Frequently Asked Questions

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FAQs

WHAT IS AN LLC?

LLCs (Limited Liability Company) are considered “Pass-Through Entities”. This means that the profits/losses of the business are “passed through” to the owners. Profits and losses are taxed on the owners’ individual taxes, not at the company level. Therefore, the LLC is never taxed. The owners of an LLC may be required to pay the Self-Employment tax of up to 15.3% on top of the profit. The rate at which the owner is taxed depends on their total income.

FAQs

WHAT IS A CORPORATION?

Corporations are taxed on their profits at a flat rate of 21%. When profits are distributed to shareholders, they are taxed as individuals. This is known as double taxation. However, one of the advantages is that corporations can deduct business expenses, such as advertising costs, operating expenses, employee benefits such as health and retirement plans. All these deductions result in substantial savings for the business over time.
FAQs

WHAT IS AN S-CORPORATION?

Like LLCs, S-Corporations are also “Pass-Through Entities”. Profits are taxed on the owners’ individual taxes, not on the company’s declared tax. Therefore, this type of corporation avoids the double taxation of the C-Corporation.

The best tax advantage of an S-Corporation is the exemption from paying Self-Employment taxes (up to 15.3%) on the owner’s individual tax. However, it is not possible to “birth” an S-corporation. First, you must incorporate an LLC or C-Corporation with your state. If your company meets the IRS criteria for electing this tax entity, OGC Tax Pros can assist you throughout the application process to transform your company into an S-Corporation.

FAQs

WHAT IS THE BEST TYPE OF COMPANY TO OPEN IN THE U.S.?

LLC vs. C-Corp
These two company options are legal entities that protect members from personal liability. The main difference lies in how they are taxed by the IRS.

LLCs are “pass-through entities”. This means that you don’t have to pay federal income tax. Instead, their profits and losses go straight to the owners. Therefore, the owner pays tax on their personal return, and is taxed at the individual rate. Since only members pay tax, taxation only happens once.

With C-Corporations, double taxation occurs. All C-Corporations pay a flat rate of 21% on their profits for the year and a second tax on the distribution of profits to individuals. C-Corporations make it easy to raise capital by selling shares. Consequently, ownership of the company is easily transferable through the sale of shares.

To find out which type of company is right for you, contact us and we’ll be happy to help you take the next steps towards having a successful business in the USA.

FAQs

CAN STARTING A BUSINESS IN THE U.S. BE DONE REMOTELY?

The process of opening a company in the USA can be done remotely, so the partners can be in Brazil or anywhere else in the world and still be able to register their business.

As long as you have a valid passport and visa, any foreigner can open their business in the country.

What do you need to open your business in the USA?

  • Decide on the name you want
  • The purpose of the company
  • Determine who the partners will be
  • What the company’s address will be

For more information on the next steps, contact OGC and start your entrepreneurial journey in the USA.

FAQs

HAT IS THE PENALTY IF I FILE MY TAX RETURN LATE?

If you don’t file your taxes by the deadline, which is usually April 15th, you will have to pay interest and penalties to the IRS on the balance due. The late penalty is usually 0.5% for each month up to a maximum penalty of 25%.

When you file your tax return late with a balance due, another unpleasant penalty is applied; the late filing penalty, which is 5% per month for a maximum period of five months. For example, if you owe US$ 5,000 in taxes and haven’t filed by the deadline of April 15 or September 15 (in the case of an extension – Individual), the late filing penalty can be as high as 25% or US$ 1,250. Use OGC Tax Pros‘ services to avoid missing deadlines and paying IRS fines.

FAQs

WHO CAN BE CONSIDERED AN AMERICAN TAX RESIDENT?

It depends on your visa and the substantial presence test. There are different visas for immigrants and some of them give you tax resident status. The tourist visa does not give you this status, but the special skills worker visa does.

In general, if your visa offers you the possibility of having a Social Security Number, you are considered an American tax resident. If you have a business in the US but your visa doesn’t qualify you as a tax resident, you must have an ITIN number to declare your income tax.

The other qualification is through the substantial presence test. To pass this test, you must be physically present in the United States (U.S.) on at least
31 days during the current year, and
And a total of 183 days during the 3-year period that includes the current year and the 2 immediately preceding years according to the formula below:
– All the days you were present in the current year, and
– 1/3 of the days you were present in the first year before the current year, and
– 1/6 of the days you were present in the second year before the current year.

Example:
You were physically present in the USA on 120 days in each of the years 2018, 2019 and 2020. To determine if you meet the substantial presence test for 2020, count the full 120 days of presence in 2020, 40 days in 2019 (1/3 of 120) and 20 days in 2018 (1/6 of 120). As the total of the 3-year period is 180 days, you are not considered resident for the substantial presence test for 2020.

FAQs

WHAT IS ITIN NUMBER?

The Individual Taxpayer Identification Number (ITIN) is your CPF for foreigners in the USA. The US Internal Revenue Service issues ITINs to individuals who need to have a US taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security Number (SSN) which is the CPF for US citizens and tax residents.
FAQs

WHAT IS AN ITIN USED FOR?

The IRS issues ITINs to help individuals comply with US tax laws and to provide a means of efficiently processing and accounting for tax returns and payments for those not eligible for a Social Security Number. They are issued regardless of immigration status, because both resident and non-resident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. ITINs have no purpose beyond filing federal tax returns.

An ITIN does not:

Authorizes you to work in the U.S.
Provides eligibility for Social Security benefits