What is a regulated investment company?
The regulated investment company (RIC) is an investment company in the United States, which is registered under the 1940 Investment Company Act, a law approved by Congress in response to concerns about the financial market and questions about unclear definitions for certain types of financial companies. According to the rules that control regulated investment companies, the company is to distribute profits directly, such as interest, capital gains and dividends, and shareholders are taxed to an individual level for these incomes while it is not. The purpose of this system is to eliminate double taxation in which the company would pay tax and investors to re -pay the tax for the same earnings. In order to remain registered, companies must meet certain requirements set by the Government, to be able to demonstrate compliance with these requirements. Other requirements should be met to prevent double taxation; Simply be registered, in other words, does not relieve a regulated investment company from DAOut duties.
In order to avoid paying federal taxes, the regulated investment company must pay 90% of their profits to investors. However, the Company will still be responsible for a four -percentage excise duty if it does not pay 98% of its profits. Such companies are allowed to charge for investors to cover the cost of operating the fund, which may include everything from covering fees for stock transfer fees to the legal paperwork fees to be submitted.
IRS regulation M concerns the operation of regulated investment companies. If the investor has money invested with a regulated investment company, the investor is obliged to pay payout taxes, even if they are reinvested. This is ensured that the tax is collected at a time when the income is prevented from avoiding tax liability.
double ZDIn most of the settings, annex is considered unfair, because it is considered to be disproportionate to be expected to pay taxes twice of the same earnings, even if the tax pays two different individuals or entities. The establishment of a regulated investment company allows financial companies to avoid this problem, which in turn means that they can generate more profits for their investors because they do not make tax payments.