CPA, Tax Attorney, Tax and Legal Adviser to Startups and Established Businesses, Specialize in International Taxation
If you are a nonresident for U.S. tax purposes, you do not need an ITIN or an SSN to apply for an EIN for an entity.
The online application process is the fastest, but this system is not available for nonresidents. You need to download and fill out a Form SS-4 for your company and name yourself as the responsible party. In the field where it asks for your "SSN, ITIN, or EIN" enter the word "FOREIGN" to indicate you are a nonresident. Mail or fax the completed form to the IRS and wait for them to assign your EIN. Alternatively, you can contact the IRS via phone and fax the form to the representative once they provide you with their dedicated fax number.
There are two main considerations. First, if you are selling products to U.S. residents located in various states, you may be liable to collect state sales tax depending upon the residency of your customers. Second, you may be liable for federal income taxes on your net earnings if it's determined that you are engaged in a U.S. trade or business and have income effectively connected with that U.S. trade or business. The rules for determining whether U.S. source income is effectively connected income are quite complex with many nuances. For the sale of inventory in the U.S., the old "title passage rule" used to apply. If title to goods passes outside of the U.S., income from sale of the goods was deemed foreign source and not subject to U.S. federal taxes. The recent tax law changes under the TCJA have modified these sourcing rules. If products are manufactured outside of the U.S. and then sold to U.S. customers, the proceeds are foreign source and not subject to U.S. tax. You also need to be mindful of the treaty provisions that may apply. The U.S. and U.K. have an income tax treaty which provides that a U.K. company's business profits will not be subject to tax in the U.S., unless the U.K. company operates a permanent establishment in the U.S. What constitutes a permanent establishment depends upon the specific facts and circumstances of your situation, so it's important to consult with a knowledgeable tax advisor and consider all of these issues.
If you're a non U.S. corporate group and you're looking to expand operations into the U.S., generally the first step is to form a separate legal entity within the U.S. For example, you can form a Delaware C corporation which is 100% owned by your non-U.S. parent company. In order to protect the assets of your parent company and other operating subsidiaries, the U.S. based corporation must follow all of the required corporate formalities. You'll need to adequately capitalize the Delaware corporation, perform all annual filings and required tax returns, maintain adequate records of corporate decisions, etc. It's also recommended that the Corporation maintain adequate liability insurance coverage for the business operations, which would vary depending upon the nature of your business and the types of risks associated with your activities.
The tax rules will vary depending on what country you want to incorporate and where you will operate your business. The type of entity you select will also impact this answer. If you are looking to form a corporation in the United States, then startup costs incurred prior to forming the corporation can be deducted to a certain extent, but are generally capitalized and amortized over 180 months. It's usually best to form the corporation early in the process to avoid having to amortize a lot of these expenditures. After incorporating the company, if you are not generating sufficient revenue to cover operating costs, you can certainly contribute additional funds to the corporation from your personal bank account. When shareholders contribute cash to the corporation, the contributions are classified as contributed capital. Alternatively, you could structure the contributions as a shareholder loan rather than an equity contribution. I would recommend consulting with a tax advisor to discuss your unique facts and circumstances in more detail.
NDA's are certainly a must have for new startup companies, especially if you are developing intellectual property. I would recommend consulting with an attorney that is licensed in your home state. Attorney's have very strict client confidentiality obligations, so you won't need an NDA with your own attorney, but you will likely need one for employees, vendors and other subcontractors.
There are a lot of options here, but I think you may have already found the best option which is setting up a holding company to own separate subsidiaries. It's not uncommon for a holding company to create a conglomerate which owns many different businesses across multiple industries, even businesses that compete against one another. In your case, it would make sense for the holding company to act only as a shell company that owns the stock of the underlying entities, rather than an entity that performs day to day management functions for both subsidiaries.
Based on the fact pattern you provided, it sounds like the entity would be classified as an investment club, so there are no licensing requirements, nor is the entity regulated by the SEC. If all of the LLC members are actively participating in the investment decisions, and you do not accept capital from outside passive investors, then you should be okay. However, you still need to be mindful of all state and local regulations that may apply to LLC's in your jurisdiction. I would recommend consulting an attorney to discuss your specific facts and circumstances.
No, this structure will not work. An S corporation is only permitted to have eligible shareholders, which include U.S. citizens, permanent residents, qualified subchapter S trusts, and certain types of estates, trusts and exempt organizations. S corporation shareholders cannot include C corporations, partnerships and other multiple member LLC's. If a C corporation owns S corporation stock through a single member LLC, the U.S. tax laws would disregard the single member LLC's ownership and consider the true owner of the S corporation to be the C corporation, and not the LLC.
Your company is required to file Form 1099-MISC for each person you paid rents of at least $600 during the year. There are, however, certain exceptions where some payments do not have to be reported on Form 1099-MISC. Generally, any payments made to a C corporation, S corporation, or an LLC treated as either a C or S corporation, are exempt from reporting. In addition, payments to a tax exempt organization are also exempt from reporting. You should request the non-profit organization complete and sign a Form W-9 which certifies its tax exempt status. You can certainly report the rents if you wish, but you are not obligated to report rents or other payments to tax exempt organizations.
If you're going to hire overseas engineers to perform work for your U.S. based company, you should be mindful of federal and state laws, as well as the laws of the foreign country where your engineers live and work. First, determine whether you want these individuals to be employees of your company, or merely serve as subcontractors hired to complete specific tasks. Generally, the subcontract relationship is easier from a compliance, reporting and tax perspective. When hiring a non-U.S. contractor, the contractor completes an IRS withholding certificate in order to verify the individual or company is not a U.S. tax resident. Foreign individuals sign a Form W-8BEN, a foreign corporation would complete W-8BEN-E, while a foreign partnership would complete a Form W-8IMY. So long as the foreign contractor is performing the work outside of the U.S., there should not be any U.S. tax withholding issues. It can become complicated if, on occasion, you have the developers travel to the U.S. to perform work. The nonemployee compensation could be considered U.S. source earnings and subject to federal and state taxes in the U.S.