How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Richard - Bizlaw Your Own Question

Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8763
Experience:  30 years of corporate, litigation and international law
18695994
Type Your Business Law Question Here...
Richard - Bizlaw is online now
A new question is answered every 9 seconds

I was just hired by a company legally registered in the U.K.

Customer Question

I was just hired by a company legally registered in the U.K. but based in Russia. They are not registered in the U.S. or my state and do not have a tax I.D. number. I have 2 questions:
1. For pay I am receiving the gross amount only with no withholding or deductions. Is this legal?
2. If they are a foreign company, will they need a U.S. tax I.D. number if they win any business from a U.S. company, even if the work is done in Europe? (they think they don't)

Thank You,
Steve
Submitted: 5 years ago.
Category: Business Law
Expert:  Richard - Bizlaw replied 5 years ago.

If you were hired as an employee they would have to register in the U.S. However, they may be treating you as an independent contractor. In that case you would make estimated tax payments as a self employed person.

 

If they win a contract in the U.S. whether they have to register in the U.S. and get a tax I.D. number depends on the circumstances of the business and what is involved in soliciting business. If they solicit work from U.S. companies that they will perform overseas, they do not need to a U.S. tax I.D. as they will have no U.S. tax obligations. However, if they employ you as an employee, solicit business in the U.S. through their employees, they will be subject to U.S. tax on some portion of their incomie and will need a U.S. Tax I.D.

 

This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.

Customer: replied 5 years ago.
That helps a lot. I am definately an employee not a contractor. My job is solicit business for the company. They insist that they do not have to register in the U.S. and I am concerned that at the end of the year there will be no W2 and, most definately, no deductions or withholding. Is there any written information that I can forward to the company to make the point?
Expert:  Richard - Bizlaw replied 5 years ago.

What state are you in? If they employ people in a state they have to pay unemployment insurance and provide workers compensation insurance, among other things. To pay that insurance have to register with the state. At the federal level, withholding of federal taxes is required. To pay those taxes the employer has to have a federal I.D. number.

 

They may not want to do all of things. You might consider discussing with them paying you as an independent contractor. Then they would pay you a fixed compensation that included both your gross wages but also the employer required contributions for things such as social security. One advantage of this approach is that you would negotiate a fixed contract in terms of duration of the agreement. You could form your own corporation and pay all your own withholding. These costs they should cover.

 

If you let me know which way you would prefer to go, I will get you where you should look to get the forms and costs you would need to consider.

Customer: replied 5 years ago.
I live in California.

Below is some of the correspondence with my boss in Russia. It is in response to my email to him saying my tax accountant has concerns about this arrangement. Besides the issue of my compensation and the need for them to have a U.S. tax ID number and provide me with a year end W2, I also believe that if we win a contract from a U.S. based company, they will also need a tax ID number regardless of what country we are registered in or where we do the work.

I appreciate your follow-up and I also realize that it goes beyond the $20 I deposited with Just Answer.

Steve

Hello Steve,

Point is that we are not registered in USA and we do not have the tax ID number. And we do not do business in USA. We are a UK-based company which has hired US-based employee who is the citizen of the USA. Maybe your consultant (my tax accountant) can help us taking into consideration what I have mentioned above. It would be helpful.

Thank you.

Vladimir

(this was followed by)


Steve,

I addition I would like to note that we not do anything in USA. We do not work, e.g monitoring, management, etc on the territory of USA. We do it outside of USA. And you are only our employee who support us to find the contract to be executed outside of USA.

Regards,

Vladimir



Expert:  Richard - Bizlaw replied 5 years ago.

The best way for this to be handled is for you to act as an independent contractor that they retain pursuant to a written contract. If you are an employee, the must make withholdings for federal taxes, they have to pay into state unemployment compensation, and withhold state taxes. To do these things , they have to have some level of registration in the U.S. which it is clear they do not want to do.

 

I suggest you tell them that to avoid registration, you need to be hired as an independent contractor and then they must pay you a gross up amount to cover all the things they would have to pay as an employer. Your accountant can give you the numbers. For example, there is the employer part of social security and medicare which is must be paid. You can create an S Corp. that would be the independent contractor. You would work for your S Corp. and pay yourself the salary. Your company would issue you your W-2 at the end of the year. The company would make all the filings. These costs they should bear because they are costs they would pay as an employer.

 

If the work you are looking to develop for them is to be done outside the U.S., this arrangement should avoid the necessity of them registering in any way in the U.S. If you are an employee they have to register there is no way to avoid it. There could be other adverse tax consequences to them if California took the position your office was actually their place of business in the state and that they should be taxed accordingly.

 

It seems to me the only way to make this work is for you be hired not as employee but as an independent contractor.

 

This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.

Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8763
Experience: 30 years of corporate, litigation and international law
Richard - Bizlaw and 2 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Bizlaw,

I am certain that they want to have me as an employee. So they will have to get a tax ID number. And if I am an employee and make a sale to a U.S. based company, I'm sure that they will have to provide that company their tax I.D. number. Is there any web site or such that I can forward to my boss that helps explain things?

On an other issue, I don't think I did things right. I added another $40 to my JustAnswer balance with the hope that when I accepted your answers, you would receive $60. When I did that I did not realize that I could just accept your answer and then add a bonus. If you only got $20 how can I get you that $40 more from my JustAnswer balance?
Expert:  Richard - Bizlaw replied 5 years ago.
I am checking on how to get the additional $40 to me, thank you for that. I am researching the information you can send to your employer on withholding obligations. I will be away for a while but will get it to you later this evening.
Expert:  Richard - Bizlaw replied 5 years ago.
The IRS publication to provide to your employer is

IRS Circular E Publication 15 Employers' Tax Guide You can get a copy of this by going to the IRS website and searching for this publication. It is in pdf format.

 

I do not have any answer to paying the bonus as yet. Once I get the answer I will let you know.

 

If you need more help please let me know.

Customer: replied 5 years ago.
Hi Bizlaw,

I finally heard back from my company and they now accept that I will need to be a contractor, as you suggested. It has been suggested to me that forming a LLC would probably be best. Friends that have done this have gone through mycorporation.com.

Some quick questions that come to mind are:
- I live in CA but I've been told that registering in Deleware is best. Won't California still want a cut.
- I believe that I will need to get a tax I.D. number and a seperate checking account that my company's payments will go in. (but not my expense checks since they are not taxable and can go in my personal checking account)
- How do I set up my quarterly tax payments and how do I handle not only the US tax withholding but also FICA (I know that I have to pay double), Medicare, CA tax withholding and California SDI. It was suggested that I not pay into the state unemployment taxes but save money in an IRA if I leave the company since I can't file for unemployment.

I had not heard back from you regarding if you got the $40 bonus from the past. If not, I'll add it when I accept your answer.

Thanks,
Steve
Expert:  Richard - Bizlaw replied 5 years ago.

Good to hear back from you Steve. There are many advantages of being a limited liability company. Many things that you cannot deduct as an individual you can as a company. If you will be the only employee, you can be either an S Corporation or a limited liability company. Limited Liability companies provide more flexibility in terms of capital structure and types of profit participations than do S Corp. They are better suited to groups of more than one person. If it is just one person, I suggest an S Corp. The cost is much less because a limited liability company requires an operating agreement which is like a partnership agreement. This is a fairly sophisticated document. The S Corp requires that you create an corporation and make a subchaper S corporation. Tax wise it is treated like a sole proprietorship if there is one shareholder or a partnership if there is more than one person.

 

Delaware has the most developed corporate law in the U.S. However, since you live n CA and will work from there, incorporating in Delaware only adds an additional lawyer of administration and expense because you will have to qualify your corporation in CA. This means you will pay minimum fees in Delaware plus your normal tax in CA as that is where the income will be generated. I would incorporate in CA.

 

You will need a separate Tax ID for the corporation and a separate bank account.

 

As a corporation, you want to make sure that your base compensation from the company is increased to pay all the employment related taxes you normally would pay. Have all your payments from the company go into the corporate account. You will work for the corporation. Expenses you incur will be billed to your company and then charged for reimbursement to the overseas company.

 

Check with your accountant on the handling of the unemployment insurance. You have a number of additional benefits from being a separate corporation. For example you can deduct a portion of your home as a home office deduction. You can also create your own pension plan and save more than you can in a traditional IRA. You should discuss these and other opportunities with your accountant. He or she can help you set up your books of account and do your overall planning.

 

Also be sure to have a written agreement with your overseas company on all the terms of your contract, the period it will operate for, how it gets renewed and things such as bonus compensation. As you are not their employee you cannot rely on company policies for these issues.

 

I did not get the $40 bonus from the last time.

 

If you have any more questions, please get back to me.

 

This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.

 

 

Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8763
Experience: 30 years of corporate, litigation and international law
Richard - Bizlaw and 2 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Thanks. Hopefully you received $60 when I accepted.

In doing a bit of research I found:

California additional taxes

S-corporations pay a franchise tax of 1.5% of net income in the state of California (minimum $800). This is one factor to be taken into consideration when choosing between a limited liability company and an S-corporation in California.


Since I am receiving $135,000/yr from my company, I'm not too keen in an extra 1.5% CA franchise tax.

Is being a sole proprietorship an option?
Expert:  Richard - Bizlaw replied 5 years ago.

The tax is on net income so it will be what is left after payment of salary and expenses. This is a controlable number. If LLC has a lower rate you can use the LLC format. You can be a sole proprietorship but you may lose some important tax benefits. For example, if you wanted to save $10,000 a year rather than $2,500 for IRA. You can set up a pension plan, pay yourself $125,000 and make a pension contribution of $10,000 from pretax funds.

 

That is why you should talk to your accountant.

 

I did receive the $45 bonus. Thanks

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
 
 
 

Meet The Experts:

 
 
 
  • Law Pro

    Attorney

    Satisfied Customers:

    1426
    20 years experience in business law - sole proprietor, partnership, and corporations
< Last | Next >
  • http://ww2.justanswer.com/uploads/LA/lawpro/2012-6-25_171315_PT206740s.64x64.jpg Law Pro's Avatar

    Law Pro

    Attorney

    Satisfied Customers:

    1426
    20 years experience in business law - sole proprietor, partnership, and corporations
  • http://ww2.justanswer.com/uploads/DC/DCraneEsq/2012-8-14_14436_DCrane.64x64.jpg MShore Law's Avatar

    MShore Law

    Attorney

    Satisfied Customers:

    1233
    Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    1162
    25 years of experience helping people like you.
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    1142
    Run my own successful business/contract law practice.
  • http://ww2.justanswer.com/uploads/ohioatty/2009-1-22_185545_me.jpg J.Hazelbaker's Avatar

    J.Hazelbaker

    Attorney

    Satisfied Customers:

    393
    Experienced and trained in the area of business law.
  • http://ww2.justanswer.com/uploads/scottymacesq/2009-6-10_221523_small.jpg RGMacEsq's Avatar

    RGMacEsq

    Attorney

    Satisfied Customers:

    393
    Licensed Texas General Practice Attorney
  • http://ww2.justanswer.com/uploads/BA/barristerinky/2012-6-10_22423_office.64x64.jpg Barrister's Avatar

    Barrister

    Attorney

    Satisfied Customers:

    301
    13 years practicing attorney, MBA