1) Hire a VP of international operations. That guy/girl should get a memo stating that they are fully in charge of all operations while I am absent and living in California. They should be able to sign all contracts, invoices and etc, using company's official letter head with address and phone number from UK. Physically, they can be present anywhere in the Europe as long as they are able to answer the phone (or messages) from time to time. Would somebody make an issue if that guy/girl is payed using some international wire transfer to some Eastern European bank account? I am not sure if I can list him as really employee or should I hire him as a contractor. Can a contractor be the company's VP? I guess that the difference between employee and contractor is in payments like soc. security, health ins. and etc. If you know how things are from that perspective in UK, that would be great. If not, I will research on that separately.

ANSWER:

A. Paying someone by wire transfer from the home office to a designated bank account in some other part of the EU is not an issue in and of itself. However, you are now beginning to convolute things. You must now consider the cross boarder tax issues in Europe. Fore example. If someone is working in Germany, and getting paid from the UK, where is he working. Because you are making the UK the home office, you need to make sure you are conducting business in the UK. The UK will quickly recognize a sham company by watching the money trail. Deposits and revues received at the UK home office and deposited to UK banks, and UK taxes for business activities are paid, is what will help to establish your business as legitimate in the UK. For the individual in the other country, he may have a tax issue.

B. You will need to hire him as a real employee. A contractor will not be a corporate officer or executive. While a contractor may pay his own social taxes, an employee will be paid the corporation. However, the real difference is who is working for whom. The relationship he will be having with the company is one of control of the business operations. You can contract your executive management, however in your circumstances, you need a corporate employee.

2) I should not be an employee of the company (on the official payroll), but I can still be in the position of the company's President. I am not sure what that role in UK is. I would guess it is Company Director judging from the papers I got for incorporation. Even in that role I should limit my responsibilities with the memo to my VP of international operations.

ANSWER: You can still be in the role of company president. You can still be an employee of the company. You can not do work for the company in the U.S. under your current visa. You are also in a positioning the U.S. that requires you to hire your own UK company from time to time. Because of the appearance of working for the company, you are trying to operationally put some distance between you and your company, and to avoid any remote appearance of conflict of interest. The main issue is your working for your own company while in the U.S. on an H-1B Visa. You can even be paid in the UK for your role as president. To the extent of the limitation in the tax treaty between the U.S. and the UK, you would have to pay either UK or US taxes on that income. You can even do phone and internet conferences with the company in the UK and it would not be considered working in the U.S. You just cannot do the kind of thing you are doing, that is, contracting work with your UK office and the U.S. office from your current employer’s location in the U.S.

3) I am not sure what corporate agent is? Can you please clarify that for me? A corporate agent is someone or some agency that can provide an address and operational base for your company in the country or county of incorporation. In the United States, many companies form in a state most advantageous to their location, goals, and tax situation. Our most common incorportions in the Unitged states is Deleware or Nevada incorporation. When we incorporate, we have to have an addresss in that state. There are companies and people who act as corporate agents and provide a corporate address in the state of incorporation. They also can provide a wide range of other services, including to serve as a corporate officer. The corporate agent can also help you to form your corporation without requiring an attorney. Perhaps you have already used one, and just do not realize it.

Here are the corporate rules for the UK which I am sure you are already aware of:

· Company subscribers may be residents outside the UK.

· You must appoint a minimum of 1 Director.

· There is no maximum number of Directors.

· Directors can be corporate bodies or private individuals.

· A Director can be of any nationality.

· Directors need not be formally trained.

· All companies must appoint a company Secretary.

· Secretaries can be corporate bodies or private individuals.

· A Secretary can be of any nationality.

· If there is only ONE Director he or she CANNOT also be the Secretary.

· There is no maximum and no minimum share capital.

· There must be a minimum of one share in issue.

· The maximum is determined by the share capital as specified in the Memorandum.

· The company is required to have a registered office in the UK.

4) I am not sure how can I get the money from the company in that way. If I am shareholder, I would guess that I am getting some sort of annual dividends from the company's profits. In this case, can I be a shareholder in the company? If yes, should I report that income on my US tax reports or that is not very smart choice. I would guess that I should do that since it is pretty legitimate income, not coming from some sort of salary. If no, what are the alternative means for President or Director to get the profits from the company.

ANSWER:

1. You can still be paid, most likely to a bank account in the UK, but you can still get payments into a U.S. bank account. (it is not for work performed in the U.S., it is for your position in the company in the UK, for which you are on sabbatical, paid leave of absence, etc.) Like the EU person not working in the UK, you will have to decide which currency to be paid in, and where you will be paying your taxes, based on the tax treaties.
2. You can still be a share holder of the company.
3. Your income must be reported to either the UK or the U.S. The tax treaty will determine which country will get the right to tax your money. Primarily, if your money for the position of President of the company is received into a bank account in the UK, and since you are on H-1B and not a Legal Permanent Resident of the U.S., you will be reporting the income and profits to the UK. The U.S. may ask you to also report it, but you will not be taxed twice. You may be taxed for the difference. For example, if the UK tax is greater, you would not owe any U.S.Tax. if the Tax in the U.S. is greater, the U.S. will want to collect the difference. The tax treaties had previously left the issue of equity compensation and funds out of the tax treaties. There have been on going discussions and agreement made to fix this over the last 18 months. We would have to look up the rules in the Tax Treaties at the time of filing the U.S. taxes at the end of the year. You may end up filing an extension in order to gain the time to file UK taxes before filing U.S. Taxes.
4. Alternative payments from the company would be equity compensation. However you may still be paid as I have already discussed.

The rest of questions are related to taxes, invoicing, and contractor and employees agreements. Let me know if you are interesting in any of these. I would be more than happy to ask you instead of somebody else.

ANSWER: Bring it on.

Customer (name blocked for privacy), I am sorry, but you missed my understanding.

Paying him in the EU country would not make it a sham. What I meant to say was that you have to have enough activity in the UK to make sure you are doing business in the UK. If the UK office is receiving payments, and then checks are mailed out, for example that is ok. If the invoicing and such are done from the UK you are ok. The payments can go anywhere. The international wire transfer for payroll can work.

It is the company who has the bank account. If you use the HSCB bank, it can create an account anywhere for you.

OK, So that is good. You have the corporate agents. All you need is to appint your vp in EU to be the main decision maker.

You just need to set up your bank accounts in the UK with HSCB and have the money transfers initiated by your trusted VP.

Dear Customer (name blocked for privacy),

I think you have it.

Remember, you will have to report income such as dividends, etc to someone, the UK, the US or both.

Here is a copy of the tax treaty: http://www.treasury.gov/offices/tax-policy/library/uktreaty.pdf#search=%22tax%20treaty%20us%20and%20uk%22

While you may have an accountant, you need to personally become familiar with this document. Notice the TITLE includes the words: "....Prevention of Fiscal Evasion with Respect To Taxes on Income and Capital Gains."

Dear Customer (name blocked for privacy),

LOL...I understand completely.

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However, prevention is worth a pound of gold as they say.

For your taxes, you should retain a good tax accountant. Now, I know some who are associated with the big guns, who are allowed to take freelance work, or you can hire them for your company. They specialize in taking corporate clients.

PWC, KPMG, to name two. Both of those companies are operating in London and the United States. They can figure your interantional taxes on both sides of the water.

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