Need some help and advice in creating a LLC in the US

[Cazorla]

Hello everyone, I am new here so this will be my first post. I apologize in advance if this kind of post was posted a lot of times before, I just couldn't find something that will completely make my thoughts clear.

I am planning to set up a LLC in the US (I am from Europe, Serbia). I was in the USA few years ago with j1 visa so I have a SSN, but as far as i understood, that will not give me some kind of advantage, maybe just that I can get EIN quicker (and maybe get some more US banks where I can open a business account).

I am planning to start a dispatching services type of company. I would have no employees in the US, I would work from home(Serbia). I am kinda struggling with figuring out taxation system in a model like this. I am still thinking about what should be the best state to open a LLC. I was reading about Wyoming so it looks like the favorite atm. It would be a single member type of LLC. I really don't have an idea what should I choose for the type for tax purpose.

My question here is, can anybody explain me through some example what would be my expenses (taxes) if I open a LLC in Wyoming and have an income of $100.000 after one year(and should LLC be treated as a disregarded entity or treated as a corporation or something else?)??? So can somebody tell me "your taxes will be 15% of 100.000" or something like that? Also, what other taxes would I need to pay? Will there be a need to pay some taxes in Serbia also (for dividends or something)?? I am trying to have everything calculated as much as possible before starting a LLC. In the end, if you have a better advice in choosing a state of forming a LLC for this model, I am here to listen to it.

Also, I know that i need to open a business account in the US. I guess I don't need to open a personal account in the US? The business account would be enough? I would also like to know what advices do you guys have in term of transfering money from business account in the US to my country in Europe. What is the best way and what are the expenses, is there maybe some other way like opening a new account in some other country from Europe, so i can transfer money from US account to that account, and after that bring money to Serbia in some less expensive way?

 

[Sols]

The LLC is tax resident in Serbia. It's a Serbian company as far as tax is concerned.

You need to speak with a Serbian tax adviser/lawyer to confirm whether an LLC is treated as corporation or a partnership under Serbian law. There is a risk that no one knows for certain

If it's a partnership, you are only subject to personal income tax. In this case, you would have to pay 15% of 100,000 USD if the personal income tax is 15%.

If it's a corporation, you need to pay corporate income tax on the profits of the company (after you pay yourself salary but before dividends). In this case, you'd pay 15% of whatever you pay yourself in salary and then 15% of whatever is left as profits in the company. If you then pay yourself dividends, you may be subject to dividends and/or capital gains tax.

Because Serbia is considered a high-risk territory for money laundering, opening a bank account is going to be practically impossible. Your best bet is something like Payoneer or TransferWise, or other EMI. There is no requirement for the LLC to have a bank account in the US. You can get US bank account details with Payoneer and TransferWise.

Speak with a lawyer who understands Serbian tax law.

 

[Cazorla]

Thanks for the quick answer.

Maybe i missunderstood something, but I didn't see in your reply nothing about taxes that i would be paying in the USA,most of your reply is concentrated on taxes in Serbia. Am I still going to pay some taxes in the USA and which one(Let's say we are still speaking about Wyoming example) ?

The part with money transfering I understood.

Thanks for helping out.

 

[Sols]

The LLC has no tax obligations in the US, unless you specifically opt for it to be taxed as corporation. LLCs are normally pass-through entities which are not themselves taxed under US law; instead the members (owners) are taxed on a personal level. If you don't live in the US and do no business in the US, this practically always means you have no tax burden in the US at all.

 

[Cazorla]

Thanks.

Just to ask for my knowledge, what is the motive then to the USA to allow me to open a company at their territory as a non resident and a foreigner, when I am not going to pay them nothing on taxes? I would have a company in their country and would make a profit from the trucking industry that is happening in their country. But I would not pay taxes to them(USA). What is the exact motive for the USA here?

Thanks in advance for the response

 

[Sols]

Just to ask for my knowledge, what is the motive then to the USA to allow me to open a company at their territory as a non resident and a foreigner, when I am not going to pay them nothing on taxes? I would have a company in their country and would make a profit from the trucking industry that is happening in their country. But I would not pay taxes to them(USA). What is the exact motive for the USA here?

You need to be careful with what's called ECI: Effectively Connected Income. If you trigger ECI, you do become subject to US taxation.

You can read more about ECI here: Effectively Connected Income (ECI) | Internal Revenue Service

As I mentioned, you are only free from US taxation if you do no business in the US. If you do business in the US, then you may find yourself liable for US personal income tax (while the LLC itself is not taxable). The enforcement of this liability appears limited as the IRS, for now, doesn't have enough information. But this is changing with IRS form 5472 and the recent UBO register law that was passed in the US.

You may need to consult with a US tax adviser as well, if you have ECI. Unfortunately, you may get different answers from different advisers. US tax code is a huge and complicated mess.

 

[Cazorla]

Alright, thanks a lot for all of the information. I appreciate it.

 

[joffreylol]

Thanks for the great replies @Sols. I am not sure how LLC would be treated in Serbia. It would be worse if it is treated as a partnership because you would pay all your taxes as a natural person I believe (that's most expensive option). If it were treated like a DOO (LLC in Serbia) you would pay taxes for your salary, taxes for being a director in company and if you have money left after expenses and salary you can pay yourself dividends. In that case company would pay 15% CIT tax and then you would pay 15% tax for receiving dividends (in total 30%). Salaries usually add up to ~42% and they count towards tax on wealth (if you make more than 3 times average gross salary) so it would be better to pay yourself dividends.

If you create ECI in US then you would have to check double tax treaties between Serbia and US and figure out where you have to pay what. I am not sure you are gaining much from US LLC, it was supposed to be good option for hiding that you are owner of LLC because they are not reporting like CRS (irrelevant for you because Serbia isn't part of CRS) and some states like WY don't have public UBO but new UBO law was passed in US couple days ago so that's gonna change.

 

[Cazorla]

It doesn't look too optimistic Do you know by any chance, would there be any differences if I also have a Croatian passport? But neither Serbia or Croatia have a double tax treaty with the USA. I guess that I need to speak with some consultant in Serbia who is familiar with this kind of situation. I guess also a US consultant will be important.

Thanks for helping out

 

[tomboy]

My advice is always the same, and that's the way it works for sure.
Setup a company in your home country, Serbia. Setup a company in the U.S either LLC (taxed as C-corp) or a C-corp directly.
Invoice your client from your C-corp, get money under your C-corp. Flush all the profit from your C-corp to your Serbian company.
You will make no profit in the U.S - therefore, you won't pay tax in the U.S.
if you decide to leave profit with the U.S corp - you will pay 21% flat on this profit left. I believe there are no reason to do so as there is no double taxation treaty between the U.S and Serbia.
Your Serbian company will pay corporate taxes under Serbian law.

 

[Cazorla]

@tomboy

This looks really helpful.

Question: Do a company in Serbia needs to be directly connected with my LLC in US? I was thinking first to open a LLC in US and at some point after that to open a company in Serbia which is going to "offer outsourcing services to north-american based carriers". That saying, company in Serbia is not directly connected with my LLC in the US, per that role-name it can serve to a numerous companies in the US. Is that still fine? Do I need to set up both Serbian company and US LLC at the same time, at the beggining, so this can work? As I mentioned, I was thinking to set up a Serbian company after some time from forming a US LLC, but if this story you said works like that, then I would set up both companies immediately when I start business.

So just to be sure that I understood well:
1) I will set up Serbian company that offers outsourcing services to north-american carriers and I will set up a US LLC dispatching services, both at the same time
2) I would set up my US LLC to be taxed as a C-corp.
3)I would make money under my US LLC (taxed as C-corp) and immediately transfer it to Serbian company account (guess with transferwise, payoneer or something like that)
4) I would not pay taxes in USA and I would pay corporate taxes(I mean, my company in Serbia would) in Serbia under Serbia law.

Please let me know if it really works like this? Also like I asked Sols up there, what would be motive for USA to let me as a foreigner having a company in their country and not paying them taxes? (again, if I understood you well lol)

Thanks a lot for the response, I really appreciate that.

 

[kranj99]

The other way of looking at it: ok you are setting up a Dispatcher Service - can I assume this to be a Truck/Freight Dispatch Service? If so, this is not the same as being a Freight Broker/Freight Agent and so ultimately your clients are Truck Drivers. Maybe you don't even need a US LLC? Since it will be the Truck Drivers who will be paying you your commissions (i.e. persons with whom you'd have built some sort of virtual relationship with), perhaps you may get away with setting up an LLC in Serbia instead and just use paypal for the Truckers to pay you? There are lots of Truck Drivers in the US who have their origins in Eastern Europe (not sure on Serbia, specifically!), and so I'm sure many such drivers would be fine in working with an a dispatch agent who's based abroad.

 

[Cazorla]

@vbam99

Yes,it is a truck dispatching service I am speaking about.

Yes, you are right, it is an option to set up company only in Serbia and that was popping on my mind. But, that would limited my options a lot, expecially in term of marketing and aquiring the drivers. Yes, there are a lot Eastern European drivers in the US, but I am not sure even for them that they will go with Eastern European based company. And out of Eastern European drivers, I don't believe I would have a big chance to attract drivers from other origins. And ofcourse my goal is to company grow as much as it can, so I guess I need to be ready for more expenses (setting up a LLC in the US also instead only in Serbia) so I can get more profit.

Thanks for helping out.

 

[kranj99]

I do some Freight/Logistics work in the US (technology related business, not dispatch or anything) and I too am EU based. In my case though I have US 'dependent agents' and so I was advised to set up a US C-Corp (i.e. an Inc.) instead of an LLC. Yes there is a double taxation issue, but the revenue (clients, suppliers, supply-chain etc.) is all US based and so I'd have put myself in a risky position with the IRS had I gone the LLC route. I'm not too sure how the IRS would classify the Truck Drivers that you're supporting, but I guess given that all the drivers are independent of you and given that you're performing a service from abroad, the LLC pass-through structure may work in your favour. But as another poster had mentioned, Serbia, while not black-listed, may raise certain flags with Banks and its something you need to watch out for.

 

[Cazorla]

I have a Croatian passport also, maybe that can help since they are an EU country. Do you know who can i find to advice me what would be the best structure for this kind of job? I mean clearly no one can tell for sure and there a lot of variations. Can you maybe recommend someone, some consultant agency or whoever? This is starting getting tiring, I am trying to figure out something I am not good at, while something that I am good at (dispatching) is on a hold . Looking how complicated and messy is the whole story, I guess that I really need to reach out some expert, so is there any recommendations?

 

[kranj99]

These guys were mentioned in another thread: Asset Protection and Tax Advisors - Anderson Business Advisors. I have not used them myself, but they look interesting and I may consider them going forward.

With that said, you can always convert from an LLC to an Inc. in the future. I'd suggest you to not to over think it, but rather focus on getting your business up and running. Maybe start with a simple Wyoming or New Mexico LLC, set up an account with Mercury for banking-like facilities and see where it gets you. In a worse case scenario, you'll need to pay a bit of taxes, do some reporting in different countries etc.....

But the reality is that you won't get expert advice on such topics in this forum and so hopefully experts such as the above can guide you better

 

[Cazorla]

Got it. Thanks a lot for helping out, it means a lot.

 

[Fulton Abraham Sanchez]

If the LLC earns income in the US and you are the only member in the LLC, you will report taxes personally. For that you need a tax ID personal or ITIN separate from the EIN for the LLC. Income earned outside of the US for LLC with a foreign member is not taxable. You need not file any form to the IRS if income is earned outside of the US, but if you personally receive distributions or loans from the LLC, you need to file form 5472.

 

[tomboy]

@tomboy

This looks really helpful.

Question: Do a company in Serbia needs to be directly connected with my LLC in US? I was thinking first to open a LLC in US and at some point after that to open a company in Serbia which is going to "offer outsourcing services to north-american based carriers". That saying, company in Serbia is not directly connected with my LLC in the US, per that role-name it can serve to a numerous companies in the US. Is that still fine? Do I need to set up both Serbian company and US LLC at the same time, at the beggining, so this can work? As I mentioned, I was thinking to set up a Serbian company after some time from forming a US LLC, but if this story you said works like that, then I would set up both companies immediately when I start business.

So just to be sure that I understood well:
1) I will set up Serbian company that offers outsourcing services to north-american carriers and I will set up a US LLC dispatching services, both at the same time
2) I would set up my US LLC to be taxed as a C-corp.
3)I would make money under my US LLC (taxed as C-corp) and immediately transfer it to Serbian company account (guess with transferwise, payoneer or something like that)
4) I would not pay taxes in USA and I would pay corporate taxes(I mean, my company in Serbia would) in Serbia under Serbia law.

Please let me know if it really works like this? Also like I asked Sols up there, what would be motive for USA to let me as a foreigner having a company in their country and not paying them taxes? (again, if I understood you well lol)

Thanks a lot for the response, I really appreciate that.

It does not matter when you form the company in Serbia. The profit from the US LLC (taxed as a c-Corp) doesn’t have to be flushed immediately to the Serbian company - you can do it whenever you want before the end of the tax year. You can do it on a weekly , monthly or yearly basis. So you can form your Serbian company later.
You understood the process perfectly.

 

[tomboy]

If the LLC earns income in the US and you are the only member in the LLC, you will report taxes personally. For that you need a tax ID personal or ITIN separate from the EIN for the LLC. Income earned outside of the US for LLC with a foreign member is not taxable. You need not file any form to the IRS if income is earned outside of the US, but if you personally receive distributions or loans from the LLC, you need to file form 5472.

It’s time to update your software... it’s not like this anymore.

“Previously single-member LLCs with foreign owners were not required to file. However, starting 2017, all foreigners who own a US LLC must file a 5472 US tax return with the IRS for disclosure purposes even if they do not owe tax in the US”