Non Citizens May Have Tax Concerns When It Comes to Anonymous LLCs.
We are US-based attorneys and can really only give advice about US-based law and taxes. If you are located outside the US, a lot depends on the country you are located in, because your country will have its own specific ways it deals with taxes and income derived outside your country, and the US will have specific ways it handles legal issues and taxes depending on the country you are a resident of.
Therefore, we really don’t have the ability to provide most non-US citizens with all the answers they seek, regarding doing business anonymously in the US, and how such business will impact their tax status.
With that said, we’ve prepared a list of answers to the most common questions we receive from non-US citizens regarding tax issues:
- You may have U.S. income tax if you have any FDAP or if you have any Effectively Connected (to a U.S. trade or business) Income (ECI).
- You still have to file certain U.S. income tax returns and statements (Form 5472, pro-forma Form 1120, and possibly Form 1040-NR) every year, even if there is no taxable income.
- You’ll almost certainly still have to pay tax to your own country, state, and locality.
- You will not be anonymous from the IRS or any federal, state, or local governments even if you use an anonymous LLC.
- If your Anonymous LLC receives U.S. source income, you’ll need to have a percentage withheld and remitted to the U.S. government. The actual percentage is based on either Publication 515 or whatever tax treaty exists between your home country (for tax purposes) and the United States, if any. Ask your accountant for actual percentages based on your business activity, as we can only speculate.
- The payors (people/businesses who are paying you) are typically responsible for withholding and remitting taxes to the IRS on your behalf in some situations. It is your responsibility to make sure that, if the payor does not withhold the proper tax, that you yourself do so and remit it to the IRS.
- Taxation by the state you form in is rare, but may occur depending on your business activities and where your U.S. source income is derived.
- You cannot elect S-Corp tax treatment for your LLC because of the shareholder restrictions imposed on S-Corps and LLCs taxed as them. Specifically, nonresident aliens (as defined in the Internal Revenue Code) cannot own interests in an S-Corp or LLC taxed as one.
- You can elect C-Corp tax treatment for your LLC to avoid the pass-through taxation, but the LLC will still need to file its tax returns and make its other filings, and automatic withholding for U.S. source income will likely still occur to some extent.
- Law 4 Small Business cannot prepare the tax returns or other tax filings for you.
- Law 4 Small Business cannot advise you on the taxes imposed by your home country.
- Law 4 Small Business cannot help you open a bank account. Most US-based banks have federal requirements to “know who who their customers are,” and require you walk into a branch office somewhere. Law 4 Small Business cannot help you with this.
- We highly recommend finding an accountant versed in international taxation and with experience dealing with the taxes of the United States and your home country. KPMG is a good option to consider.
We have a number of other knowledge base articles involving non-US citizens and tax issues that may help answer your other questions.
Law 4 Small Business (L4SB). A little law now can save a lot later. A Slingshot, LLC, company.
Author: Larry Donahue
Larry Donahue is an attorney and founder of Law 4 Small Business, P.C. He is licensed to practice law in Illinois, New Mexico and the US Patent and Trademark Office.
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