So I have my company, which is an LLC which I control, no nominees or else. What is the correct procedure to distribute a dividend, document wise?I men, if my bank asks me 'show me the documents for this transaction' and this transaction is a dividend distribution, is there anything more than a document like this one https://support.freeagent.com/hc/en-gb/articles/115001222964-The-dividend-voucher where I say that I'm distributing a dividend to myself?Being resident in the UAE there are no taxes, so this is just to prepare for next year compliance
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Distributing dividends from company to individual: what is the correct process?
- Thread starter karishi
- Start date
LLCs do not distribute dividends. Dividends are issued to shareholders, and LLCs do not have shareholders.
For an LLC, the distribution or disbursement of profits is on the one hand determined in the operating agreement (at least if you have more than one member), and on the other hand the profits are directly attributable to the members (especially for single-member LLCs).
If you don't have an operating agreement, now would be a good time to draft one. There are lots of templates online you can use as a starting point. But you might want to have a custom one drafted by a lawyer.
For an LLC, the distribution or disbursement of profits is on the one hand determined in the operating agreement (at least if you have more than one member), and on the other hand the profits are directly attributable to the members (especially for single-member LLCs).
If you don't have an operating agreement, now would be a good time to draft one. There are lots of templates online you can use as a starting point. But you might want to have a custom one drafted by a lawyer.
A llc can issue dividends. IRS classifies a single member llc default as a disregarded entity. But this is just IRS handling of it. A US LLC itself is free to issue dividends.
For me as I said is mostly a question of compliance: this year Wise asked me, like I wrote in another topic, about money I sent to my mother. that was cleared with a "service agreement", so since this year I will only send money to myself I guess that the only KYC question would be about dividend distribution. my LLC is from St Vincent and it's a pass thorugh entity, so basically in any case the money should be taxed as personal income, that's why I'm resident in the UAE. Just wanted to prepare in advance
do you mind to tell who you had to help you with the setup of the company? looking for a reliable agent?
If I'm not mistaken, even if a US LLC opts to be taxed as a corporation, the withdrawal of funds is still considered distribution but taxed as dividends. I'm not sure if that difference matter, though. Maybe for some tax treaties.
Good to be prepared! The same principle applies, just make sure the Operating Agreement explains how/when profits are or can be distributed and you should be able to satisfy Wise.For me as I said is mostly a question of compliance: this year Wise asked me, like I wrote in another topic, about money I sent to my mother. that was cleared with a "service agreement", so since this year I will only send money to myself I guess that the only KYC question would be about dividend distribution. my LLC is from St Vincent and it's a pass thorugh entity, so basically in any case the money should be taxed as personal income, that's why I'm resident in the UAE. Just wanted to prepare in advance
I set it up with SFM, which are terrible, and I totally advice you to avid them. Currently I am using BBCIncorp | Online Company Formation and Corporate Service and I've found them to be very good.
Yes, by IRS. But the laws of the LLC doesn't specify this. So if you live in another, especially a tax free country like UAE, you could call it dividends, independent of how IRS in the US would label it.
But, if the purpose is to convince the banks, then of course it might be best to find the most common way of labelling the transfer.
SFM opened the company and then literally disappeared for two years and a half, when I needed to put the company in good standing and so on. They re appeared to blckmail me two months ago, but this is for another topic. BBCIncorp changed the registered agent, transformed the IBC to LLC as IBC ar no longer tax free. I've been with them for two years an a half and never had issues. Why do you need a normal bank for the company? Wise works well, if you business is legit.
they also open bank accounts if you look on the site, but the thing is, the bank will report with CRS to your home country. So it depends on what proof of residence you can present to the bank, while, at the moment, Wise is not reporting. Don't know your needs, but at the moment the safest setup is probably UAE, residency and company, although it's more expensive, start to make sense if you do 100k a year
CRS is not the issue here, Wise will sooner or later report too. I don't believe you will go home free for ever with them.
But thank you for the information I will get in touch with them.
On their site they say:
Will you report my transfers to the tax authorities?
Wise Limited (Wise) is a UK company authorised by the Financial Conduct Authority as an Electronic Money Institution. We are still evaluating the impact of the Common Reporting Standards, including FATCA, to our business and how we will adopt the new requirements. At this time we are not reporting this information to HMRC or any other tax authority.
https://wise.com/help/articles/2932394/how-does-tax-work-with-my-wise-account
and I read it as "if they ask, we share". In any case of course you should not count on Wise being non CRS as a long term solution, just wanted to bring CRS into the picture. If it's not an issue, even better, in any case I sent UAE documents to Wise, UAE residency is still the safest option here.
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