Please find hereafter some tips to set up a company in the U.S. provided by our board members.

Note that this information is not all-comprehensive. We highly recommend that you contact a lawyer and a CPA to create your company.

For more information, contact Elsa at elsa.depeupiere@france-sandiego.org.

• Am I allowed to stay in the US?

You need to have the permission to stay in the US if you are not a citizen or don’t have a green card to operate a business.
Whether you are here on a visa, a green card, or if you are a citizen, there is no difference in setting up, operating, and owning a business.
The only difference is whether the owner lives in the US and operates the business on a long term basis.

• Entity types

There are several kinds of legal entities:

- Corporation (stocks, shareholders, double taxes). Could be C, or S. Depending upon the type of company, S could be better for a Tax point of view. Always check with a CPA before making a decision.
- Limited Liability Company known as LLC (operating agreement, percentage ownership, single taxation and protect your personal assets). However, you have to pay a State Tax of around $800 per year
- Limited Partnership (silent partners, passive investors, single taxation)
- General Partnership (all active partners, single taxation)
- Limited Liability Partnership known as LLP (reserved for accountants, lawyers, some other professionals only)
- Sole Proprietorship (easiest, just any person working, some have “trade names” like “Joe’s Plumbing”). However, no protection of your personal assets.

All of them are described at the California Secretary of State's website: http://www.sos.ca.gov/business/be/starting-a-business-types.htm

Our advice is always to consult an accountant and an attorney before deciding which entity to use since there can be key differences in taxes and liability.

• Taxes

The big differences in entities are taxes liability. A corporation may pay double taxes on profits--the corporation itself pays taxes and each shareholder may pay taxes again on the same profits.

An "S" corporation can avoid this double taxation. An LLC pays taxes the same as a partnership, which has each person paying as an individual. General and limited partnerships and sole proprietors all pay as individuals.

An accountant should always be consulted.

• How to register a company

The forms provided from the Secretary of State website are all that are needed to form a business entity. They are simple to use and meant for non-lawyers.
However, people should use these forms only if they know what they are doing or after legal consultation. Using these forms without full knowledge can result in major mistakes, such as not having enough stocks, not having an operating agreement (which are not provided by the State), not having partnership agreements, etc.

It is important to note that taxes are due the year the entity is formed whether the person begins to operate the company or not. There are exceptions to this taxation rule, however.

Also, one important point: You do not need to form a company the moment you decide to start a business. The right step by step approach is to
- write a business plan,
- surround yourself with advisers,
- decide to have partners or not,
- protect the name of the company and of the products/services you will sell,
- chose a web address, set up hosting and emails, draft a first professional site,
- create some buzz using on social networks, talk to potential prospects and commercial partners,
- and then, only then, evaluate the revenue streams that would justify the creation of one entity against another.

Do not rush these steps as it is not necessary to overwhelm yourself with administrative tasks before you even make a first dime.

BTW, when you start generating some cash, don’t forget to declare and pay your tax, sales tax included.

• "Employee" vs. "independent contractor" (IC).

An employee must be a green card holder or citizen, or an alien with a valid visa for work. An employee works directly under an employer and must be a citizen, or be a green card holder or have a visa to work if they are an alien. There are some exceptions to this rule for aliens who are married to an alien with a visa.

An IC may or may not need a visa. For example, an IC may be contracted to work from France or Brazil and do the work in those countries, even if the company and the IC met in San Diego to form the contract. The IC will need a visa if they are working within the USA.
An IC is mostly defined as someone with freedom and no direction from an employer. The line between employee and IC can be hard to define sometimes. Examples of IC's are: plumber, lawyer, accountant, gardener, and painter. But notice that each of these people can work for a specific company and be a full time employee of that company.

• Opening a bank account

Companies that wish to open bank accounts usually submit legal formation documents, tax identification numbers, and identification of person controlling the account. Without any “Credit History” demonstratable by these persons (minimum 2 years), US banks are often reluctant to open accounts for businesses, and even more to facilitate credit (through loans or credit cards).

• Don’t forget to register your company at the B.O.E to obtain your seller’s permit.

The State Board of Equalization (BOE) is a public agency charged with tax administration and fee collection in the state of California. The areas of authority of the Board fall into four broad areas: sales and use taxes, property taxes, special taxes, and acting as an appellate body for franchise and income tax appeals (which are collected by the Franchise Tax Board)

You must obtain a seller's permit if you:
- Are engaged in business in California and
- Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail.
- Will make sales for a temporary period, normally lasting no longer than 30 days at one or more locations (e.g. fireworks booth, Christmas tree lots, garage sale)

The requirement to obtain a seller's permit applies to individuals as well as corporations, partnerships, and limited liability companies. Both wholesalers and retailers must apply for a permit.

If you do not hold a seller's permit and will make sales during temporary periods, such as Christmas tree sales and rummage sales, you must apply for a temporary seller's permit. Such permits are normally issued to selling operations lasting no longer than 30 days at one location.

For more information, visit the following web page: http://www.boe.ca.gov/sutax/faqseller.htm#1

• Companies set up in Delaware?

Only large companies or very sophisticated companies should incorporate in Delaware since Delaware has very good corporate laws that favor management.
Also, If you plan to have multiple addresses in the USA and your business is growing at a fast pace, a Delaware company is recommended.
Other than that, there is no reason to form a company in Delaware that operates in California since that company will be a "foreign" corporation that is treated both as a foreign corporation AND as a California corporation. All foreign corporations operating in California must register the same as a California corporation.

Final note: California is very friendly about forming businesses and the entity to operate under. People with experience may not need legal or accounting advice, but most people (especially those experienced) get both before acting.
There can be severe consequences for starting a business without the proper advice. For example, not having a partnership agreement even if the partners form a corporation with 50/50 ownership can be a mistake--what if one partner wants to sell and won't sell to the other partner? Such details can be disastrous to ongoing businesses.

Registering in California allows you to be your own Agent, rather than to pay a fee per year if you register in another State

• Domain name - Website

Easy way to set up a domain name and web site: http://www.godaddy.com/

Please do not hesitate to contact us to have lawyers and CPA referrals.
We will also be pleased to connect you with some of our members who have already set up a company in California and who will share their experience with you.

info@france-sandiego.org, T (619) 544 1445.