Even with the introduction of FATCA (Foreign Account Tax Compliance Act) and the various foreign reporting requirements such as annual FBAR Reporting, starting a business overseas is still as popular as ever for many US taxpayers.
The island of Jersey is a favorite location for US taxpayers to form a foreign corporation or other business entity and/or branch office of the US company.
The following is a summary of forming a business entity in Jersey, followed by a summary of FATCA:
As a preliminary matter, it is important to obtain a license grant from the Jersey authorities in order to facilitate the development of a business entity.
LLC: As in the United States, a Limited Liability Company is one of the more popular business formations on the Island of Jersey. The formation of an LLC is relatively simple and there is only a very small fee for creating this type of business structure. One very appealing aspect of the limited liability company is that a person does not need to be a citizen or national of Jersey in order to be owner, manager or director. Moreover, as a limited liability company the owners are generally only liable for debts up to the amount of their investment and not personal liability beyond capital invested.
Sole Traders: A Sole Trader is similar to a sole proprietor in the United States. As in the United States the problem with opening this type of business is that it puts the owner at unlimited liability as opposed to an LLC for example. In addition, when operating internationally it may be more difficult to find other individuals or companies to invest in you when you are operating as a sole trader instead of an LLC.
Partnership: While a partnership is relatively easy to start up, the main downside of a partnership is that the partner are responsible for the debts of the partnership. A Partnership may have a limited partner or “sleeping partner” who will only have liability up to the value of their investment.
Foreign Business: If a foreign business, such as a US business would like to form a Branch, Subsidiary, or Representative office in Jersey, those options are available. And this is the option selected, it is important to discuss the business and tax ramifications in detail with an experienced international tax lawyer before deciding on an option.