Question Conducting Business in the US

[kranj99]

Hello all - in January I will be starting a new venture. I will be managing it as a side-income activity from the EU (where I am resident), but the actual business is in Freight Logistics and moving goods throughout the US. All income will be US generated (service fees paid by US corporate customers mainly).

So I will need a US LLC and this will need to report into the IRS for taxes.

I wanted to catch some thoughts from the esteemed members on this forum here on what might be the best approach for me. If you are a non-US citizen/non-US resident and planning to do actual business in the US, how would you structure yourselves?

I would likely need to start off with Mercury +Transferwise as my EMI and once covid is sorted and we can get back to normal travel, I'd simply head over there and open a more mainstream bank account. So I don't think I can hide UBO details here even if Wyoming is a privacy friendly state.

Any advice is appreciated!! Thanks in advance

 

[tomboy]

Open a c-corp in the U.S.
invoice all the profit to your European structure. you will not be tax liable in the U.S as you're not a US citizen and as long as your company does not make profit in the U.S.
you will pay taxes in the country where you live.

 

[Mark Rucken]

Open a c-corp in the U.S.
invoice all the profit to your European structure. you will not be tax liable in the U.S as you're not a US citizen and as long as your company does not make profit in the U.S.
you will pay taxes in the country where you live.

He pointed out that the income will be generated in the US 100%.

 

[tomboy]

He pointed out that the income will be generated in the US 100%.

How does it matter ? he's not physically in the United States, he's not American. his company will be a non-dom.
Receiving payments from the United States is not enough to qualify as "domestic income".
What matters is where the decisions are made and from where the company is operated/managed.

 

[kranj99]

Thanks for the feedback to both of you.

I ended up consulting with a US CPA yesterday and he advised going the C-Corp route as the business will have US based "dependent agents". It's an old-school business, no e-commerce or anything and so while I'd be the UBO sitting in Europe and doing the coordination work, the suppliers, clients, commission-based sales agents etc. will all be on the ground in the US. The IRS could consider that as US income.

One way to reduce tax liability on profits though would be to set up another company in another country and bill the US C-Corp for monthly management fees or something. This may or may not be all that legal though. Depends on how its structured. But otherwise it looks like in order to stay legal, I'd need to pay US Corp tax on the C-Corp and then if and when I take out dividends, I'd need to declare them and pay personal tax on those...

I think I will go the WY route, but it won't be an LLC, rather an Inc. WY at least does not have local state tax and so less admin overhead.

Thanks again

 

[Mark Rucken]

How does it matter ? he's not physically in the United States, he's not American. his company will be a non-dom.
Receiving payments from the United States is not enough to qualify as "domestic income".
What matters is where the decisions are made and from where the company is operated/managed.

This is not how things work. If the IRS determines that the majority of business is conducted in the US, for example if you rent services of shipping companies, if your product is produced fully or partially in the US or maybe hire US residents to do sales for your company on US soil, they might consider you as a US resident company and send you a nice letter that they want to talk to you. I have seen this way too many times.

Look below what the CPA told him, very nice and educational answer.

As everything in life, you can gamble or just stay on the safe side

 

[tomboy]

and bill the US C-Corp for monthly management fees or something

yeah it's exactly what I told you. I was right for this and I am also right on the non-dom part.
regarding the "domestic income" this is not true, as long as you are not a U.S citizen nor resident you will not be tax liable in the U.S if your c-corp does not make profit.
it's been 20 years that I am running under this structure, I have been advising many people to do it and as of today never heard about anyone having trouble.

 

[Fulton Abraham Sanchez]

I agree with @tomboy. If the C corp shows no profits, there is no tax to pay. The creation of a company in another country to bill the US C Corp for expenses and make US C Corp zero profits it might be open to challenge by the IRS. Better to bill the US C Corp for expenses from your company home country and pay taxes there.

 

[tomboy]

I agree with @tomboy. If the C corp shows no profits, there is no tax to pay. The creation of a company in another country to bill the US C Corp for expenses and make US C Corp zero profits it might be open to challenge by the IRS. Better to bill the US C Corp for expenses from your company home country and pay taxes there.

Agree with you 100%
this is the setup any decent CPA will offer.

 

[fshore]

You can bill the US Corp, but you have to do it on arms length and provide related party documents and file forms.
The irs will only approve the deductions if done on arms length.

Also, BTW a US c Corp is always taxable in the US. Its only disregarded llcs that are not necessarily taxable in the US.