Questions of the Week: January 31, 2013By
Q: I want to start a business in the United States with a bank account; should I do it as an individual or set-up a corporation?
A: Incorporating your business means you are serious about the business you are doing. Incorporating your enterprise will isolate your personal assets from those of your company. The Corporation (or Limited Liability Company LLC) helps shield your home, private bank accounts, cars, retirement savings, etc. – from the ongoing threat of business related lawsuits.
The second benefit of forming a corporation is the possibility of tax write offs. Legitimate business expenses related to health insurance, rent on a home office, travel/entertainment, office equipment expenses, etc…can significantly reduce the business owner’s tax bill.
The third benefit of forming a corporation is avoiding double taxation. Double taxation occurs when corporate income is subjected first to federal income tax, and then taxed again as personal income when it is returned to shareholders in the form of dividends.
A fourth point to consider is that for individuals, only a US citizen may open a US bank account. In contrast, any US corporations, even those owned by non US citizens, may open US bank accounts.
Q: What is an EIN number?
A: In the United States, an EIN (employer identification number) is to a corporation what a social security number is to a person. The IRS (Internal Revenue Services) issues the nine digit number to identify taxpayers which are required to file, for various reasons, a business tax return. Employers may choose to obtain an EIN or use their Social Security Number for the purpose of reporting taxes withheld on behalf of their employees.
Q: Is Delaware a good place to start a corporation or LLC?
A: Delaware provides powerful benefits for entrepreneurs. There are no personal residency requirements to open a Delaware Corporation or Limited Liability Company (LLC). You do not have to be a US citizen to form an LLC or C Corporation in this state. Directors meetings can also be organized outside of Delaware. The business office and actual control of the registered Delaware business can take place anywhere in the world. There are also no minimum capital requirements to register your Delaware business. No corporate income taxes are owed to Delaware if your company’s daily commercial activities are conducted outside of the state.