formation.  The ownership of the shareholders of a corporation are not generally known to the public, although its directors and officers are public records and therefore known to the public.

Limited Liability Company

A limited liability company (LLC) mixes some of the best aspects of a partnership and a corporation. An LLC is controlled by an agreement between its members.  For the purpose of new businesses started by entrepreneurs, an LLC or corporation is the preferred entity.  For some people a corporation would be the most advantageous because it allows the entity to continue on beyond the life or interest of any of its individual shareholders, allows a limited liability, and generally is more flexible than an LLC since it allows new individuals to come and old individuals to sell their share of the corporation.

Immigration Aspects

Persons wanting to open a business in the United States, or invest in one, are concerned about their ability to build and manage their businesses.  A foreign citizen has difficulty in building and managing their business in the United States, due to Immigration laws.  Despite the difficulties, there are various ways to allow individuals to temporarily stay in the United States, for extended periods of time, to manage their investments and businesses.  The formation of a business may have a great effect on the type of visas that an individual may make use of.  The visas included a B-1/B-2 Visitor Visa for six months, an L-1 or Inter-company Transfer where an individual is transferred for a period not to exceed seven (7) years, from a business in their home country to a subsidiary in the United States, or a E-1 or E-2, Treaty Trader Investor Visa which allows a business to be begun and managed in the United States with indefinite ability to enter,
remain and exit the United States.  Each of these visas has very specific requirements, and an individual’s ability to obtain that visa depends on strict compliance to the rules.

Investments in the United States

Individuals often wish to make investments in the United States, and there are many variations to those kinds of investments.  While the immigration component of an intending investor is an important consideration, there are areas where certain types of investments can be made with few immigration requirements.  The intending investor must consider the tax ramifications, both in their home country and in the United States, prior to making their investment.  Generally, individuals making passive investments in the United States, either by buying a home, buying share certificates, or a direct investment in a business that includes little involvement or presence in the United States, is less regulated by the immigration authorities. 

Of course, with the heightened security there are certain formalities that must be followed, and certifications must be obtained.  One of the important pieces of identification in the United States is the Social Security Number, which is becoming increasingly difficult to obtain unless you have permission to stay in the United States for an extended period of time.  On the other hand, because of an investment individuals may obtain ITIN numbers that have some of the same benefits of a Social Security Number.  ITIN numbers can be obtained and will allow a passive investor in the United States to assist them in starting a business in the United States, and assuring that there is compliance with United States tax law.

The individual wishing to start a business or an investment in the United States should be aware that it is important to consider the tax ramifications of their investment, both on their native country’s tax system and those in the United States. 

Licensing

The licensing of a business is varied depending on the type of business.  For example, the licensing for a restaurant with a liquor license underscores California’s concern for health standards for food, and the relative strictness of the sale of alcohol.  In many cases, a liquor license is most easily obtained by purchasing it from a previous owner.  On the other hand, many other businesses require little or no licensing with a City Business License, easily obtained in the City of Los Angeles.