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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 has been fighting a long-running battle
to be able send information on interest payments from
such accounts to the individual's home tax authorities.
As of the end of 2005, the situation remained unresolved,
although the new regime is in operation for Canadians,
and pressure from Europe has lessened since Brussels
went ahead with its own Savings Tax Directive in July,
2005..
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.
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