Immigration Investors’ Watch for U.S Security Laws

U.S Investment Immigration program, especially regional centers program, have been a hot topic among immigration investors and advisors. Majority attention as to do and don’t has been given to US immigration law. However, because when a regional center forms a limited partnership or limited liability company in which the EB-5 investor would become a limited partner, the regional center is offering a security, a regional center must comply with federal and state laws in conducting the offering of securities. 

Securities laws are designed to protect investors by providing accurate information about potential investments and punishing persons or entities who harm the investors and the financial markets. The investors should recognize that not every every investment is safe and not every professional who offers to helps through the process has necessary expertise. 

The securities Act requires that all securities sold must be registered with the SEC, unless exempted by the rules. Basically the law states that if all the investors are accredited investors then the regional center is exempted from registering information with SEC. However, if a regional center conducts general solicitation and advertisement, the regional center would be required to register the securities or find another another exemption. 

If a regional center is not exempted from the registration, the process would take three years of audited financials, or if it qualifies as a smaller reporting company, two years of comparative audited balance sheet data in annual financial statements. The regional center cannot offer or sell securities until the registration statement is effective. What this means to EB5 investors is that they cannot sign a subscription agreement until effectiveness of the registration statement. From a time perspective, the investor cannot afford to wait for the process of a registration statement to be prepared and filed with the SEC, and then for the SEC to declare the registration effective. 

Therefore, it is the regional center’s obligation to comply with the conditions under SEC laws. The investors will want to do his or her own due diligence to ensure the regional center is complying with all applicable securities laws. 

Why LLC

Why LLC?

LLC has gain its increased popularity in the past years based on professionals’ advices. But it has been a challenging task to explain to foreign investors about tax benefit LLC entails. 

LLC逐渐在过去若干年里越来越受专业人士的推荐。向外国投资者解释为何选择LLC确一直是个难题。 

From income tax perspective, an LLC is not a separate tax-paying entity in the eyes of IRS. Profits, losses, deductions and credits are allocated to each member who is separately and individually liable for his share. This scheme is called tax passing through. The benefit of it is that the company’s income is not taxed before it is allocated to members, unlike in corporation.

从收入税的角度来说，LLC在IRS的眼里不是一个纳税体。 所有的盈利、损失、减免等等都是分到个体拥有着。 这个计划叫做Pass-through. 这样的好处是公司的收入在公司拥有者的手中时没有上过税， 而一般公司就有。   

In direct contrast, income and profits are taxed at the corporate level when earned, then taxed again when distributed to the various shareholders as dividends. 

S corporations are taxed in a somewhat similar fashion as are LLCs. The tax burden on retained earning in an S corporation passes through to the individual shareholders. Good news is that there is more to it, that it, the income can be re-characterized. For example, if the S corporation earns profits that would be taxed as ordinary income if earned by an individual, the S corporation can pay the earnings as a “distribution to shareholders.” When one received payment in this fashion, they can avoid Social Security and Medicare tax, currently a 15.3% tax savings. 

S-Corporation和LLC 就很相似。 S-Corporation还更好， 因为有的收入可以做为给拥有者的分配， 有的呢可以做为工资。 这样可以避免缴纳Social Security and Medicare 税。 这样还能省15.3%的税呢。 

Unfortunately, all owners must be US citizens if a LLC desires to be taxed as S-corporation. Foreign investors have no better choice than LLC if they want to best protection and least hassle. 

不幸的是， 只有美国公民才能申请以S-Corporation的方式缴税。 LLC对于外国人从个人资产的保护到最少的麻烦方面，是最好的选择。 

Tax Issues For Foreign Investors 外国投资者面临的税收问题

Along with the surge of green-card oriented foreign investment into green-card, several taxes issues arise. It’s common question from foreign investors that what form of company should they adopt. To answer the question correctly, two factors, state formality and taxes, must be taken into consideration. 

随着绿卡的高潮， 外国人到美国开公司的越来越多了。 需要开什么样的公司于是便是最常见的问题。 在这个问题上，两个重要的因素要考虑在内， 一个是州政府手续问题， 一个是税收问题。 

From a corporate perspective, the LLC provides the same veil protection as a legal entity to its members but is subject to fewer formalities. Non-US members’ than a traditional corporate structure but has the same limited liability protection for its members. Units or interests that are issued to non-U.S. persons do not require any formal registration under exemptions to certain federal and state securities laws.

从公司的角度来讲， LLC为他们的拥有者的私有财产提供的保护是一样的。 但同时，LLC的拥有者的投资不需要象其他公司一样要向有关部门申报。 

From a U.S. income tax perspective, an LLC may be treated for tax purposes either as a disregarded entity or a partnership. The income, profit, deductions, and losses generated by the partnership generally flow through the LLC to the investor on a pretax basis as shown on a Schedule K-1. Unlike corporations that may be taxed twice, the LLC’s tax flow through members’ personal taxes, therefor is imposed once. 

从美国收入税的角度来讲，LLC在IRS的眼里不是一个纳税个体。 它的收入， 盈利，税收减免或损失都分配到个人处， 由个人直接上税。 不象Corporation， 一次收入有可能交两次税， LLC的收入只上一次。 

Domestic U.S. investors who are partners expect to pay taxes, based on their prevailing U.S. federal and state tax rates and income and cash distributions received from the LLC, as shown on each partner’s Schedule K-1. Foreign partners may not have these expectations. Indeed, how does a foreign partner who 1) is not physically located in the United States, 2) does not maintain an office in the United States? Under the Internal Revenue Code of 1986 and its accompanying regulations, if a foreign partner has business activities, offices, or employees within the United States, his or her distributive share of partnership income is deemed to be “effectively connected” with trade or business conducted within the United States.

美国人每年都要按一定的税率纳税。 那么外国人呢？ 尤其是没有住在美国的外国人呢？ IRS 1986的税率规定这样的外国人的税收按照国际贸易的方式交。