Did you know…
…that, in Ireland, the most common Director firstname is John and surname is Murphy? Or that the most common Director star sign is Cancer and the most common Director postcode is Dublin 4? So if you’re name is John Murphy, you live in Dublin 4 and have a birthday sometime between 22nd June and 23rd July…it looks like you’re destined to be a Director of a company…if you believe in that sort of thing!
This is from the IRS website:
Q. A non resident alien who doesn’t meet the 183 day test is a partner in a US partnership where the US partnership deals with rentals; must he file an FBAR?
A. With the October 2008 revision to the FBAR form and instructions, FBARs are now required by nonresidents who are in, and doing business in, the United States. Whether a person is a nonresident alien for tax purposes has no bearing on the person’s FBAR reporting obligation. The domestic partnership may have to file FBARs if it has a financial interest in, or signature authority (or other authority that is comparable to signature authority), over a financial account that is located in a foreign country. Whether a person is considered to be in, and doing business in, the United States is determined based on an analysis of the facts and circumstances of each case. Generally, a nonresident is not considered to be in, and doing business in the United States for FBAR reporting purposes if he only holds a partnership interest in a domestic partnership.
OK, so what does this mean? The above case says that the non-resident, with just a partnership interest in a US partnership, doesn not have to disclose all his foreign (non-US) bank and financial accounts to the US Treasury; but, by extension: Suppose you are a Canadian corporation; you send salespeople on a regular basis to clients in Buffalo and Detroit. Somewhere between 2 trips a year and opening a full time office, a line gets crossed, and your Canadian bank accounts must be reported to the US Treasury Dept by the following June 30, or face steep fines AND IMPRISONMENT for the officers and directors of the company:
Q. What happens if an account holder is required to file an FBAR and fails to do so?
A. Failure to file an FBAR when required to do so may potentially result in civil penalties, criminal penalties, or both. If you learn you were required to file FBARs for earlier years, you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause. Keep copies, for your record, of what you send.
What to do if you are in this situation?
Q. How do foreign account holders report their accounts to the IRS?
A. The holders report their foreign accounts by completing boxes 7a and 7b on Form 1040 Schedule B and completing Form TD F 90-22.1
To help small businesses, the US Homeland Security Dept along with the IRS and the rather more benevolent Small Business Administration teamed up to provide the following guide: Planning for 2009 H1N1 Influenza A Preparedness Guide for Small Business.
The guide provides tips for developing a response plan for a flu pandemic that can affect a business and its employees, and is well worth a read. The fact that it is free is an added bonus.
This year, The Wharton School (perennial competitor to my alma maters, Columbia Business School and London Business School) has again generated some interesting ideas in its annual Business Plan Competition: Article
This year, hi-tech ideas have yielded ground compared to
This year’s competition had 168 entries, showing the huge involvement of the student body of the University of Pennsylvania even in these tough economic times. As the article says:
This year, with the economy in disarray, business plans from the “Great Eight” finalists played the field, with products ranging from a new training machine for crew teams to artificial eyes that dilate to a noninvasive way of measuring blood sugar levels.
Venture funding is drying up quickly, and what is out there is so expensive as to attact only the most desperate. In spite of this, these contestants gave it their all to compete for the $70,000 in funding.
What does all this mean? If you are considering starting a business, it’s still not a bad time to start, but be careful of where your funding is coming from! Plan carefully and think through what you want to do and how you will earn more than your cost of doing business. Master these critical matters and your business will do well in bad times or good times.
The accounting firm Marcum & Kleigman LLP has an interesting article about avoiding problems with sales tax filings for business. Sales tax is a major revenue source for states, especially New York, so never mess with them on this point. I personally knew one of the agents from this section; while a nice guy personally he had no qualms about shutting down an uncooperative business. Check out this article: Marcum & Kleigman sales tax audits
USA Corporate Services helps new businesses register for sales tax as part of our startup services. Check out our services at USA Corporate Services Inc.
As reported at Sales Tax Defense, the State of New Jersey is holding a fund raiser by offering to waive criminal pursuit if you will just pay up missing reports and taxes before the end of the amnesty. Naturally, failure to play be the rules means additional penalties beyond just the normal punishments so it will pay you to pay up. It’s New Jersey, so there are some odd rules that need to be worked around but well worth the effort if you like to sleep at night.
Amnesty FAQs: Amnesty FAQ
Amnesty FAQs for Practioners and “Special Situations” Special FAQs
Amnesty forms: Amnesty Forms
Try this quiz and see how you do: ENTRPRENEUR QUIZ
I got an 18…
LLCs and corporations are different in more ways than just letter combination. Each derived from different types of laws, and therefore come with significant baggage.
Corporations, owned by shareholders and ruled by a Board of Directors through hired officers, are the result of centuries of entrepreneurs using other people’s money to produce profits. This led to protection of those investors from unforeseen events caused by the entrepreneurs. The Board was developed as an oversight of the operation, to protect the shareholders from unscrupulous managers, and therefore is strictly liable to look after the shareholder’s investment. Like a corporate republic, shareholders are the “citizens” of the company, with one vote for each share of stock they own. They use the total number of shares to vote for the directors they favor to govern the republic.
Boards hire managers to run a company day to day. Although top management is usually on the board as well, prudent shareholders also want independent directors to ensure that the insiders are not putting their interests before that of the owners. Shareholders themselves are forbidden from running the company – that has been delegated to the board members and the management they hire. Shareholders also cannot just walk into their investment’s place of business and grab something off the shelf; they can only receive benefits granted by the managers – primarily the dividends granted from profits generated from the company or capital gains from selling shares of the company at a higher price than what they bought the shares for. Shareholders are not liable for anything done by the corporation beyond the risk of the capital invested (the definition of “limited liability”), in exchange for which the shareholder has no control over the management of the invested company.
The application for authority and what it really means
The filing of an application for authority in a state means that the company is allowed to do business there. The laws that administer how the company is run are unaffected – this is covered by the laws of the state where it is incorporated. However, within the ‘new’ state the company must follow the same rules and regulations as a local company, and generally will pay the same taxes.
To illustrate:
Company A is a New York corporation, Company B is a Delaware corporation. Both are neighbors in an office building in Albany. Company A filed its Certificate of Incorporation with the Secretary of State of New York, has 200 shares with no par value which are issued to one person, who is also the director and the president. Company B filed its Certificate of Incorporation with the Secretary of State of Delaware, then obtained a certificate of goodstanding and prepared an application for authority to do business in New York, filing the goodstanding and application with the Secretary of State of New York.
Each year, the New York corporation and the Delaware corporation will file their corporate tax returns with the IRS and NYS Dept of Tax and Finance, and will have to follow essentially the same tax rules for each. Every two years, they will have to file a biennial report to the New York Secretary of State, listing the Chairman and directors, the address for process and other information. However, Company B will also pay a registered agent in Delaware to provide a registered address within the State, will file an annual report and pay a Delaware franchise tax of at least $100. Each year, the two corporations will be required to hold annual meetings of the shareholders and the directors; however the rules governing these meetings, and what is allowed to be approved and by whom will be different.
Because the laws governing these corporations are different, there will be times these differences matter. For example, after five years, both Company A and Company B have faced difficult times and are looking to close up. The shareholder of Company A, out of money and out of business, is personally liable for the unpaid wages of his employees, while the shareholder of Company B, incorporated in Delaware, is not.
Often we get asked, where should we incorporate? What’s all this about Delaware?
Here’s our rules of thumb:
If you do business in different jurisdictions, or incorporate in a state different from your current location, you will have to file for authority to do business in your state. This document, which may have somewhat different names in different states, registers your company (LLC, corporation, not for profit or whatever type of entity you are) officially, and prevents any other company from using your name in that state.