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Offshore Entity

A legal entity incorporated in a jurisdiction outside of the investors’ home country. Companies move their business offshore usually for the purposes of favorable tax treatments and relaxed regulations.

Foreign Account Tax Compliance Act (FATCA)

FATCA is a U.S. federal law requiring banks around the world to report banking and business activity of American citizens to the IRS (Internal Revenue Service). Otherwise, they could face fines.

Economic Substance

A set of rules introduced by EU countries to jurisdictions having very low to no tax liability. The purpose is to address the problems of base erosion and profit shifting while promoting tax transparency globally. Countries that fail to comply with these standards may be in the EU blacklisting.

Tax Residency

A place where an individual is legally required to pay for his or her taxes.

Shareholder/ Stockholder

An individual or an entity owns at least 1 share of a company’s stock-financial equity.

Merchant Account

A type of bank account acts like a holding account which allows businesses to receive all payments in multiple electronic methods before being deposited into the typical bank account.

Employer Identification Number (EIN)

An unique 9-digit number to identify a business entity issued by the Internal Revenue Service of the US.

Double Taxation

Double taxation happens when an individual or other entity is taxed twice: first in where they conduct business, and second in their home country.

Limited Liability Company (LLC)

The ever-popular business entity that limits the owner's liability for the debts and obligations based on their capital contributions. Under the US law, LLC has the pass-through taxation structure of a partnership or sole proprietorship and limited liability of a corporation.

Corporation

A separate legal entity which can enter contracts, loan and borrow money, sue and be sued, hire employees, own properties, and pay taxes. In the US, there are two common types of corporation:

  • S corporation: A tax status registered under IRS to pass income, losses, deductions, and credits directly to their shareholders for federal tax purposes.
  • C corporation: The default legal entity for a corporation that separates from its owners and offers personal asset protection. Typically, C corp will face double taxation.
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