David McKeegan founded Cleer back in 2016 when he saw the needs foreign founders of US startups were facing. David is a seasoned entrepreneur and passionate about supporting fellow entrepreneurs.
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Guest Resource
Cleer Tax Website – Do not let your tax & financial filings get in the way of building the business of your dreams.
3 Value Bombs
1) You can start and run your business without being tied to one place.
2) Compliance with state regulations adds another layer of complexity to ensure full compliance.
3) Get a tax extension before the April 15 deadline. This will give you extra time to understand your obligations.
Sponsor
HubSpot: Scale support and drive retention and revenue all in one place with HubSpot’s all-new Service Hub. Visit HubSpot.com/service to learn how this all-new solution can help you deliver for your customers!
Show Notes
**Click the time stamp to jump directly to that point in the episode.
Today’s Audio MASTERCLASS: Helping Foreign Entrepreneurs Navigate the US Tax Code with David McKeega
[1:12] – David shares something he believes about becoming successful that most people disagree with.
- He believes that you can start and run your business without being tied to one place.
[2:42] – David shares his story of exiting Greenback after 14 years.
- David and his wife received offers from investors and private equity firms for a while but focused on building the business.
- Eventually, they decided they wanted more freedom and began considering the offers seriously in early 2023.
- Within a couple of months, they received multiple offers and began a thorough evaluation process. After about eight months, they sold the business to a private equity firm in April 2023.
[4:33] – What were the main things that you learned from that process?
- David, a former banker, was familiar with processes from his previous work on the buy side. However, he found this process surprisingly lengthy. Every day felt like walking on a knife’s edge, unsure of the other party’s thoughts.
- Despite the uncertainty, they maintained open and honest conversations with the private equity company’s deal team, which proved beneficial.
- These candid discussions set their negotiations apart from typical situations, fostering transparency and understanding.
[6:12] – Why David Started Starting Cleer Tax.
- Carrie and David focused on Cleer shortly before their business exit. The idea sparked during a conference hosted by Dan and Nene at the Dynamite Circle in Bangkok. During the event, they witnessed a failed attempt to pitch an Expat Tax Services idea to a speaker.
- Despite the setback, they received an unexpected email from the speaker, who urgently needed help with tax returns for a new job. seizing the opportunity, they quickly built a website and set up the business over a weekend.
- Cleer Tax initially focused on corporate tax work, which differed from their expat business, catering mainly to non-US entrepreneurs residing outside the country.
[8:51] – A timeout to thank our sponsor!
- HubSpot: Scale support and drive retention and revenue all in one place with HubSpot’s all-new Service Hub. Visit HubSpot.com/service to learn how this all-new solution can help you deliver for your customers!
[12:35] – David talks about the tax issues people encounter when entering the US market as a foreigner.
- The US can be tough for foreign businesses. There are many reasons why, such as fierce competition and complex regulations. Unlike other countries, the US uses its accounting standards and has different tax rules for each of its 50 states.
- This complexity can overwhelm newcomers, especially those unfamiliar with US tax laws. Non-US business owners face unique reporting requirements to the IRS, which, if missed, can lead to hefty penalties that may jeopardize their companies.
- Many local accountants lack expertise in these international regulations, as they primarily work with local clients.
[14:21] – How can you stay compliant so you do not get torpedoed by the IRS?
- If you are not a US citizen or corporation and you are entering the US market, you must be aware of additional reporting requirements.
- Forms like 5472 and 5471 are crucial for reporting ownership of foreign or US companies by non-US individuals. Failing to complete these forms on time can result in hefty automatic penalties, such as a $25,000 penalty for 5472 and a $10,000 penalty for 5471.
- These penalties can significantly impact your business’s profitability. You must comply with regulations like FinCEN beneficial ownership reporting and disclose foreign bank accounts.
- You need to adhere to US GAAP standards and manage taxes in states where you have business activity. Many newcomers are unaware of these requirements and may seek assistance for one task without realizing the need for multiple filings and compliance measures.
[17:15] – How can you can stay compliant, so you do not get torpedoed by the IRS?
- Depending on your business structure, if you open a C Corp in the US, you will need to file Form 1120 annually.
- As a foreign owner, you must file Form 5472 to report foreign ownership. This year, you will also need to complete FinCEN beneficial ownership reporting and report any foreign bank accounts with FinCEN 114.
- For Delaware-incorporated businesses, you will need to file the Delaware franchise tax annually.
- If you miss the March 1 deadline, you will incur a $200 penalty.
- You must address any state tax obligations, including sales tax if you have nexus in any of the 50 states.
- Compliance with state regulations adds another layer of complexity to ensure full compliance.
[18:00] – David gives his takeaway.
- Get a tax extension before the April 15 deadline. This will give you extra time to understand your obligations.
[18:15] – David gives his call to action.
- Cleer Tax Website – Do not let your tax & financial filings get in the way of building the business of your dreams.
[18:39] – Thank you to our Sponsor!
- HubSpot: Scale support and drive retention and revenue all in one place with HubSpot’s all-new Service Hub. Visit HubSpot.com/service to learn how this all-new solution can help you deliver for your customers!
Killer Resources!
1) The Common Path to Uncommon Success: JLD’s 1st traditionally published book! Over 3000 interviews with the world’s most successful Entrepreneurs compiled into a 17-step roadmap to financial freedom and fulfillment!
2) Free Podcast Course: Learn from JLD how to create and launch your podcast!
3) Podcasters’ Paradise: The #1 podcasting community in the world!
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