C-Corp vs LLC for non us citizens

[StatiS]

I am EU citizen and would like to form a company in the US (state New Mexico or Wyoming). The business is basically selling digital goods for games through ebay and a custom website. After doing extensive research I decided on US LLC as I will not owe any US taxes but after my consultation with a CPA I am thinking about C-Corp.

She agreed that with the LLC I am US tax exempt but she said that the tax law may change and IRS can go after me even after 10 years for not interpreting the law correctly. She proposed the strategy of forming a C-Corp and paying myself salary equal to nearly the whole profit and just leaving $1000 to be taxed as corporation profits. I will pay $210 taxes for that profit per year and would have the peace of mind because I am tax compliant. She also said that by filing the form 5472 for LLC I am not filing taxes but just telling the IRS that I don’t owe them taxes. On the other hand if I give them $210 per year they will leave me alone and not bother with me.

What do you guys think of this ? Are there any other taxes that the corporation would be liable for? It was very strange to me because on the forum nearly everyone talks about LLCs.

 

[ciccino]

Really interesting question and I'm very interested to know it too

 

[Fulton Abraham Sanchez]

Do not complicate your life with a C corp. If you get a payment from the C corporation it will be reported to the IRS as a 1099 Misc or a 1099 Div as foreigners can receive payments from a corporation either as contractors or distribution of dividends. In addition any foreigner owning over 25% of a corporation needs to report transactions with the corporation to the IRS.

 

[Martin Everson]

I am EU citizen and would like to form a company in the US (state New Mexico or Wyoming). The business is basically selling digital goods for games through ebay and a custom website.

Ok

After doing extensive research I decided on US LLC as I will not owe any US taxes but after my consultation with a CPA I am thinking about C-Corp.

Really?

What do you guys think of this ?

Your clinically insane.

 

[StatiS]

Thanks for the heads up! Can you elaborate on the matter though ?

 

[Martin Everson]

Thanks for the heads up! Can you elaborate on the matter though ?

I am pulling your hand away from the fire. Do not involve yourself with the US tax system unless your a US person or do business there.

Thank me later.

 

[StatiS]

Thank you but I want to minimise taxes in my country. Moreover there is not anonymity whatsoever.

If I pay myself dividends from the LLC there is withholding of 10% in USA ( according to treaty). Then I don’t owe any taxes in my country on these dividends.

I saved 5% and won’t deal with crap VAT thresholds and so on.

 

[Eldorado]

I am pulling your hand away from the fire. Do not involve yourself with the US tax system unless your a US person or do business there.

Thank me later.

Do you mean setting up Delaware LLC is meaningless as well?

 

[EuroKiss]

Utility of a C-Corp is just in case you plan to rise external capital.
No reason to go through this path if you are not interested on that. Over complicated legally and for tax purposes.

 

[StatiS]

Okay C corp in the bin. I am thinking about New Mexico LLC distributing dividends to me.

 

[Sols]

LLCs do not distribute dividends. Under US law, the profits of a transparent LLC becomes personal income.

How it's treated where you live depends on local law. The LLC might be considered a partnership (no corporate tax, only personal income tax) or it might be treated as a corporation (corporate tax, and dividends/income tax depending on what applies in your case).

 

[marioIT]

I see you're from BG, what's your actual setup in Bulgaria? revenue? why do you want the US company?
You talk about being "tax compliant", but you shouldn't forget about your home country... no matter if LLC or C-corp, it will want its share too!
95% of the US CPAs or maybe more know nothing about international taxation. They just care about the US side of things, they don't care/know if their setup makes you a tax evader in your home country!

 

[EuroKiss]

Okay C corp in the bin. I am thinking about New Mexico LLC distributing dividends to me.

No dividends distribution whatsoever.
The LLC is pass-through, more than focusing on the US taxation you should put in order your home country taxation.

 

[StatiS]

I see you're from BG, what's your actual setup in Bulgaria? revenue? why do you want the US company?
You talk about being "tax compliant", but you shouldn't forget about your home country... no matter if LLC or C-corp, it will want its share too!
95% of the US CPAs or maybe more know nothing about international taxation. They just care about the US side of things, they don't care/know if their setup makes you a tax evader in your home country!

In BG I don’t have a company. Profit is 5000€ per month. Currently everything is from ebay sales.

I would like the US company for a number of reasons:

1) no VAT threshold registration
2) ebay managed payments - if I want payouts in us $ I have to be registered there. Currently I am losing 3% on all transactions from US. Roughly 1500€ per year.
3) don’t want my name in BG public records. Not trying to evade taxes just don’t want certain individuals to see I have a company. Here there is no privacy whatsoever.
4) here comoany must pay 15% tax no matter if it is ET ( sole trader) or OOD ( limited liability company). I want to reduce the tax rate to 10% somehow. 5% per year will save me 3000€.

And this is income from ebay only, we are developing a custom website plus another informational website so I expect the savings will increase. Heck even for 4500€ per year is worth it to me.

 

[JustAnotherNomad]

Talk to a BG tax advisor first and foremost about how a US company would be treated by the BG tax authorities.
Saving taxes probably won't be possible, but you may be able to keep your name out of public records. Then again, there may be simpler ways to do that.

 

[StatiS]

I will try to find someone who has a clue. So far I talked to two CPAs and they really didn’t. I am thinking of saving 15% vs 10% ( personal income tax rate )

 

[JustAnotherNomad]

That's not how this works - at least not in most countries.
If registering a country abroad was sufficient, you could register it in a country like the UAE where there is no tax at all. Why even bother with a US company? Then you keep all the money in the company and voilà , no more tax to pay in your home country. Wouldn't that be amazing? Spoiler alert: Of course the government in your home country isn't stupid, so they have rules in place that limit/prohibit that.
That's why you have to talk to an advisor from your home country first and foremost, not only an advisor from the country where you want to register the company: The US will be happy that you want to pay some tax there "voluntarily" (by registering a company there, which nobody forces you to do). They don't care about your tax liabilities in your home country. If things are not set up correctly, you might even end up paying MORE taxes than if your company was only registered in BG due to incompatibilities between the tax law of both countries.

See also my comments in this thread: Wyoming llc federal taxes

 

[startfleetio]

I am EU citizen and would like to form a company in the US (state New Mexico or Wyoming). The business is basically selling digital goods for games through ebay and a custom website. After doing extensive research I decided on US LLC as I will not owe any US taxes but after my consultation with a CPA I am thinking about C-Corp.

She agreed that with the LLC I am US tax exempt but she said that the tax law may change and IRS can go after me even after 10 years for not interpreting the law correctly. She proposed the strategy of forming a C-Corp and paying myself salary equal to nearly the whole profit and just leaving $1000 to be taxed as corporation profits. I will pay $210 taxes for that profit per year and would have the peace of mind because I am tax compliant. She also said that by filing the form 5472 for LLC I am not filing taxes but just telling the IRS that I don’t owe them taxes. On the other hand if I give them $210 per year they will leave me alone and not bother with me.

What do you guys think of this ? Are there any other taxes that the corporation would be liable for? It was very strange to me because on the forum nearly everyone talks about LLCs.

I don't think leaving a certain number in the bank to get taxed at a minimum is a good idea, given that this will definitely involve questionable methods as well. The US clearly has transfer pricing rules.

From what you described, it is highly likely you could pass as an NRA with no USTB and ECI. Which EU country are you residing in?

 

[StatiS]

Bulgaria. I want to use the 10% personal income tax rate but so far I heard that I have to register as sole trader and pay 15%.

 

[JustAnotherNomad]

PLEASE talk to a BG tax advisor. The taxation is not your biggest issue here...