Which state is best for doing business in the US?
04 Apr, 2020 (GMT+7)
The contributions of foreigners who continue to enrich the United States have great impacts on the country and its people. For Vietnamese business owners and investors, they usually set up their operations in the states with many Vietnamese communities live or states that offer tax incentives for businesses. In general, Vietnamese businesses tend to choose between these two states, California and Delaware, for doing business in the United States.
| Delaware | California | |
|---|---|---|
| Location |
Located between New York and Washington states, the east coast of the United States |
Coastal in the west of the United States |
| The famous sectors |
Energy, mining, agriculture, supplies for nail care |
Real estate investment, finance, information technology. |
| Time processing for opening business |
1-2 working days |
30-40 working days, could be 4-6 days with extra cost |
| The requirement for opening business |
- Anyone can set up a company in Delaware - Private the name of the director, shareholder, and officer |
- Must have local agency (maybe an insider) - Requires name disclosure only when its shareholders, directors, and managers hold at least 5% of that company. |
| The court |
A court for business (The Chancery Court) |
Common court |
| Tax |
- Corporate income tax is 8.7% for federal taxes (if doing business within the U.S) (2019) Franchise tax:
|
Corporate income tax is 8.84% for federal taxes (2019) - The tax for Corporation (C-corp or S-corp) and Limited (LLC) companies are different. - The lowest annual franchise fee is US $800, the due date is the 15th of the third month after the end of the year. But companies are exempt from this tax for the first year. |
Besides, in both states, the business needs to register a business license. However, for a Corporation company, it is necessary to have the name of the shareholder and the director, vice versa, for a limited company, the members are required in opening the company. The Corporation company must submit an annual report and a franchise tax together.
In general, the establishment of a foreign investment in the United States, especially in California, will need to take some factors into considerations. First, California banks require business owners to come for a face-to-face interview when opening corporate bank accounts. Applying for a US visa also poses another difficult problem for business owners and investors as many Vietnameses are not qualified for the US visa. Therefore, business owners can choose to do business in the United States and open a bank account in Hong Kong or Singapore to minimize travel costs and risks.
Second, if most of the business’s operation is located in the state (for example, opening a restaurant or nail salon), California could be a good idea. In contrast, Delaware would be a suitable choice for businesses looking for low tax rates. In addition, profits generated from outside the state would be exempted from. The Corporation Company (C-corp or S-corp) would be best suited to Vietnamese businesses in the United States because it can receive profits from other company’s shares with 80% tax exemption. In addition, businesses are allowed to include social security taxes and other benefits for employers and employees in the company's business expenses. This is also an advantage of this type of company.
