Summary Of Corporate Forms A summary of the tax characteristics of different corporate forms.

Domestic International Sales Corporation The DISC was used in conjunction with Foreign Sales Corporations, but has been reborn following 2003 legislation.

Limited Partnership Limited Partnerships are often used for investment-holding purposes, and have 'pass-through' status for domestic partners.

Summary Of Corporate Forms

This section describes US organisational forms which can be used in tax-effective structures, both for US residents and for non-residents. Although US taxes are hard to escape for residents, there are many ways of legally minimising tax; and for non-residents, taxation is entirely avoidable in most investment situations.

A corporation is normally a 'C' corporation (taxable under Chapter C of the Tax Code). Certain types of smaller corporation can be taxed under Chapter S of the Tax Code, which allows a 'pass-through' of income for tax purposes. These are known as 'S' Corporations.

Limited Liability Companies and partnerships that carry on no business in the US and derive no income from any sources within the US do not need to file a US federal tax return. The US can thus be a conduit for foreign business or foreign investments - the LLC allows the foreign business or foreign investor to use many of the United States' tax treaties. However, an LLC that elects to be treated as a corporation does need to file a return.

Confidentiality remains good in the US, although the Treasury Department is continually trying to breach banking secrecy and professional confidentiality. Unlike Europe, the US has no OECD- inspired 'know your client' rules; companies and trusts can be formed discreetly and no record of ownership or directorship is filed with the Government. Non-resident ownership of a US bank account incurs no taxation, although the Treasury Department fought a long-running battle over the sending of information on interest payments from such accounts to the individual's home tax authorities.

Procedures for the formation of companies, partnerships and trusts vary somewhat between states. As an example, to incorporate in Delaware, a favourite location for companies, or to form a limited liability company, a certificate of incorporation (for a corporation), or a certificate of formation (for a limited liability company) needs to be filed with the Division of Corporations, along with the appropriate fees. The corporation’s by-laws or limited liability company’s membership operating agreement are not needed for the initial formation process when filing these articles of incorporation.

Most states permit the formation of a 'close' ie privately owned corporation, which is eligible to elect “S” Corporation status with the IRS. However, a close corporation cannot have any non-resident aliens as shareholders.

A Limited Liability Company acts in many ways like an “S” Corporation, but can have non-resident shareholders, as can a Limited Partnership. However, a Limited Partnership generally offers less protection of personal assets than does an LLC; neither of them is as robust as a trust in asset protection terms.

Summary Of Corporate Forms A summary of the tax characteristics of different corporate forms.

Domestic International Sales Corporation The DISC was used in conjunction with Foreign Sales Corporations, but has been reborn following 2003 legislation.

Limited Partnership Limited Partnerships are often used for investment-holding purposes, and have 'pass-through' status for domestic partners.