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Legal Issues

Since SafeTrip® will be operating as a Limited Liability Company (LLC) in the U.S., it will have to adhere to the Federal Tax Laws enacted by the Congress in Title 26 of the United States Code (26 U.S.C.). (IRS, 2015). If SafeTrip® did not plan to hire any employees in the U.S. it might not have been necessary for the company to incorporate the business, but since it does plan to establish a presence it then have to evaluate what type of entity should be form and where it should be incorporated.

SafeTrip® plans to have an office in Miami, FL and one in New York, NY that will house two sales teams. The IT support functions will be outsourced to China. The sales teams will be responsible for partnering with the local business and making sure that brand awareness is established in their regions. The process to incorporate a company in the U.S. with a foreign owner is very similar to the process that is followed by a U.S. resident. The company will be registered in the State of Florida and the formation documents will be filed with the Secretary of State. As a foreign business the entity will need an Individual Taxpayer Identification Number (ITIN) and will need to complete the IRS Form W-7 (BizFilings, 2015).

A Limited Liability Company is taxed as a “pass-through entity”. What this means is that the IRS imposes taxes on the individual owners of the firm rather than on the business itself. This is similar to the way that the IRS enforces taxes on partnerships and sole proprietors (Laurence, 2015). The file form that the firm will need to complete and submit to the IRS is the Form 1065. This form has to be reviewed by the IRS, in order to confirm that income is being reported accurately. Within an LLC, each member will complete a K-1 for their individual tax reporting purposes (Laurence, 2015).

Trade Agreements and Treaties

In 2014 Sino-American or Chinese-U.S. relations improved significantly with regards to the trade of technology. In November of 2014 China and the U.S. signed the Information Technology Agreement. What this allows for is the free trade of products such as computers, telecommunications equipment, semiconductors, and other high technology products (International Business Times, 2014). The agreement eliminates tariffs on products within this category, which benefits SafeTrip® since the EasyBands product falls under this umbrella. This gives the EasyBands a competitive advantage since it will allow the company to utilize the more efficient manufacturing costs of China, in order to develop the product and sell it to the U.S. market with minimal intermediary expenses. Economic cooperation is expected to continue to improve as research is conducted into the Free Trade Area of the Asia-Pacific which would further strengthen trade between China and the U.S. (BBC, 2014).

Labor Laws and Jurisdiction

As an entity operating in the U.S., SafeTrip® will abide by the federal laws that are administered and enforced by the Department of Labor (DOL) in the U.S. The DOL compliance assistant website is a resource provided by the government to make sure the employment laws in the U.S. are clear and followed. The Fair Labor Standards Act (FLSA) provides the foundation for how SafeTrip® will compensate the U.S. employees (U.S. DOL, 2015).

When it comes to jurisdiction over employer wrong-doings with employees it is the DOL that has oversight. When it comes to crimes committed against the public it is the Justice Department in the U.S. that has primary jurisdiction. The Department of Justice (DOJ) is the primary enforcement body of the rule of law in the United States and has certain divisions that focus on white-collar crimes such as the Fraud Section (FRB) (U.S. DOJ, 2015).

When it comes to settling any international disputes, SafeTrip® will defer to the WTO dispute settlement procedures as specified by the Dispute Settlement Understanding (DSU) (WTO, 2015). The Uruguay Round was considered to be successful in clarifying and strengthening the DSU system. The focus of the DSU is on being consultative and trying to settle disputes in an amicable fashion where both sides get satisfaction to a greater or lesser extent.