Olsen's value-driven storm may also have another element that is helping to create a backlash against the recent wave of jobs outsourcing here in the U.S. "Although many governments have policies that discourage offshore investors, the largest economy in the world still remains relatively open, and a growing bargain to foreign investment. We're counseling a growing number of offshore entrepreneurs from China and Europe who have started new U.S. businesses, especially start-ups in the technology sectors," said Olsen. "They are creating jobs, and that is helping to address the deficit created by the outsourcing of jobs by larger companies in recent years."
He also feels that whether it's language barriers, unfamiliarity with U.S. laws and customs, or any number of other reasons, many of these new businesspeople are making mistakes that will shorten their reach for the American Dream. The advisor notes a growing body of research, such as the recent report entitled "A World of Opportunity: Understanding & Tapping the Economic Potential if Immigrant Entrepreneurs," by New York-based think-tank, Center for An Urban Future. The report found that immigrants have become the major driving force behind job creation in America's largest cities, and are more likely to be the "entrepreneurial sparkplugs of regenerating cities."
But, there are problems emerging as well. Many times these highly motivated new U.S. business owners are less wise to the ways of doing business here, and may not spend the proper time thinking out issues that can affect their future financial success. Even seemingly obvious issues such as whether or not to set up residency here in the U.S. can present taxing problems.
Henry Yin, a successful Northern California-based entrepreneur who has become a citizen since coming to the U.S. thirty years ago, says that part of the problem may also be one where passion clouds the need to prioritize. "Many times business entrepreneurs are driven by their product, their service or their idea. The energy becomes focused on that part of the challenge instead of being spread around, and that can shortchange equally important issues like setting up proper business models and positioning systems to fit in well within tax laws," says Yin
In his recent client handbook," DOING BUSINESS IN THE UNITED STATES: Foreign Corporations, Individuals and Trusts," Olsen suggests several common mistakes that have become far too common for foreign entrepreneurs when they set up shop in the U.S.
One mistake is a failure to understand tax treaties between countries. Underestimating the effects of cross-border transactions and transfer pricing rules can cause delayed taxation by authorities on either side of the borders. Also, the U.S. government requires multinational companies and individuals doing business around the world to disclose all of their activities on special reporting forms. Failure to file the proper forms could subject taxpayers to penalties ranging as high as $60,000. Another mistake is failing to consider becoming a U.S. resident. If immigrant entrepreneurs do eventually choose to become residents, transferring their assets makes them subject to gift and estate taxes, says the former IRS agent.
Neglecting to set up a proper business structure is another. "The wrong corporate structure could make the business subject to unnecessary tax withholdings or even double taxation on assets," according Olsen. He adds that all offshore-owned companies need to be especially aware of the differences in individual state tax laws, and what activities might make them subject to specific taxes.
Olsen says that the most common - but also most devastating effect - can be an inadequate understanding of the U.S. tax structure. "Even seemingly inconsequential issues such as those surrounding payroll taxes, income taxes, and very specific excise taxes carry heavy fines if ignored," says Olsen. On the plus side, Olsen says businesses need to be aware that there are also special tax credits available for them, if they know where to look.
"It is common knowledge smaller businesses provide the great majority of the jobs in this country. In our business we also know that, for many, the traditional American Dream, home ownership, is no longer enough. They want to create a new business here, and along with it, jobs and financial success. We just have to make sure they understand the rules and build companies with a better chance at long term success, both for their sake and for the benefit of the American economy."
