Question Foreign US LLC as C-Corp: Easier banking/Paypal/merchant processing?

[kranj99]

There's been some chatter on the difficulties in getting a paypal account for a foreign/non-US-resident single member LLC. I was wondering if any one has experience in registering their foreign owned LLC to be taxed as a C-Corp and if so has it been easier from a banking/paypal perspective? I am thinking something along the lines of setting up LLC-A as a holding company, with pass-through taxation and then set up a second LLC-B, that would be entirely owned by LLC-A. LLC-B would elect to be taxed as a c-corp though and not pass-through to LLC-A. LLC-B would essentially serve as a sort of payment agent for LLC-A, collecting on behalf. I was further thinking maybe some sort of inter-company billing where say LLC-A bills LLC-B for some sort of management fees so to keep the taxable income of LLC-B to a minimum. I would declare LLC-A profits to my home country of course.

Is this a dangerous approach? Any pitfalls to watch out for?

Thanks in advance

 

[JohnLocke]

I'm not sure about the legal perspective. However, where are you located and will you be a manager / director of the company?

 

[Sols]

Being taxed as C Corp does not affect your chances of getting a bank account or merchant account. That's not really something financial institutions take into consideration.

 

[kranj99]

Being taxed as C Corp does not affect your chances of getting a bank account or merchant account. That's not really something financial institutions take into consideration.

Thanks for this. I was under the impression that banks (or paypal, rather) often frown upon foreign owned pass-through LLC's but that they were more flexible with LLC's that are taxable as C-Corps (i.e. they feel less risk with this type of set up sort of thing).

 

[Sols]

Thanks for this. I was under the impression that banks (or paypal, rather) often frown upon foreign owned pass-through LLC's but that they were more flexible with LLC's that are taxable as C-Corps (i.e. they feel less risk with this type of set up sort of thing).

It's not something that's going to make a difference. Economic substance (where you are based, where the operations take place, where customers are) and turnover are much, much more important.

The risk is not changed in any meaningful way by being taxable in the US. You pose a risk by having no connection to the US, not by whether you pay taxes in the US or not.