🥳 You did it, and you even paid that eye watering legal bill that went with it.
We will try and make this easy for you, as by now you are probably so over this process and very eager to get back to doing what you do best, building something amazing.
Heres our cheat sheet of tasks:
The IRS (the tax authority in the US) issues an Employer ID Number (EIN) to businesses to identify them for tax purposes. You will need this number for your tax filings, employing staff and even to open a bank account.
You can apply by completing this form. If you are not a US citizen, then leave section 7b blank. The IRS is slow to process these right now in light of the pandemic, so don't expect a quick response.
You can apply online here, but only if you have a US citizen as a founder who can add their social security number. This route does generate an instant EIN and the whole process takes under 15 minutes.
🌟 Top tip - ask if your US lawyer can join your board for a day. They will almost certainly be a US citizen, and so can do the instant online application.
Your existing accountant most likely cant help you with your US reporting. They wont be registered or experienced enough to do this unless you are us. Sadly your new US accountant can't deal with your international accounts, so you will be doubling up here.
Make sure to find an accountant who comes recommended for working with startups like yours. The international group dimension, on top of being a startup, brings nuance that others may miss. Find one that's proactive. Ours sends us friendly reminders for key dates, long before its due. Sadly this is not common and we hear of startups only being told about filing deadlines when they get fined for being late. We are happy to share our recommendations if you contact us directly.
Now that you have a new holding company, you will need to file a tax return in Delaware, in addition to the one you were filing in your home country. This needs to be done between January - April and relates to the prior year. You will need an accountant here, it's not like other countries where you can easily self-file. If needed, you can apply to extend this until October, but you will need to speak to your accountant ASAP to get this arranged.
There are both federal and state taxes which you may be subject to, and the US has rules about profits generated overseas (something called GILTI), and it's definitely worth having a chat with your accountant before you become profitable so they can help you plan this.
You will also have to complete something called an FBAR form, which is disclosure of all your overseas bank accounts, even if they are not in the name of the holding company. It's a pretty simple form and you just need to tell your accountants the details of the accounts, and the highest balance during the year.
Basically this is a fee which you pay each year, for the privilege of being registered in Delaware. It varies company to company but typically expect to pay between $1,000- $8,000 USD per year. There are 2 methods to calculate it, most find it cheaper to use the 'par value method'
You will need to complete a short form and pay the tax before March 1st each year. Its not hard to complete the form, you can most likely DIY and all you will need is the prior year accounts for your US company, which you should have done anyway as they will need filing. It will calculate the tax payable for you, and just tell you what and how to pay.
The US is a very litigious environment. The potential to become embroiled in a legal battle here is much higher than in Europe or other parts of the world. One way to mitigate this is to ensure your insurance provider is aware of your new corporate structure. Explain exactly what you are doing with your new company and ensure you obtain the appropriate business insurance.
If you intend to do business in the US, such as employing staff and getting customers, then you will need to register to do business in any relevant states. This will include more paper work and potentially taxes, so do it on an as-needed basis.
At the very least, keep a basic spreadsheet with who has what and if you have any options issued. It can get messy as you grow so it's easy to get into good habits early.
There are broadly three ways of doing this legally.
The documentation you will need for each will vary, and we have written more on this topic in our blog under inter company transfers and transfer pricing.Lastly, be aware when sending funds internationally as some banks can charge high fees, give awful exchange rates and take days to process transfers which shouldn't take more than 24hrs.
Thanks for reading
This article is provided only for informational purposes. Rebank does not provide tax, accounting, or legal advice.