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USA

Why United States of America?

Located in North America, bordered on the west by the Pacific Ocean and on the east by the Atlantic Ocean, United States of America is the world’s fourth largest country in size and the third largest in terms of population. Official United States of America is abbreviated as U.S. or U.S.A., by the name of America. It consists of 50 states and a Federal District. The country is the world’s greatest economic power, measured in terms of gross domestic product (GDP). Moreover, the wealth of the nation is partly a reflection of its rich natural resources and enormous agricultural output, but it owes more to the country’s highly developed industry. USA plays a leading role in world trade by virtue of the sheer size of its economy and its exports and imports. It continues to sustain an economic life that is more diversified than any other country on Earth, providing the majority of its people with one of the world’s highest standards of living.

Advantages

Consistently ranked internationally best for its overall competitiveness and ease of doing business backed by an effective regulatory environment, U.S. business culture encourages free enterprise and competition with the following factors:

Transparent, stable, and fair legal system

With stable democracy, transparent and predictable legal system, USA treats foreign and domestic firms equally under the US law. Its state and local economic development organizations promote and encourage business growth, while the regulatory system provides predictability and ample operational freedom.

Freedom to choose

The country welcomes enterprises from all over the world and encourages economic growth when a new business is born about every minute. Moreover, from location to business structure, it is entirely up to each investor on how they would like to form their business in the US. While, the procedures for incorporating and registering a business may vary by state/territory. The process is typically straightforward, fast, and inexpensive.

Soft landing programs

For entering in USA, enterprises can utilize soft landing programs which can help them to centralize the resources such as, legal services, accounting, business mentoring, business development resources and facilitate connections with local university clusters and trade associations.

Trade and investment regulations

Global trade policies continue to evolve with changes in commerce, digital trade, and the specific market’s strengths and priority sectors. However, these changes are obligatory and the companies are needed to evaluate their investment decisions based on the global trade environment.

Free trade agreements

Indeed, tremendous benefits have flowed from U.S. free trade agreements (FTAs), which cover 20 countries to avoid double taxation and reduce tax barriers. US FTAs have been doing an outstanding job by making big markets, even out of small economies.

Simple Tax Regime

In USA, majorly the individual income taxes, corporate income taxes, social insurance taxes, taxes on goods and services, and property taxes are applicable.

Individual tax

American citizens and residents are liable to taxed on their worldwide income, however, the non residents are liable to taxed on their US source income and income connected with a US trade or business with certain exceptions.

For individuals, the top income tax rate for 2021 is 37%, except for long term capital gains and qualified dividends. Further, the following tax rates are applied on single tax payers:

  • Income from USD 0 to 9,950 is liable to taxed at the rate of 10%;
  • Income from USD 9,951 to 40,525 is liable to taxed at a rate of 12;
  • Income from USD 40,526 to 86,375 is liable to taxed at a rate of 22%;
  • Income from USD 86,376 to 164,925 is liable to taxed at a rate of 24%;
  • Income from USD 164,926 to 209,425 is liable to taxed at a rate of 32%;
  • Income from USD 209,426 to 523,600 is liable to taxed at a rate of 35%;
  • Income from USD 523,601 and above is liable to taxed at a rate of 37%

Corporate tax

A corporation established or organized under US law or under the law of any state is considered to an extent a domestic corporation, even in the case that it does no business or owns no property in the US. Moreover, under US law, a fixed place of business is considered as a permanent establishment in the country. Following are the corporate tax rates in the USA:

  • The federal corporate income tax is levied with a flat rate of 21% to the effectively connected income.
  • State and local governments may also impose income taxes ranging between 1% to 12%.

Corporations with up to 100 eligible shareholders, which meet certain specific requirements, are generally not subject to US federal income tax.

American Companies

In USA, mainly following types of business entities are formed:

Limited Liability Company

In USA, this type of entity is one of the most popular types of business entities. It is ideally suited for smaller organizations and startups, for several reasons:

  • It is fast and easy to setup and have a simple business structure.
  • Forming an LLC is generally inexpensive.
  • To run an LLC is easier than running a C Corp or S Corp.

Subchapter or Small Business Corporation (S Corporation or S Corp)

This business entity was created and enacted into law by Congress in 1958 and was created with intention to encourage small and family business creation, while eliminating the double taxation that conventional corporations (C Corps) had to pay. However, the key factors for S Corps include:

  • It is formed and regulated on a state level.
  • The liability of the entity and the personal liability of the owners and investors are separate and limited only to the value of their investment.
  • The owners of the entity are not personally liable for business debts, claims, or other liabilities.

The C Corporation

This type of entity is also known as a C Corp and is formed and regulated on state level.
These entities are created by filing ‘Articles of Incorporation’ with the secretary of the state within the state of incorporation. It is the most formal company and a corporate structure in USA. Moreover, the policies and the cost of creating a C Corp may vary from state to state.

The Nonprofit Corporation

This type of corporation donates revenues generated to achieve a specific goal that is of public benefit. Nonprofit corporations are allowed to create profits; however, those profits must be used to preserve the existence and expansion of the corporation.

USA plays a leading role in world trade by virtue of the sheer size of its economy and its exports and imports. It continues to sustain an economic life that is more diversified than any other country on Earth, providing the majority of its people with one of the world’s highest standards of living.

Author: Chandrawat & Partners

Date: April 2022

Topic: Doing Business in USA

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