Sep 282015
 

IRS Tax NoticeMany U.S. businesses get their funding from local banks or private U.S. investors.  Sometimes, however, there is an opportunity to get financing from abroad on more advantageous terms.  One such opportunity was recently illustrated in a recent Wall Street Journal article.  The article describes U.S. real estate developers receiving funds from foreign investors in exchange for green cards.  When such an opportunity arises, certain U.S. income tax implications should be considered as part of the deal.  In my first blog, I will discuss these tax implications as related to U.S. businesses.

When a U.S. business receives funds from a foreign person, it could either be in a form of a loan or an equity investment.  Throughout the term of this investment, the business makes interest payments, dividends, or profit payments, and in the end it will either repay or redeem the investment.   However, the business is required to withhold a certain amount of tax and to remit it to the IRS for any payments made to the foreign person.  Regardless of how the transaction is put together, the business will be required to inform the IRS of this investment.  In order to properly address these issues, the business should have certain processes in place, and the people responsible for paying the foreign person should be aware of the consequences of failure to follow the applicable laws.

If you fail to withhold and remit the tax or notify the IRS about the transaction, the business is liable for the tax itself plus interest and penalties. The business may also bear penalties and interest for a failure to notify.  It is even possible for a single individual within the business to be personally liable for these expenses and, therefore, care should be taken when dealing with such investments.

A business can make sure that its own withholding and reporting obligations are satisfied and it can structure this transaction in such a way as to make it easier and more attractive for the foreign person to invest money.

Any U.S. business interested in exploring this area further should contact an attorney at Ourednik Law Offices.  Don’t get caught by the IRS!

Mar 202013
 
Are you thinking of setting up a business?

If you are a serious entrepreneur, start your business out right by talking with an attorney about the many facets involved ins tarting your venture. With only 1% of businesses surviving the first five years, you want to start out, not only on the right foot but, with the biggest advantage you can. First, if you don’t have a business plan, a qualified attorney can write one for you. Your business plan is a road map for financing, goals and even how your business will be managed. Do you know whether to set up your business as an S-Corp. C-Corp More…

Jan 222013
 
Breakfast with the Experts

Now that the Fiscal Cliff has come and gone, do you know what changes have occurred and how they will affect you and your business? What about Obamacare? How ill that impact your business? The Small Business Resource Network will host “Breakfast with the Experts,” February 5 from 8-11 a.m. at the UNF Herbert University Center (12000 Alumni Dr.). Accounting experts will talk about the latest concerns regarding healthcare laws and the new tax laws, which will take effect soon. Business owners who want to stay informed on the latest changes from Washington should not miss this informative workshop There More…

Jul 252012
 

The IRS is continuing to go after taxpayers who attempt to use S corporations to avoid payroll taxes.  Generally speaking, a wage-earning taxpayer is subject to a variety of payroll taxes, which can include income, Social Security, Medicare, and unemployment taxes.   Sometimes, business owners reach the conclusion that they can pay themselves very little in terms of salary and then call the rest of the company’s earnings a distribution, in order to escape payroll taxes. The problem with this strategy is that the IRS will aggressively pursue taxpayers whom they feel are paying themselves an “unreasonably” low salary in an More…

Sep 122011
 
Sale Of A Single Member LLC Presents Special Issues For Buyer And Seller

Generally, unless a single-member LLC elects to be treated as a corporation it will be considered a disregarded entity under the IRS check-the-box regulations.  Since the entity is disregarded, its assets, liabilities and operations are considered owned directly by the sole member. Thus, if the buyer purchases only the membership interest in an LLC and not the LLC’s individual assets under state law, federal tax law treats the acquisition of that interest as a direct purchase of the LLC assets. Consequently, a sale of the membership interest under state law will be considered a direct sale of the LLC assets More…

Jun 262011
 
Special New Mileage Deduction Amounts for 2011

Finally a bit of a break!  The Internal Revenue Service (IRS) recently issued Announcement 2011-40.  Beginning on July 1, 2011 and continuing until December 31, 2011, Taxpayers will be entitled to use the mileage rate of 55.5 cents per mile for business use.  This represents an increase from 51 cents allowed during the first 6 months of 2011.  This upwards adjustment was inspired by the increased price of fuel in 2011.  This is a special mid year adjustment made by the IRS to help ease the burden on taxpayers. The business standard mileage rate above is used to calculate the More…