[ESTABLISHING A BUSINESS ENTITY IN THE UNITED STATES] 532
with input from both the accountants and lawyers advising the business. Withholding tax issues can be particularly important for non-United States investors in partnerships, limited liability companies, and other pass-through entities. Generally, these entities must determine withholding tax liabilities at the time income is earned, not at the time distributions are made. As a result, there may be withholding taxes due from the entity even when no distributions are made. In addition, a 10% withholding tax may apply to sales of an interest in a partnership or LLC taxed as a partnership that is engaged in a U.S. trade or business by a nonresident alien individual or foreign corporation. In general, for a United States corporation, withholding taxes are due at the time of a transfer, and there is an annual report filing by March 15 of the following year. Withholding taxes can often be substantially reduced or eliminated under a tax treaty but taking advantage of the tax treaty will require the timely filing of a form (W-8BEN or W-8BEN-E) with the United States Internal Revenue Service
executive may be well-advised to engage in tax planning prior to becoming resident in the United States in order to minimize the impact of these requirements. c. Special Business or Investment Visa Issues Anytime a business in the United States wishes to host, train, or employ a foreign national not already authorized to work in the United States, they must obtain the appropriate immigration status for that worker or face penalties. A visa is a passport stamp, issued by the State Department, which allows the foreign national to travel to the United States and request admission under a particular immigration status. In most cases, the underlying immigration status justifying a visa must also be approved by U.S. Citizenship and Immigration Services prior to applying for a visa at a U.S. consulate abroad. A brief discussion of several of the most widely used classes of temporary and permanent visas (statuses) follows in this Section. Importantly, due to the Covid-19 pandemic, several Presidential Proclamations remain in effect indefinitely, which impose restrictions on the entry of certain travelers who have been physically present in 33 countries, including Brazil, China, India, Iran, Ireland, South Africa, United Kingdom and the European Schengen area during the 14-day period preceding their entry to the United States, including most business visa holders, in an effort to help slow the spread of Covid-19. Certain categories are exempt from the proclamations, including permanent residents and spouses/minor children of U.S. citizens. For certain business travelers, including those working in the critical infrastructure sector, as well as healthcare professionals combatting Covid-19, National Interest Exception waiver (NIE) requests can be submitted to consulate for consideration on a case-by-case basis. If granted, the NIE remains valid for twelve months. Importantly, most U.S.
claiming treaty benefits. iv. Employee Tax Issues
The United States also requires all employers, regardless of what form of entity is used, to withhold taxes from amounts paid to employees, and to file employment tax returns showing all such amounts. Most businesses will use a local payroll servicing company to manage the withholding process. Executives transferred to the United States will have special considerations. Upon becoming a resident in the United States, an executive will be taxed in the United States based on his or her worldwide income (subject to credits for foreign taxes paid) and will be required to fully report all non-United States bank accounts and possibly other holdings. In many cases, an
ILN Corporate Group – Establishing a Business Entity Series
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