Companies tax in the US

Corporate Taxation in the US

If you own an active company in the US, you will probably be interested in the topic of corporate taxation in the US.
Every owner of a company in the US is required to file reports with the tax authorities.

It does not matter whether your company in the US is an LLC or INC, the tax reports are similar in both cases.

In the US, there are different types of taxes:

• Federal tax
• State tax
• Sales tax
• Local VAT

Now we will briefly discuss each of them.

Federal Tax

Federal tax is the tax paid to the United States, that is, to the government.
The federal tax treatment of each company varies depending on the type of company, and depending on the ownership structure.
In short, there are three points to discuss:

• A single-member LLC
• A two-member LLC
• An INC comapny, regardless of the number of shareholders.

Federal Tax for a Sole Proprietorship LLC:
There are three minimum federal tax filings:

1. A 1120 "proforma" return, which is a report of the company's profits. An LLC is not actually required to pay taxes, but this return is filed to show how much the company has earned and lost, as if it were a regular corporation.

2. A 5472 return, which details the activities between the LLC and the owners. This is essentially a breakdown of the transfer of profits to the owners or other related companies, or investments by the owners. This report is a disclosure of transfers to the IRS for information purposes and not for tax purposes.

3. A 1040-NR return, the letters NR being an abbreviation for nonresident. This is the tax return of the individual, that is, the company owner, in the United States. The LLC is transparent for tax purposes, so the person who actually pays the taxes in the United States on the company's profits is the company owner.

LLC with two or more partners:
Here too, there are three minimum federal tax filings:

1. Form 1065. This is a report similar to the "example" Form 1120 above, only for a partnership. This is a report designed to show what the company's profit/loss was, as if it were a regular corporation. In the case of an LLC with two or more partners, the company is seen as a partnership by the IRS, so Form 1065 is relevant, not Form 1120 as before.

2. Schedule K1, which details each partner's share of the company, i.e. how much percentage he owns in the company.

3. Form 1040-NR, just like before and for the same reasons.

*Form 5472 is not required, as it is only required in the case of an LLC held by a single person, and not in the case of a partnership as in the case of an LLC with two or more partners.

INC Company:

1. Here, a real Form 1120 is required, not "Sample" report as in the above case of a single LLC.

2. Form 5472 (see details above).

3. If shareholders received dividends, then a 1040-NR report is also required.

Federal tax rates
The federal corporate tax rate in the US is 21% as of the date of writing.

It should be remembered that the companies that pay this tax are only INC companies, as LLC companies are transparent for federal tax purposes.

Therefore, the relevant US tax rate for LLC companies is the marginal tax rates of the individual:

It should be noted that in general, foreign citizens are not entitled to deduct expenses from their income.

When is the filing due?

• Individuals: April 15
  Sole Proprietorship LLC: April 15
  INC: April 15
  LLC with two or more partners: March 15

State Tax

As mentioned, the United States is divided into 52 states. In most states in the United States, there is a state corporate tax, i.e., "State Tax".

What are the state tax rates?
The following are the state tax rates in selected states:

State tax is determined by the state in which the company generates income, not by the state in which the company is incorporated. Therefore, in each state where there are sales, the company is required to pay tax at that state's tax rates.

Who is required to pay?
Here again there is a distinction between an LLC and an INC. An LLC is not required to pay state tax, only the owners of the company. On the other hand, an INC will be the one required to pay the taxes.

When are state tax filings required?
This varies from state to state. Typically:

• Quarter 1: April 15
• Quarter 2: June 16
• Quarter 3: September 15
• Quarter 4: January 15 of the following year

VAT: Sales Tax

In addition to the state tax, most countries also have a VAT - a value-added tax called Sales Tax, which is the VAT we know.

When a company sells products or services in a country, it is not required to pay VAT in the country automatically, but there is a certain minimum activity after which the company is required to pay.

This minimum means that if a company has over 200 transactions in the country, or if the company has sold over $100,000 in that country, it will be required to register for VAT and start making submissions. The company will be required to register for VAT in every country where it has made sales in that amount or quantity. In some states it's only 200 transactions, in some states it's 200 transactions or $100,000, in some states it's only $100,000, but the rule is clear: in the vast majority of states, if the company has not made more than 200 transactions in any state, or in a volume of over $100,000, then it will not have to register for VAT in any state.

Once the aforementioned requirement to register for VAT has arisen, from now on the company will be required to file reports, in the vast majority of cases on a monthly basis - usually on the 20th of the following month.

Who is required to pay?

In the case of VAT in the US, it is irrelevant whether the company is an LLC or INC. This means that although the LLC is transparent for tax purposes, it is transparent for income tax purposes only - federal tax and state tax. This means that the VAT is paid by the company, not the owner of the company.

Local VAT (municipal/district)

Municipalities or counties often add their own taxes to the state VAT.

In what cases do you have to pay?
You are required to pay if you have a physical presence in the city: an office in the city, employees in the city, the company holds inventory in the city. On the other hand, if the sale in the city is made remotely, local VAT usually does not apply.

The difference between VAT (state) and local VAT:

When to file?
The filing date for local VAT varies from state to state, but is usually mid-April of the following tax year.

Different cities, of course, charge different local tax rates. Therefore, we are attaching a table here that generally lists the state VAT rates, and the VAT rates that include both the state and the local average rate:

Summary

We outlined the different Taxes for a U.S company, and even the tax rates for the individuals.

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Disclaimer: The information in this article is not tax advice but is provided as general information only.