What is a Domestic Profit Corporation?
The question many ask when considering becoming involved in the business of what is a domestic profit corporation is what is a domestic profit corporation? Basically, a domestic profit corporations are a type of limited liability company (LLC). A limited liability company means that the owners of the corporation are individually responsible for their corporation’s debts and profits. Each individual owner must agree to and pass an annual general meeting. This is the only way to take the corporation off the books.
A domestic profit corporation differs slightly from a foreign corporation. A foreign corporation is one that is formed in a different country from where the corporation wants to do business. A domestic one on the other hand is formed where the corporation has a majority of its voting shares held or issued in its home nation. The home country will have its own taxation system. The shareholders will not be taxed for dividends received or capital gains and they will not have to pay U.S. taxes on income derived abroad.
Another difference between the two is that domestic corporations are subject to the various restrictions of the Income Tax Code. This includes the foreign tax treatment. Domestic corporations are never subjected to the double taxation imposed by the IRS under theIRC. This is because a domestic corporation cannot have more than five shareholders. There are also various reporting requirements that the domestic corporation must follow including the regular filing of its annual report to the IRS along with its financial statements.
As previously stated what is a domestic profit corporation differs slightly from a foreign corporation. A foreign corporation can be subjected to double taxation if dividends received are subject to U.S. tax. The only way to prevent double taxation is to treat all dividends as income by using the proper tax routing for the funds. If the corporation is a non-domestic one then it may be able to bypass the double taxation through a process called taxatown.
As you can see there are quite a few differences between what is a domestic profit corporation and a foreign profit corporation. The first difference refers to the domicile of the corporation which can be either domestic or foreign. The second difference refers to the ownership structure of the corporation which can be a direct ownership of the corporation by a shareholder or a partnership. A non-domestic corporation may be owned by many different entities instead of by a single entity.
The main reason that these types of corporations are less subject to U.S. taxation is due to the fact that they are “incorporated” in another country rather than their profits being “trailed”. Basically what this means is that they are not members of the United States Corporations laws and are allowed to do whatever they wish with their assets. However, foreign corporations are not so lucky. They are required to report their taxable income on an international basis and must pay taxes to the government of the location in which they are registered. Furthermore, foreign corporations must pay taxes to each government in effect in their jurisdiction. This makes it very difficult to avoid taxation.
If you are asking what is a domestic profit corporation there are several answers to that question. First off, any non-domestic corporation can be taxed as a foreign corporation depending on what it does with its assets. Secondly, foreign corporations cannot have any share ownership or bond issues which would allow them to circumvent the U.S. tax system. Lastly, any company which is registered in more than one state is considered a foreign company and is subject to U.S. taxation.
Hopefully this brief article has given you some insight into what is a domestic profit corporation. Please feel free to use this information in any way that you deem appropriate to your business. I hope that you find it useful. If you would like further information on how I can help you in your business, please feel free to visit my website by following the links below.