Establishing Businesses in Guam - Assignment Example

? Establishing Businesses in Guam of Guam Establishing Businesses in Guam Guam is a small island off the coast of United States. It has approximately one hundred and seventy thousand and has bright business opportunities. There are several regulations that have been put in place by the Guam government that regulate the start of different forms of businesses. In order to start a business, an investor needs to formulate a good and workable business plan. It should include a detailed account of the business’ vision, mission, objectives and what the business is going to venture into. This business plan should be convincingly workable since can help in securing loans for the business capital (Norman, 1999). Small Business Administration (SBA) is the Guam’s government official agency that deals with helping in the formulation of business plans and securing funds necessary for its establishment. In the Business plan, investors should include the legal structure of the company. This would be determined by the following factors; investor’s ownership, management responsibilities and tax consequences. The various types of businesses include; sole proprietorship which has advantages like quicker tax preparations, low start up costs and ease of money handling. Its disadvantages include; personal liability and lack of financial control. In the case of starting a corporation, a type of business which has legal rights that separate its liability from the owners’ and it’s chartered by the state (Norman, 1999). To start this kind of business in Guam, investors are required to pay a filing fee of 50$. This levy is used to fill by-laws and articles of incorporation at the Guam Department of Revenue and Taxation. A corporation that seeks to be taxed as a corporation is called a “C” corporation. It pays federal and income tax on earnings while those that don’t pay income tax on their proportionate shares are called “S” corporations. In all forms of business ownerships, there should be proper use of bonding, insurance and legal agreements in dealing with issues concerning both the owner’s and company’s liabilities. The next step involves acquiring an Employer Identification Number also known as the Federal Tax Identification Number. The EIN can be secured from Internal Revenue Service offices. The Employer Identification Number will be useful in opening of the business bank account. This is done at the initial stage and it is an essential requirement for all companies and businesses that hire employees. The Employers Identification Number is issued to the applicant on the submission of form SS-4 to the Internal Revenue Service. Furthermore, there is an option of applying for the EIN online for instant issuance (Daily, 2010). Next, the investor registers for taxes. All companies incorporated in Guam have a mandate to register for one or several identification numbers that are tax-specific, licenses or permits which includes sales tax, unemployment tax and income tax withholding. According to section 26201, Article two, Chapter twenty six of Title eleven of the Guam Code of Annotated, privilege taxes should be assessed, levied and collected monthly against persons on the basis of their activities and business in Guam determined by application of rate against gross proceeds of sales, values or gross income. Businesses and business owners are required to pay Use Tax under the Guam’s Use Tax law which is applicable on the occasion that one has imported personal property that will be consumed or used in the operations of your business. If the business hires employees, it is required to pay the Payroll Tax (Norman, 1999). Guam has a separate Territorial Tax system apart from the United States based on the Internal Revenue Code. As business owner or entity conducting operations in Guam, is required by this code to file and report a Guam Territorial Tax Return. In title 26 and 31 of this code, business owners are mandated to file form 8300 if the business earns more than ten thousand in cash from a single transaction or from a series of related transactions. This information should be reported to both the US Treasury Department of Financial Crimes Enforcement Network (FinCEN) and the Department of Revenue and Taxation. A Gross Receipt Tax (GRT) should also be paid by businesses which have operations in Guam. It is usually a 4% levy on the final sale of the business’ goods (Daily 2010). An eleven percent occupancy tax is also paid by hotels for the daily room rate. There are other local taxes levied on alcoholic drinks, property recreational facilities, tobacco, securities, insurance and banking. The next step is to secure permits and licenses for the business. To operate legally, businesses are required by the Department of Revenue and Taxation’s General Licensing and Taxation Branch to apply and secure licenses and permits on local or state level. Permits depend on the level which the business is operating except in the case of professionals like medical practitioners, lawyers and certified public accountants (Rich, 2006). This is because they are subjected to rule and regulations of their respective regulation board or agency. To determine the set requirements for the specific industry on which the business is operating, the owner is required to visit the local municipality for details on licensing. However, according to Guam’s Department of Revenue and Taxation’s web page, in the circumstance of foreign or domestic partnerships, limited liability partnerships, limited liability corporations or corporations’, one should first register the business with the department’s General Licensing and Registration branch. Certified or notarized copies of the business Article of Incorporation, partnership agreements, corporate by-laws and a correctly filled application should be submitted (Bohn, 1970). Additionally, depending on the type of business operated, business owners may need other documents and get clearances as well as permits from different government agencies. An example is in the occasion of a purchase of a rental property, it’s required to apply and get clearance from the Department of Public Works and Department of Land Management. It is important to note that on June 30, all business permits and licenses expire. Licenses issued after or before this date are considered temporary and appropriate fees are charged. Another important requirement when starting a business in Guam which is not legal is to know and understand the language, culture and ways of the Guam’s society. The Guam People, also known as Chamorros are warm and friendly. They have a welcoming culture to the island. Guests are treated in a similar way to family members. Hence, makes the island a great place to visit and start a business (Rich 2006). Take an example of starting a bank in Guam. For a person to start a bank or a business that involves receiving money on behalf of others on deposit, he is required by Guam’s corporate laws to apply and obtain an annual commercial license. However, licenses to foreign banking companies will only be issued to them on the approval of its application by the Banking and Insurance Board. An annual fee of one thousand dollars is paid on every application. An additional annual fee of five hundred dollars will be paid for every automated teller machine, cash dispensing machine or Customer-Bank Communication terminal that is not contagious to a main bank branch. When seeking for the licensing of a banking business, applicants must make the application to the License Division of the Guam’s Department of Revenue and Taxation in the acceptable form (Daily, 2010). The application should contain evidence showing that all the conditions and requirements, regulation and rules have been met. Failure to meet any of these prerequisites leads to the denial of the license. It can also lead to a revocation of the license. All other applicants for commercial licenses and investors in the Banking sectors are required to have sufficient evidence that; they have settled all tax obligations set by the Business Privilege Tax Law, in addition to any interests and penalties if any before the application of the license, he meets thereto rules and regulations as a person of upright moral character and has integrity. On environmentally friendly businesses, Guam encourages new entrepreneurs to come up with business plans that would ensure their businesses would protect the environment from further pollution and destruction. This could be done by recycling their waste produced. According to Guam Environmental Protection Agency the rate of recycling in Guam was 17.85% in the year 2011. Demolition and construction debris recycling was not included in this statistics. References Norman, J., (1999). What No One Ever Tells You About Starting Your Own Business. New York: Dearborn Trade Publishing. Daily, F. W., (2010). Tax Survey for Small Business. California: Trademark Office. Rich, J. R., (2006). Unofficial Guide to Starting a Business. Boston: Wiley Publishing, Inc. Bohn, J. A., (1970). The Government Code of the Territory of Guam. Washington: Sage Publishers. Hess, S. A., Bales, V. J., Folk, D. P.,& Holt, A. K., (2007). Design Professional and Construction Manager Law. Chicago: ABA Publishing. Read More