100% American companies owned by non-Americans

Q: I am the sole owner of an American limited company (LLC), an overseas non-U.S. citizen. My company provides remote services. Do I need to submit a tax return and pay income tax?

A limited company (LLC) that chooses to be a single member of a non-independent entity (the default option) only needs to pay taxes based on the owner's tax situation. Because the owner himself is not in the United States and only provides services remotely, there is no effective link between his income and the United States. This means that a limited company (LLC) does not need to pay any U.S. taxes, nor does it have to bear U.S. federal tax obligations (in other words, it does not need to file income taxes) in addition to paying the annual fee in the state where it is registered. Remember-according to the regulations, although you did not generate any income in the United States, you may still have to pay income tax in your home country.

 

Q: If I import and sell products in the United States, will the answer to the previous question remain the same?

If your company sells tangible goods in the United States, then you need to report the income of that company to the IRS. Non-US citizens need to submit Form 1040NR to report income from the United States. Please do not interpret this form yourself-we recommend that you hire a CPA to help you with all US tax issues. At the same time, you need to obtain an ITIN (Individual Tax Number) so that CPA can provide you with the best assistance.

 

Q: What should I do if my limited company (LLC) has more than one owner?

A limited company (LLC) (partnership) with more than one owner, or a limited company (LLC) selected to pay taxes as an S company or a C company (regardless of the number of owners), even with zero income A tax return must be submitted.

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Q: Okay, I understand the tax payment of a limited company (LLC), but how does a corporation pay tax?

Corporations are tax entities independent of owners. This means that the company has to submit its own tax return and bear the tax obligation. This also means that individuals cannot freely transfer money between the owner (shareholder) and the company. The company can reimburse the owner for the company's expenses, and can also pay for the owner's services for the company, both of which are tax-free. The only other way for shareholders to obtain capital from the company is for the company to pay dividends. Dividends are not tax-exempt and are usually regarded as shareholder’s personal taxable income. As a shareholder, your personal income tax must be paid in accordance with the income tax regulations of your country of residence.

 

Q: What is the best way to reduce the taxable income of a limited company (LLC) or a joint stock company (Corporation)?

Most companies have income and expenses. The US Internal Revenue Service has a list of operating expenses eligible for tax reductions. To be sure, expenses that are obviously related to business maintenance and operation (such as hosting, advertising, employee salaries, etc.) are considered tax-deductible expenses. Other fees are only partially waived. It is best to ask the CPA to negotiate which expenses can be tax deducted, and how much the tax deduction will be. To minimize tax obligations, you need to report as many expenses as possible that qualify for tax reduction. However, you must be able to prove that these charges are true, so it is necessary to keep the receipts and/or bank and credit card statements.

 

Q: Okay, let's talk about salary. Can I pay myself as a company manager to avoid double taxation?

If you are a non-US citizen, you may not have a work permit, which means you cannot receive a salary like an alien or a US citizen. very sorry. However, you can provide services to American companies, such as management services, and collect fees in the form of consulting fees. At this time, you should report the income in accordance with the tax regulations of your country.

 

Q: What should we do if we invest all or most of the income of a US company into services provided by other companies registered in our country?

As long as you can prove that you have provided the service and have accurate records, you can do so. You can also provide this service to regions outside the United States to avoid being treated as income from the United States and required to deduct 30% tax (see below for details).

 

Q: What should we do if we keep all the profits of the company in the US to pay corporate income tax instead of distributing it to shareholders? Can we reinvest this money in the company?

Yes, it's OK.

 

Q: Given that all owners are non-Americans, from the perspective of income tax, is it advantageous to register a limited company (LLC) or a joint stock company (Corporation)?

This is really a tricky issue, and there are many factors to consider. Each entity has its own advantages and disadvantages, so before drawing conclusions, you have to analyze your specific situation, predict the future development of your company, and consult CPA, which will help you. Remember, there is always no "right" or "wrong" answer-usually as long as you can form your own business entity, it is suitable.

 

Q: How and when should I submit the tax return?

You can hire a knowledgeable American Certified Public Accountant (CPA). In most cases, the deadline is around April 15 (may vary slightly each year). You can apply for an extension before this date. The new deadline is September 15 for companies and October 15 for individuals. Please keep in mind that a joint-stock company (Corporation) must report quarterly, while a limited company (LLC) as a partnership can report once a year. Accounting services for corporations may be slightly more expensive.

 

Q: Do I need an ITIN to declare tax? If so, how can I get it?

Whether you need to obtain an ITIN depends on whether you are liable for tax returns for the profits of the US company. If you obtain member benefits (ownership) in a limited company (LLC), you may need an ITIN, but if you are a corporation shareholder, you probably do not need an ITIN.

Remember: Unless there are exceptions, individuals must declare taxes and submit a valid federal income tax return to obtain an ITIN. For more details, please visit: IRS website http://www.irs.gov/ .

 

Q: Do I need to pay state income tax?

The tax only applies to C companies, not limited companies (LLC). It applies to income earned by corporations in the state, and is different from the federal income that applies to all income from the United States.

Even if a limited company (LLC) does not have to pay income tax, you'd better negotiate with the CPA whether you need to declare the limited company (LLC) income tax in the state of registration.

 

Q: Should I register in a state without income tax?

Likewise, if you choose a limited company (LLC), it doesn't matter. In the case of a corporation, it only matters if you think the income from the registered state is high. For example, if you have a Delaware Corporation, but your business does not have income from Delaware, then you do not need to pay Delaware corporate tax, as long as you pay federal corporate income tax. .

 

Q: I heard that as a non-US citizen, I need to pay 30% income tax on income in the US. Is it true?

In some cases, this is indeed the case. This practice is called "NRA (Non-American Foreigners) Tax Deduction", which means that your recipient keeps 30% of the amount you pay and remits it to the United States Internal Revenue Service.

According to the regulations of the Internal Revenue Service, "NRA tax deductions must be FDAP income. FDAP is the abbreviation of Fixed or Determinable, Annual or Periodic (fixed or determinable, annual or periodic). More common, by some U.S. tax deduction agents Payments that may bring FDAP income to suppliers and other service providers are derived from the sale or exchange of interest, royalties, personal service subsidies, rents, pensions, pensions and income of patents, copyrights and similar intangible assets ". ( Click for more details ).

Here is a key issue: the FDAP income paid to foreigners for NRA filing and tax deduction must come from the United States. So how do you know if your FDAP income comes from the United States? Here are some examples:

1. Interest: If the debtor is a US resident, then the interest usually comes from the US.

2. Royalties: If the underlying property is used in the United States, the royalties are also from the United States. When the payment is based on the productivity, use or allocation of intangible assets. Certain intangible assets, including payments related to the sale of copyrights and patents, are generally similar to the judgment of the source of royalties.

3. Rent: If the leased property is located in the United States, the rent is also from the United States.

4. Personal services: If the services are provided in the United States, then the payments for these services are usually also from the United States.

 

Q: What is the W-8BEN form? When do I need to submit?

Form W-8BEN refers to the foreign identity certificate of the beneficiary of tax deductions in the United States. If you are a foreigner, then you need to fill out this form and submit it to the tax deduction agent or payer, and you are the beneficiary of the tax deduction amount. In other words, if you have FDAP income from the United States, then your payer will be responsible for retaining 30% of the tax based on the information listed on the W-8BEN form.

Please remember that when the tax deduction agent or payer makes this request, regardless of whether you have a request for tax reduction or tax exemption, you must submit the W-8BEN form

 

Q: What is the tariff agreement between the United States and my country? How will it affect my income tax obligation?

If you are a citizen of a country that has a tariff agreement with the United States, and you are an overseas supplier, then you may enjoy the above 30% tax reduction. Each agreement has specific provisions to define the tax reduction or exemption rate. These regulations reduce the tax rate according to the type of income and the actual situation of the person who is exempt.

 

U.S. businesses owned by U.S. and non-U.S. partners

Q: There are US partners in companies owned by non-US citizens. Will this have any adverse effects?

As far as we know, this is not the case. Tax regulations apply first to entities and then to individual partners, depending on the tax payment status of each partner.

 

Q: We have American partners in our corporation. Can I choose to be an S company?

No, S company cannot have non-US owners.

 

Q: I am a US citizen and want to start a business. 50% of the partners are overseas non-US citizens. If we form a C company, what types of taxes will my partners pay?

For non-US residents, these two structures have advantages and disadvantages. Company C means that your partner does not necessarily need to submit a US tax bill. Company C can pay him dividends, but Company C does not provide tax deductions on dividends paid, so the income may be double taxed, once as a corporation and once as the owner. In the United States, pay in your name, and in the partner’s country, pay in his name as dividend income.

 

Q: Double taxation does not sound very good. What should we do if we choose to pay taxes as a limited company (LLC) (partnership)?

A limited company (LLC) that pays tax as a partnership is exempt from double taxation. But of course, non-US partners should pay US taxes on the income and profit share of the business. Then, the partners submit the 1040NR form, report the profit share, and pay US taxes based on these profits. Such partnerships must also deduct 30% of tax for overseas partners. When he submits the personal non-resident tax return, the tax withheld will be deposited into the account based on the income to repay the tax owed.

 

U.S. companies owned by overseas companies

Q: Can a non-U.S. company own a U.S. company?

Yes, it's OK. The premise is that the US company is not an S company (or a limited company (LLC) that pays taxes as a C company).

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Q: From a tax perspective, would it be more advantageous for me to establish a US company under the name of a non-US company?

Not necessarily. Ownership does not determine whether or not U.S. business operations generate taxes. To understand how taxes should be paid in your specific situation, you need to consider the US taxes of non-US citizens and whether the profits they earn in the US are considered to be effectively linked to the operations of the US business.

 

Q: I own a company in my country and want to register a limited company (LLC) under the company's name. Can I distribute the U.S. profits of this limited company (LLC) to the company in my home country and pay taxes in my home country?

It is not uncommon for online businesses to avoid U.S. taxation, but factors specific to each company must be considered. As you saw in the previous question and answer, ownership is not the only factor in determining whether tax should be paid, so such cases should be discussed with tax experts in the United States.

 

Q: If I set up a U.S. company under a non-U.S. company, and the non-U.S. company sells goods to the U.S. company for resale, and the price is the same as the U.S. company’s sales in the U.S., is it feasible? I want to avoid paying taxes in the United States.

You cannot sell at zero profit because the so-called "transfer pricing regulations" stipulate that related entities located in two different tax jurisdictions must determine the charging standards for each other's transfer of goods

 

U.S. businesses owned by Americans residing abroad

Q: I am a US citizen and the sole owner of a limited company (LLC). I live in a foreign country, the company only engages in online business, and there is no physical connection with the United States. What kind of taxes do I have to pay?

Online business tax is the same as any other corporate income tax, and as a US citizen, your global income must be taxed. If you are in a foreign country, you may be eligible for tax exemption from labor income when you earn wages overseas. But the profits of your U.S. business still have to pay U.S. state and federal income taxes.

Individuals also enjoy tax exemption for income earned overseas, but the tax exemption limit in 2013 is $97,600. Any income exceeding this amount in a year must be taxed.

 

Q: I am a US citizen living overseas. Is there a way for me to run a business overseas and avoid US taxes?

By setting up a non-US subsidiary, it may be possible to avoid or at least delay the payment of US taxes, but usually this is only temporary, because any income should be taxed in the US if the proceeds are brought back to the US. According to the long-term goal of the taxpayer, at least the payment of U.S. taxes can be postponed, but if he intends to take the money back to the U.S. at some point, he must pay taxes as overseas profits. There are some ways to further delay or circumvent the payment of U.S. taxes on returned domestic profits, but this involves the complex area of ​​tax exemption codes for the specific circumstances and methods of taxpayers, so I won’t repeat them here.

 

Conclusion

As we mentioned earlier, U.S. taxes are absolutely important. We hope that this article can be enlightening for you and give you an understanding of how US taxation works and what to do next.

Please keep the following two points in mind:

1. No matter what your situation is, it is best to consult a senior U.S. tax expert to help you analyze the specific situation and give you qualified advice. The knowledge learned in this article can save you time and allow you to focus on understanding deeper issues related to your own situation. A 30-minute tax consultation will only cost you $50 or $100, which may be your most cost-effective investment.

2. There is no “right” or “wrong” in the strict sense of the tax plan—according to your special circumstances, the plan you are considering should be a question of “suitability”.

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