Low tax. British law. USD linked currency. Stepping stone to investments in China. Enterprise support is government policy. Hong Kong is ideal for multinational businesses...
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Overseas companies intend to carry out business in Hong Kong need to apply for registration within one month of establishing a place of business in Hong Kong....
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Foreign Investors in China
The Wholly Owned
Foreign Enterprise (WOFE), also called Wholly
Owned Foreign Enterprise (WOFE), is a Limited Liability Company established and wholly owned by the foreign investor(s) in China. ...
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Representative Office (RO), also known as Permanent Resident Office, is an office of a foreign enterprise set up in China for liaison with Chinese businesses and customers on behalf of its parent company.....
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THE LLC CONCEPT
The Limited Liability Company (LLC) has special features
that distinguish it from ordinary companies. Like a corporation, an
LLC has a legal existence separate and distinct from its owners.
Like the shareholders and directors of an ordinary company, the
members and managers of an LLC are not personally liable for the
LLC’s debts and obligations. The principal attractions of the LLC
for the users/owners are its operation and tax treatment:
(1) Operationally the management of the LLC functions
similarly to a partnership and is governed by a written agreement
among the members of the LLC; this is different from the traditional
corporate governance of companies where management is outlined in
the Articles of Association (also known as Bylaws).
(2) A properly structured LLC will be treated by many
tax regimes as a pass-through entity with tax being paid by the
members and not at the LLC level.
THE DELAWARE LLC
Each of the 50 states of the United States is
constitutionally an independent legal jurisdiction with the right to
enact laws in many areas of activity. Each state has enacted its own
LLC statute with most states doing so after 1988 when the U.S.
Internal Revenue Service commenced issuing rulings that an LLC would
qualify for partnership tax treatment. Among the states, the state
of Delaware has emerged as the premiere LLC jurisdiction with
approximately 25,000 LLCs being formed annually. The status of
Delaware as the leading LLC domicile is linked in part to the
important role played in the U.S. by the Delaware corporate
legislation and its Chancery Court in the development of American
corporate jurisprudence. The influence of the Delaware corporate
regime is evidenced by the fact that more than half of the companies
on the Fortune 500 list and of the companies listed on the New York
Stock Exchange are domiciled in Delaware.
An equally important factor for Delaware’s popularity as
a corporate domicile is the pro-business role of the Government of
Delaware – specifically the office of the Secretary of State which
is responsible for corporate formation.
FOREIGN OWNERSHIP OF LLCS
There are important tax and corporate governance
advantages to the ownership by non-U.S. persons of a Delaware LLC.
These are:
(1) No restrictions on foreign ownership or management
of the LLC. Members may be individuals or business entities of any
nationality or domicile. Single member LLC’s are permitted. With the
exception of a Registered Office and Registered Agent in Delaware,
no physical presence is required.
(2) The LLC management agreement is not a matter of
public record and can be in any language.
(3) No disclosure in the public record of the names of
the members or managers of the LLC.
(4) Non-residents of the U.S. who are members of an LLC
and who are not otherwise subject to U.S. federal income taxation
pay no tax in the U.S. if the LLC’s income is from non-U.S. sources
and the LLC carries on no business in the U.S.
(5) The LLC’s corporate records may be maintained
outside of the U.S.
(6) The ownership interests in an LLC of an individual
non-resident of the U.S. are subject to the U.S. estate tax but can
be avoided if the ownership interest is held through a foreign
company.
GOVERNMENT FILINGS
On formation the LLC files a Certificate of Formation
with the office of the Secretary of State which lists:
(1) The name of the LLC which name must contain the
words “Limited Liability Company” or the abbreviation “L.L.C.” or
“LLC”.
(2) The name and address in Delaware of the LLC’s
registered agent and registered office.
The LLC is not required to make any reports to the State
of Delaware of its members, managers, directors or income.
If the LLC has more than one member it is required after
establishment to apply for a Federal Tax Identification Number and
on an annual basis to file an information return with the U.S.
Internal Revenue Service. Provided that there is no income earned
from United States sources that would be taxable by the U.S., the
information return will reflect that the LLC had no taxable income
for the relevant tax year. As part of our LLC management service we
can apply for the LLC’s tax identification number and prepare and
file the LLC’s annual information return.
If the LLC has only one member its existence as a
separate entity can be disregarded for U.S. federal income tax
purposes. The single member LLC is not required to apply for a
Federal Tax Identification Number nor file an annual information
return.
CORPORATE GOVERNANCE
A unique feature of the LLC legislation is that it
allows members to define their business relationship in a written
agreement which governs the operation and management of the entity.
The policy of the drafters of the LLC legislation was to
allow members of the LLC the maximum freedom of contract in the
commercial context. As part of our LLC service we provide clients
with a specimen LLC operating agreement for their use.
The members of the LLC may choose whether they wish to
manage the entity or to appoint a member or a third party to be the
manager. There is no requirement that members themselves be the
managers of the LLC. A member acting as the manager or a third party
acting as the manager is not liable for any debts or liabilities of
the LLC solely by reason of that person being a member or acting as
a manager.
The typical LLC agreement will address the following
issues:
(1) Identifying the party responsible for managing the
LLC.
(2) Rights and duties of the manager and any limitations
or restrictions on such authority.
(3) The economic rights of members, including the making
of contributions to the LLC, the right to receive allocations of
profits and losses, and the timing of and restrictions on
distributions by the LLC to its members.
(4) Any special voting rights.
(5) Any classes or groups of members or managers with
different rights, powers and duties.
(6) The issuance and transfer of interests in the LLC,
the admission and withdrawal of members.
(7) Mandatory and non-mandatory purchase of interests in
the LLC on the occurrence of specified events such as death,
disability, resignation or expulsion of a member.
Where the operating agreement is silent on a management
issue, the provisions of the LLC statute will apply.
PARTNERSHIP TAXTREATMENT
Depending on the tax domicile of members it may be
possible to provide through a written agreement of members for
allocations of income and/or deductions of an LLC treated as a
partnership among members on amounts which differ from the members’
economic interests in the LLC as well as the ability to provide a
tax basis to members for non-recourse debt. It also is permissible
for the members to elect for an LLC to be treated as a separate
corporate entity.
USES FOR LLCS
The LLC structure is particularly attractive as an
alternative to the use of general partnerships and limited
partnerships as the LLC provides all members with limited liability
protection against claims of creditors. This protection benefits
entrepreneurs and other start-ups.
The pass-through tax character of the LLC means that for
a single member LLC tax return preparation and reporting occurs only
at the member level with resulting cost savings and administrative
efficiencies for all businesses that can operate in an LLC
structure.
Venture capital, real estate and other types of joint
ventures can take advantage of the ability to use the LLC operating
agreement to allocate profits and losses among participants in a
manner which reflects the business agreements they have reached.
The ability to limit the life of the LLC can also be
used effectively in joint ventures, start-ups and other projects
with a transactional purpose that is for a specified time period.
The LLC can be employed in the international context to
achieve tax efficiencies where the income of an LLC is allocated
among members from different tax regimes.
DELAWARE LLC FEES
Establishment USD525
Name availability search, name reservation, preparation
and filing of the Certificate of Formation (including all filing
fees), preparation of members register, issuance of membership
interests, preparation of LLC operating agreement, liaison with
client.
Annual Maintenance USD500
Providing Registered Office and Registered Agent
services including forwarding and filing of LLC Tax Notice.
Note: Annual maintenance cost for the second year and
thereafter of USD500 does not cover state franchise tax of USD120.
Apostille of Certificate of Incorporation USD200
Arranging to have the certificate of incorporation
apostilled by the Secretary of State of California.
Each LLC is provided with a filed copy of the
Certificate of Formation, standard LLC operating agreement, Form
8832 (Entity Classification Election) and Form SS-4 (Application for
Employee Identification Number).
Our Delaware LLC service also includes the provision of
a company kit which contains member certificates, company seal,
member transfer ledger and a register of members.
GENERAL FEE INFORMATION
Company fees are billed in advance upon formation and
annually thereafter.
Due to the nature of the service provided fees are not
refundable. Work performed in addition to the services described
above will be charged at our standard rates applicable to the
personnel performing the work. Such time will be billed in arrears
either monthly, semi-annually or annually depending on the volume of
work performed.
. Hourly rates for additional services:
– Directors $200
– Senior Personnel $85 – 150
– Junior Personnel $35 – 75
. The above fee schedule excludes disbursements which
are billed separately.
. Special transaction fees may be charged for work of a
particularly onerous, time critical, high value or otherwise
exceptional nature.
. The company may retain brokerage, insurance or any
other commissions received in the normal course of its business.
. Fees and expenses are quoted and payable in US
dollars.
. Fees are subject to annual review.
. Different fees may apply where instructions are
received directly from the beneficial owner.
Hong Kong Head Office
Room 1106, Futura Plaza, 111 How Ming Street, Kwun Tong, Hong Kong
TEL +852 2341 1444 FAX +852 2341 1414
WEB
http://www.by-cpa.com E-mail
info@by-cpa.com
