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USA - California

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If you look at starting a new business in the United States, you will find that everything is very individual and each of the US states is suitable for a different type of business. So if you are choosing where to set up your company, you need to be very careful. The California dream is not just a dream, but reality. It is a reality in such vital fields as the entertainment industry, agriculture, technology, etc.

California and business exactly for you

California is one of the largest and most economically active states in the USA. There is money and opportunity at every turn, and if you are prepared to work hard, you will surely reach them. If your business has anything to do with the film industry, there is no better place to do it than California. Another center is also important for business – Silicon Valley, which has become the capital of technological start-ups connected with many projects from all over the world.

California is a great choice for tech start-ups. However, if you do not plan to conduct your business directly on the Californian market, it is better to choose another American destination that offers a more favorable tax environment.

Tax system

The tax system in the United States is quite complicated and extensive. In the system, there are federal taxes intended to finance federal projects, and in addition there are state taxes, the amount of which is determined separately by each state. Since the range of state taxes varies from state to state (often significantly), some US states are more suitable for business, some less so. Federal corporate income taxes range between 15 % and 35 %, depending on the amount of taxable income. The lowest rate applies to an income of $50,000. In general, the tax system is very complex, and it is useful to consult with professionals to effectively set up the structure of taxes paid.

Before doing business in the US, it is important to review the following information. There are two basic types of corporations in the United States with different taxation.

The first type is the Corporation (C-Corp), which pays corporate income tax at both the federal and state levels. If a company wants to pay dividends, it is required to pay dividend withholding tax, which is also paid at the federal and state levels. These taxes can be quite high. However, an optimization can be done by asking the IRS to allow you to pay tax only on a personal basis (this creates an S-Corp). This means that if the company reports a profit of one hundred thousand dollars, taxes are paid as if you made the profit yourself.

The second basic type of company is the Limited Liability Company (LLC), whose profits are taxed directly in proportion to the partners' share of ownership. Compared to an S-Corp, this type of company offers greater tax flexibility. Florida adds an additional 5.5 % to income tax. The advantage, however, is that there is zero taxation on personal income in Florida. The basic sales tax rate that is added to physically sold products is 6 %.

Basic information

  • Type of Legal Entity: Limited Liability Company (LLC)
  • Establishment time: 2 working days
  • Number of shareholders: in LLC named „members“ minimum 1, maximum not stated
  • Shareholders: members can be FO or business entities
  • Share capital: not defined
  • Shares on bearer: not allowed
  • A registered address in California is required
  • Local registered agent required.
  • Directors: on an LLC named „managers“ they can be appointed, but the LLC can operate without a manager, so the minimum is 0
  • Director Residency: Directors do not have to reside in California

Taxation

  • Income tax is 0 % for LLCs (8.84 % for corporations)
  • Annual Franchise Tax $800
  • Dividends, royalties, interest tax rate is 30 %
  • The state VAT rate is 7.5 %, local municipalities set VAT up to 10 %
  • Double taxation agreements with various countries were applied, determining tax rates on dividends, interest and royalties
  • Bookkeeping and preparation of accounts is necessary, filing a tax return is not necessary for non-residents
  • The audit is not mandatory
  • Anonymity and privacy. Information about directors (administrators) and shareholders is not published in the company register

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