Top 3 questions South African professionals ask about US tax

| February 9, 2012

An interview with Frank Gutta, Tax and Financial Planning consultant for businesses and high net worth individuals.

The most common questions I get from South Africans that want to start a business in the US are:

  • Can I own a business as a non-resident of the US? If so, what is required?
  • I want to buy some real Estate in the US, should it be in my personal name or a Corporation? What documents are needed?
  • How will I be taxed?

Before I answer these questions, let me tell you a little about myself.
I too am a former South African, actually a Plaas Jaarpie (don’t know if I spelt it right, it’s been a long time) from Mafeking. I left SA in early 1977, where I worked for a CA firm in Johannesburg and did the audit for some well-known companies like Ellerines Furnishers, etc.

At first, I lived in New York City for about five years working as a controller for an engineering consulting company and moved to Fort Lauderdale in 1982, where I worked for an international CPA Firm Seidman BDO. I started my own CPA practice the end of 1985 to the present day. My practice focuses on Tax and financial planning for businesses and high net worth individuals.

Now to answer some of the most common questions I am often asked.
1. Can I own a business as a non-resident of the US? If so, what is required?
Yes, a non-resident can definitely own a business in the US. If you are going to own or buy a business under a Corporation, you will have to file the necessary documents to establish the entity.

Then this entity will have to apply for what is called an Employer Identification number, which has to be signed by an officer of the entity that just got established.

The officer will have to provide his or her social security number, but in the case of a SA resident who does not have a social security number, needs to apply for a Taxpayer identification number. This can be obtained by completing the form W7 which asks for a bunch of personal information and in about six to eight weeks the US government will provide you a number.

Then you will be able to apply for the Employer identification number, once you receive that number, you are ready to open a bank account and obtained the necessary licenses to start operating your business.

Sounds complicated? Not if you know what you doing.

2. I want to buy some real Estate in the US, should it be in my personal name or a Corporation? What documents are needed?
Buying real estate or starting a business does not require anyone to open up a Corporation, but it is a good idea. Protection from personal liability is one of the main reasons people setup their business ventures under a Corporation.

3. How will I be taxed?
Taxation is also another concern; will I be taxed twice if I am a corporation? Once when the Corporation makes a profit and again when I as the owner take my dividends. An LLC (Limited Liability Company) which elects to be taxed as a Partnership may avoid the double taxation issue of a regular Corporation.

There is also a 30% withholding requirement that has to be withheld at the source for all non US residents on US source income. This can be reduced or recouped depending on the amount and the circumstances by filing the appropriate tax forms.

Clear as mud? Hope I answered some of your questions!
If you would like to contact me for any additional information please do not hesitate to contact me at:
Frank@FrankGuttacpa.com
Telephone 954-452-8813
Web Address WWW.FrankGuttacpa.com
490 Sawgrass Corporate pkwy # 310, Sunrise, FL 33325

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Category: Entrepreneur, Financial Discipline, Organizational Structure & Design, Strategy

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