Information Center (FAQ) Information Center (FAQ)

      FAQ

      1. Why incorporate in Delaware?
      2. What's the difference between a Corporation and an LLC?
      3. Tax Issues
      4. Words of Wisdom from a Tax Professional concerning US companies owned by non-US persons
      5. I live in **, can I use VALIS' services?
      6. What forms of Payment does VALIS accept?
      7. Can I fax you my documents instead of Uploading them in your secure Upload Area?
      8. Can VALIS help me to get a PayPal account?
      9. Why do your competitors only charge $25 for EIN retrieval?
      10. Do I need a SSN or ITIN to get a bank account?
      11. Can a business open a bank account?
      12. Can I withdraw from my PayPal account to my new bank account?
      13. Can I use an expired passport?

      ANSWERS

      1. Why incorporate in Delaware?

      Most importantly Delaware has:
      NO SALES TAX
      NO PERSONAL PROPERTY TAX
      NO INTANGIBLE PROPERTY TAX

      Corporate...
      Delaware state income tax is not levied on corporations which are not doing business in Delaware.
      Annual franchise tax is low ($75).
      One person can be the only Officer, Director, and Shareholder.
      Officers and Directors can be indemnified, limiting their personal liability.
      Corporate books and records may be kept anywhere in the world.
      No minimum amount of capital is required.
      Non-resident shareholders pay no Delaware tax on shares.
      Shareholders are protected by takeover statue, which limits abusive hostile takeover tactics.
      Directors need not be shareholders.
      Service from the State of Delaware is fast and efficient.
      Incorporation costs are low.
      Most Delaware corporations can be formed within minutes and documents are available within 24 to 48 hours.
      Delaware corporation law has well-established legal precedent.
      Delaware courts are respected nationwide for their expertise in corporate matters.
      Voting provisions requiring greater-than-majority approval may be enacted.
      Liberal choice of corporate name provisions and ease of reserving corporate name.
      Corporation may pay dividends from profits and surplus.
      Shareholders, directors and/or committee members may act by unanimous written consent in place of formal meetings.
      Directors may be given the power to make and alter by-laws.
      Corporation may hold stocks, bonds or securities of other corporations, real and personal property, within or outside the state, with no limitation as to amount.
      Different kinds of business may be carried on in combination.
      Corporation may fix quorum of board of directors -- not less than one-third of the whole board; two if only two shareholders; one if only one shareholder.
      Voting trusts and voting agreements may be created.
      Generally, stockholder liability is limited to stock held in the corporation.
      Delaware law includes Close Corporation provisions.
      Classes of stock may be issued in series.

      LLC...
      Delaware has maintained a preeminent position with its Limited Liability Company stature.
      Delaware law does not require that the name of any member of the LLC be disclosed in the certificate of formation. Some states require the publication of the names of all members.
      Unlike other states, single member LLC's are permitted.
      The creation of your LLC may be your only contact with Delaware. Delaware does not require you to have any meetings in the state nor are you ever required to visit Delaware.
      A Delaware operating agreement may contain provisions which deny voting rights to some members and may also exculpate members and managers from personal liability and may permit indemnification. Delaware permits maximum flexibility in drafting operating agreements. Companies may be managed by its members or by a manager.
      Delaware does not impose any income tax on LLC's which do not transact business in Delaware. Additionally, Delaware does not impose either an income tax or inheritance tax upon members who are not Delaware residents.
      Delaware permits terms in the operating agreement which will exculpate managers, members, agent and employees from personal liability for management of the company and permits indemnification of those persons by the company.
      Unlike other states, no minimum capital is required.
      Neither members nor managers need be US citizens. Units of ownership may be owned by individuals, corporations or any other business entity existing under either US or foreign law.
      There are no limits on the type of legal business which a company may transact.
      Annual State fees are $250

      Go to top added/updated @ 2006-09-02 14:17:51

      2. What's the difference between a Corporation and an LLC?

      LLC or Corporation?
      We have received many e-mails asking us the difference between a general corporation and a limited liability company (LLC). We will try to answer your questions and provide you with some general information about corporations and LLC's. Please remember that this article is not intended as a substitute for good legal or accounting advice.
      The law of corporations date back many years. Most people understand that a corporation is viewed as an entity separate from its owners (shareholders) and the shareholders are not personally liable for the debts of the corporation unless they have agreed to be liable (responsible) or are guilty of fraud. The term "limited liability" refers to the concept that generally the shareholder's liability for the debts or obligations of the corporation is limited to the amount of money already paid to the corporation for the stock.

      Limited liability companies are a relatively new creation. LLC's were first created by Wyoming in 1977. Delaware created its Limited Liability Company Act in 1992. In the 1960's and 70's several states including Delaware adopted close corporation acts which were intended to create flexibility in the operation of limited liability entities. These companies never became popular because of the limitations and rigidity contained in the law. Delaware's Act was drafted to avoid that rigidity and to provide the required flexibility. It is important to remember that there is no requirement that either a shareholder of a corporation or the member of an LLC be an US citizen or resident. The same applies to officers, directors and managers.

      The IRS has ruled that a company which under its state's law qualifies as an LLC will not be taxed at the entity level but its income and loss will be taxed to its owners who are called in the context to an LLC, members. If an LLC has only one member, the IRS still recognizes it as an LLC, however the entity is disregarded and is, for tax purposes only, treated as a sole proprietorship. A single member LLC has the same limited liability as a single shareholder corporation.

      An LLC owned by ONE non-US person or ONE non-US registered company, will be considered a disregarded entity as long as there is no Nexus (significant presence) in the USA. A bank acount and mail forwarding service does not generally constitute Nexus (according to our accountant). A disregarded entity does not have to file a federal income tax return in the USA each year. The IRS expects you to declare any company income in the owners taxes, wherever those happen to be filed/paid.

      An LLC can be viewed as a partnership whose partners have limited liability. It has all of the best features of partnerships and corporations with none of their rigidity. As with a partnership, the relationship between the partners, and the partners with the company, is determined by an agreement. In an LLC that agreement is called an operating agreement. The operating agreement may be either written or oral. If no operating agreement is adopted, the Act is the default operating agreement. We do not think that it is wise to have an oral operating agreement.

      The company may be managed by all or just some of its members. If it is managed by less than all of its members it is considered to have centralized management. The person(s) who manage the business is then called the manager. There may be just one manager. The manager need not be a member. We speak about either member managed companies or manager managed companies. Managers are similar to officers and directors. A manager may have a title such as president.

      Delaware's Act is considered to be the most modern and most flexible in the nation. Delaware places almost no limitation on the ingenuity of attorneys and business persons in drafting operating agreements.

      Unlike a subchapter S corporation an LLC is not subject to rigid tax laws dealing with who may be a shareholder, the nature of the business of the company, the number of shareholders or any tax requirement that a tax election forms to be filed with the IRS. Please remember that an S corporation must pay FICA taxes on wages paid, including wages paid to shareholders, but not on earnings and profits (dividends). Members of an LLC, except those who do not participate in the management of a company with centralized management, must pay self employment taxes on income derived from the LLC.

      Delaware requires that corporations report the names and addresses of its officers and directors on an annual basis. There is no filing of any names associated with a LLC. The franchise tax report is not even signed by the LLC. Membership or management of a Delaware LLC can truly anonymous. It is important to note here that the moment you register your LLC with the IRS (to get a bank account or otherwise), the anonymity is gone.

      Go to top added/updated @ 2004-03-02 14:18:33

      3. Tax Issues

      LLC TAX ISSUES:
      Any single member LLC, where that sole member is a foreign person for U.S. tax purposes (meaning he or she is not a US citizen, does not have a U.S. green card or who does not reside in the U.S. for more than a month or so each year) - the LLC is ignored for U.S. and most states income tax purposes. Accordingly, any income earned is treated as earned directly by the foreign person. Such income is not subject to U.S. taxation so long as the foreign person did not perform his services or sales activity in the U.S. himself or thru an employee or agent. This means no person (the foreign person, employee of the foreign person or agent thereof) is physically present in the U.S. while earning the income. It is apparent that many, if not most of the single member LLCs are conducted purely over the internet with no physical presence in the U.S.

      For example: If a French citizen, the owner of Internet business that sells goods over the internet receives an order from a U.S. citizen. The order is received, goods shipped and invoice sent by the French sole member of a U.S. LLC. The Sole member never sets foot on U.S. soil - nor did he have any employees or agents conducting his business on U.S. soil.

      Would the income earned be taxable in the U.S. or require a return to be filed in the U.S.?

      The answer is NO...no reporting of the income nor are payments of any taxes required. I hope this is clearer. This rule only applies to the Single Member LLC.

      TAX ISSUES SUMMARY:
      You would not have to file a federal LLC tax return if there is no activity in the USA and you meet the rest of the criteria discussed above. If there is more than 1 owner/member then this rule doesn't apply and you will have to file a U.S. LLC return.

      If you anticipate 2 or more owners, then you can form either an LLC or a CORPORATION. You will have to file a US LLC or Corporate income tax return each year even if the profit is $0. However, there are several tax mitigation strategies you can employ to legitimately reduce any U.S. taxable income. Paul will be happy to discuss these with you on a client by client basis.

      We can recommend an accountant for you if you are interested in having help with your year end statements (or anything else), just email us with this request and we'll send you the details and cc. the accountant so they are expecting you.

      This FAQ answer was provided by Paul Phillips, of Consulting Sciences, Inc., paul @ eoag.com.

      Go to top added/updated @ 2005-01-04 10:15:34

      4. Words of Wisdom from a Tax Professional concerning US companies owned by non-US persons

      Words of Wisdom from a Tax Professional concerning US companies owned by non-US persons

      Go to top added/updated @ 2004-03-02 14:21:17

      5. I live in **, can I use VALIS' services?

      As long as you don't live in a country that the USA disallows business with we can open an account for you. Currently we can't work with people living in or citizens of North Korea, Cuba, Libya, Iraq, Iran, Sudan, Syria, and UNITA-Controlled Portions of Angola.

      Go to top added/updated @ 2008-06-19 14:12:08

      6. What forms of Payment does VALIS accept?

      VISA, MasterCard, Discover, Wire Transfer, Western Union, and US$ International Money Orders.

      Go to top added/updated @ 2009-03-02 14:11:25

      7. Can I fax you my documents instead of Uploading them in your secure Upload Area?

      Yes, but they have to be readable, most of the time they aren't. It is better if you upload them in your secure Upload Area.

      Go to top added/updated @ 2004-03-02 14:16:45

      8. Can VALIS help me to get a PayPal account?

      Yes and No. PayPal will approve you or not based on their own policies, often they will approve you even if you don't live in a pre-approved country, with the stipulation that you first get a US Bank Account in your company name. Contact PayPal for info then come and get a USBPP and a Corporate account from us. The USBPP does qualify you for a US Business PayPal account.

      Go to top added/updated @ 2007-06-27 09:03:54

      9. Why do your competitors only charge $25 for EIN retrieval?

      Because they only get an EIN for a company who's owner is a US Resident with a SSN. We can get an EIN for a company who's owner is a non-US resident without a SSN.

      Go to top added/updated @ 2009-03-20 00:00:00

      10. Do I need a SSN or ITIN to get a bank account?

      No, but you will need an EIN for your company, which we can get for you. If you are a US citizen or Resident, or you already have an ITIN or SSN the bank will need it, but if you don't they'll do fine with a W8-BEN.

      Go to top added/updated @ 2007-06-27 09:09:59

      11. Can a business open a bank account?

      Businesses can open an account if they are US Corporations. We can setup a US Corporation et al for you: USBPP
      For details on opening an account: Banking

      Go to top added/updated @ 2004-03-02 14:13:12

      12. Can I withdraw from my PayPal account to my new bank account?

      Yes using the PayPal "Withdraw" feature, it is completely free.

      Go to top added/updated @ 2007-06-27 09:13:50

      13. Can I use an expired passport?

      No, only valid International passports can be used.

      Go to top added/updated @ 2004-03-02 14:15:33