KNAV P.A. is a full-service accounting firm providing unparalleled services ranging from set-up, accounting advisory, assurance, taxation, valuation and business advisory. KNAV has been catering to distinct requirements of multinational organizations as they expand and establish in new geographies. KNAV with its qualified team of pioneers in US GAAP, IFRS, Canadian GAAP and Ind AS distinguishes itself through its client-centric focus and partner-led solutions.

USA, being the world’s largest economy, confers an ocean of opportunities for amplifying the growth of businesses by offering top-notch infrastructure and a large consumer base. KNAV’s with its expertise and experience provides support at each step for organizations to meet the regulatory requirements and accounting frameworks enabling businesses to flourish.

WHAT WE DO

– US GAAP advisory

– Advice on application of accounting policies and accounting and auditing standards

– Financial reporting advisory

– Implementation of new standards and processes

– Standardizing IFRS Conversion

– Updating the accounting tools and functions

– Statutory audits in accordance with relevant local legislation

– Review engagements (including net working capital)

– Compliance engagements

– Special purpose and compliance audit

– Initial set-up and accounting support for commencing a business

– Preparation of financial statements as per applicable GAAP

– Advise on complex and non-routine transactions

– Automation of cashflow statement preparation

– Treatment of differences emanating from conversion to reporting currency

– Listing support in multiple countries including US, Canada and India

– Transition to different accounting framework

– Preparing and filing federal tax returns

– Evaluating special deductions and credits such as Domestic Production Activities Deduction, R&D credit,

Foreign tax credit, etc., which can help reduce the overall effective tax rate

– Conducting Earnings and Profits studies to enable corporations assess their ability to pay dividend

– Representing before IRS

– Assisting in various miscellaneous federal filings such as withholding tax returns, 1099 filings, etc.

– Preparing and filing of state and local income tax returns

– Studying multi-state nexus and revenue apportionment

– Evaluating various state specific deductions and credits which may be helpful in attaining tax efficiency

– Advising on sales and use tax nexus applicability and compliances

– Representation for state and local income tax and sales & use tax audits

– Assisting in various miscellaneous state and local filings such as franchise tax returns, property tax returns, etc.

– Consulting on optimal structuring for acquisitions or dispositions

– Advising on deductibility of various transaction costs

– Analyzing restrictions on post-acquisition utilization of net operating loss and other tax attributes

– Analyzing available elections related to acquisition (such as 338 elections) to determine the most tax

efficient manner of structuring an acquisition or disposition

– Advising on optimum acquisition vehicle & funding

– Developing transfer pricing global tax plan for corporates

– Preparing transfer pricing documentation in accordance with US regulations

– Providing litigation support in case of transfer pricing assessments

– Assistance with/preparation of current and deferred tax calculations (quarterly and annual)

– Identifying uncertain tax positions in current and prior years and measuring these uncertain positions

– Assistance with/preparation of financial statement footnotes and related income tax disclosures

– Developing tax basis balance sheet

– Communicating with external auditors

– Assessing the quality of earnings

– GAAP accounting & SEC reporting compliance

– Analysis of cash flows

– Balance sheet assets & liabilities review

– Identifying key business drivers, trends in profitability & risk concentrations

– Evaluation of management’s forecast

– Buy-side & sell-side diligence

– Organizational maturity diligence

– Purchase price allocation for business combinations & transaction accounting

– Valuation of equity-based compensation & ESOP’s

– Valuation of performance-based stock options & restricted stock awards

– Intangible asset impairment review

– Valuation of financial instruments (derivatives, foreign currency convertible bonds etc.) for financial reporting

– Valuation of intellectual property

– Valuation of litigation and dispute settlemen

– Valuation

– Advisory

– Market research and analysis

– Property tax services

– Litigation support

– Due diligence

– Strategic consulting

– Construction of Hypothetical

– Qualitative assessment – Critical Terms Match

– Quantitative assessment – Dollar Offset, Regression Analysis, Monte Carlo Simulation

– Hedge Design Documentation

– Hedge accounting policy assessment

– Review of accounting and disclosure for financial instruments

– Financial statement audit including A-133 Single Audit

– Agreed-upon procedures audits –
—– State and Federal Compliance Audit
—– Attestation of management assertions
—– Performance Audits
—– IT General Controls Audit

– Assistance in preparation of financial statements

– Assistance in preparation of Comprehensive Annual Financial Report (CAFR)

– Professional Consulting Services
—– Education and training at all levels (clerical up to governing board members)
—– Budgetary analysis
—– Grant management
—– Implementation of internal control procedures
—– Implementation of process improvements and timely month-end close.
—– Financial reporting statements and schedules, including CAFR
—– Capital asset accounting and reporting
—– Financial planning and cash flow management

– Conduct financial and accounting investigations to uncover facts

– Identify key financial and business facts to support legal arguments

– Litigation support for mediation and arbitration

– Bankruptcy and re-structuring

– Business interruption or loss of income/profits

– Fraud investigations

– Forensic accounting

– Criminal and civil fraud investigations

– Health care criminal and civil fraud investigations

– Health care compliance

– Financial institution fraud and anti-money laundering compliance

– Mortgage fraud

– Corporate internal investigations and compliance

– Shareholder and contract disputes

– Foreign corrupt practices investigations

– Securities fraud

– Employee defalcations & misappropriations

– Post M&A disputes

– Working capital adjustment disputes

The United States in general, offers ease of doing business, but complying with varied state laws may be a little challenging for businesses setting up their presence for the first time. All entities considering to setup a presence in US should consider the tax landscape as these can vary significantly between state, county and city. KNAV provides expert service and advise for start-ups as well as established businesses to meet the regulatory requirements and adherence to the accounting framework in the US.

FORMS OF BUSINESS STRUCTURE IN THE USA

A business can be structured in the following ways:

Sole Proprietorship

Sole proprietorship is the simplest form of business structure that is owned and controlled exclusively by one person who bears sole responsibility of the business, including all its liabilities and profit or loss.

Partnership

Partnership is the simplest structure for more than one person to own a business and usually structured as limited partnerships (LP) or limited liability partnerships (LLP). The various forms of partnership differ based on the extent of liabilities borne by the partners for e.g. in a LP one partner bears unlimited liability while all partners have limited liability under LLP.

Limited Liability Company

An LLC is a hybrid of a corporation and partnership as it provides an ability to limit personal liability for members whiles providing access to profits without having to pay corporate taxes. It serves as an opportune structure for keeping tax rates lower than corporations and protecting personal assets of the owners.

Corporation

Corporations are formed as a legal entity separate from its owners and depending on may be structured as:

  1. C corp

A C corporation is registered under subchapter C of the Internal Revenue Code and is a legal entity completely separate from its owners and also taxed separately from its owners. These are suitable for medium to high risk business that might need access to capital through stock sale, plan to go public or sell the business at some point.

  1. S corp

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purpose and avoids double taxation limitation of a C corp. The corporation must file with the IRS to get the S corp status in addition to registering with their state and it is important to note that not all states provide same tax treatment to S corp like federal governments. S corp is limited by number of shareholder (100) and the requirement that all shareholders be U.S. citizens.

  1. B corp

A B corp or a benefit corporation, is a for-profit corporation recognized by a majority of U.S. states that only differ from C corps in purpose, accountability, and transparency and are taxed in the same manner as a C corp. Although the B coprs are for profit they are accountable and work to produce some public benefit and some states also require them to file annual benefits report.

  1. Non-profit corporation

Non-profit corporations referred to as 501(c)(3) corporations are organizations formed to carry out charitable, education, religious, literary, or scientific work and not for the purpose of generating profits. An organization planning set up would need to file with the IRS to get tax-exempt status along with registering with the state as required.

Branch of a Foreign Corporation

A foreign corporation may also choose to establish its presence by opening a branch in the US. A branch is usually not a separate legal entity and is considered more like the entire company doing business in the US which might not be favourable from tax and other liability perspectives.

REGISTRATION REQUIREMENTS

Businesses structured as an LLC, corporation, partnership, or nonprofit corporation would require registering with the state where business activities would be conducted i.e. typically a state where:

  • The state in which the business has a physical presence
  • A significant portion of company’s revenue is earned from that state
  • Employees of the business work in the state

For businesses that are operated from more than one state are considered domestic by the state that it is registered in and are required to file for foreign qualification in all other states where the business is active.

A registered business would then apply for an Employer Identification Number (EIN) which serves as the federal tax ID. A state tax ID number is also required to be obtained if the business is required to pay state taxes based on each state’s requirements.

The requirement for a business license or permit (both federal and state) depends on the type of activity; activities such as agriculture, aviation, mining, transportation and logistics that are governed by federal laws require federal licenses and permits and those activities that are regulated by the state require state permits.

AUDIT REQUIREMENTS FOR COMPANIES IN THE US

Financial statement audit requirements in the US depend on whether the business is public or private.

Public Company: Companies whose securities (equity and/or debt) are traded in public markets in the United States are required to have annual      audits by an independent CPA firm registered with the Public Company Accounting Oversight Board (PCAOB). Public Companies are also required to have the quarterly financial reviewed by a PCAOB registered CPA firm.

Private: Although federal laws do not require audits for private businesses it is generally a requirement of other stakeholders such as investors, banks and/or other lenders. Although an audit might not be a regulatory requirement, financial audits are preferred by companies as they provide numerous benefits such as:

  • An audit validates the compliance of the company’s accounting policies with applicable accounting framework.
  • An audit provides insights into the internal control systems and policies of the company providing an opportunity to identify and correct the weaknesses in internal controls.

Nishta Sharma

Managing Partner

nishta.sharma@knavcpa.com