Our Chinese Company wants to buy goods in the USA – and export them back to China to our Chinese Company.
We will hire 2 or 4 people in California to buy and ship the goods back to our Chinese Company in China.
We may have 1 US citizen (lives in California) as an owner/investor in the US.
Do we need to:
1) Form a new LLC in California if we have the 1 US citizen as an owner? Or just have them as an owner of our Chinese Company in China?
2) Have a wholesale business licence in Californa?
3) Pay employment taxes to the government Fed+CA for the California Employees?
4) Pay Fed+CA income tax if we sell at no markup to our Chinese Company – from a US company?
5) Finally – even though we are doing the business and buying products in CA – should we incorporate in WY/NV?
Thanks for your help!
Dear Mr. Su,
Allow me to answer your questions one by one:
1. If your company intends to maintain physical presence in California (such as employees, office, etc.) it should be registered in that state. I would recommend forming a domestic CA LLC, however its also possible to register the Chinese company as foreign entity in California (but its a more complicated and expensive process).
The Chinese company can be the owner of the CA LLC, or alternatively you can decide that the ownership of that particular entity will be vested in your US partner, in which case a relationship between the companies would need to be decided upon using contracts.
2. No licensing is required to wholesale goods, unless those goods are regulated (such as alcohol, tobacco, etc.). I will not be able to advise you on import/export related licensing, but I believe it would greatly depend on what merchandize you are trading. We offer a complete License Research service for $99 to dig deep into regulations and see if your business would need any licensing.
3. If you hire employees in California you would be required to register for all the employment related taxation such as payroll and unemployment insurance. We can help you with all the aspects of such registration, and it would be a good idea to hire a payroll company to take this headache away from you.
4. When you purchase your merchandize in the US and then resell it abroad your company incurs profit or loss. Either way you need to report it to the state and federal authorities. Its done by filing a tax return (LLCs do it ion annual basis), and you should retain the services of an accountant to help you with those issues. We offer a free tax webinar for Non-U.S. entrepreneurs doing business in the US where you can learn more about the questions of taxation.
5. You could incorporate in one of the incorporation heavens, but because you will still need to register in California, as this is where your US operations are based out, and due to the nature of your business it might be redundant.
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