Registering a business in the U.S. may not be as simple as many believe

Many people confuse the complexity of the U.S. Tax Code as it relates to business with the simplicity of a company registration in the United States. It takes less than an hour with some states to register, but it may cost thousands per year in missed tax benefits if proper taxation was not considered. According to Bloomberg, 8 out of 10 businesses fail in the first 18 months. However, those 2 that survive will have to pay taxes. Being thoughtful of tax risks from the get-go will help you lay out the foundation for future growth and save a lot of money for the company and its owners.

Here are 5 reasons why you should speak to a CPA after you spoke with an attorney, but before you actually register your company with a state:

  1. Evaluate the tax consequences while operating a business
  2. Evaluate the tax consequences of exiting the business
  3. Determine the state of residence (head office) for the business – not to be confused with the state of registration. It requires a state nexus discussion.
  4. Determine the right entity type. An attorney would help you choose between a corporation, a partnership or an LLC based on, mostly, non-financial considerations, but your true decision is based on the U.S. Tax Code. An LLC could be treated as a C corporation, S Corporation or a partnership. Your personal financial situation and the legal status in the U.S. becomes of paramount importance.
  5. Account for startup expenses

The accountant’s role in planning entities is usually underplayed by the attorneys as accountants get in their way of addressing non-financial priorities. Thus, a tax advice is often overdue and works mostly to state the facts in reactive manner as opposed to proactive planning. “Preventive tax medicine” always keeps you ahead of the game.

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