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corptalker

New member
Hey there,

I have browsed this forum quite a bit and although I found quite a few threads that were similar, none of them addressed my question directly.

I am a EU citizen (Czech citizen). I provide digital services online (no tangible, physical product). My clients are currently situated in Europe (Switzerland). It is possible that the clients may change over time (from all around the world). My company is fully digital (I have a contractor in India and the UK).

My current understanding is following. If I form a Delaware LLC as a non-US resident and I make sure that I have no US clients (as having US clients would lead to a standardised US taxation on the profits generated from the US clients), then there is 0 tax imposed on the profit that the company generates. However, if I would pay myself from the US company - I am exposed to personal income tax (according to the Czech laws).

What if I simply do not pay myself out and use the card/money from the company (either use a credit card or withdraw the funds) and argue that these are business-related expenses?

Would I be exposed to tax either way, as they would consider the LLC a Czech company given that it is controlled by a Czech citizen?

Thank you for your help.
 

Sols

Staff member
Mentor Group Gold
My current understanding is following. If I form a Delaware LLC as a non-US resident and I make sure that I have no US clients (as having US clients would lead to a standardised US taxation on the profits generated from the US clients), then there is 0 tax imposed on the profit that the company generates. However, if I would pay myself from the US company - I am exposed to personal income tax (according to the Czech laws).
Does Czech law stipulate whether a US LLC is treated as a pass-through/neutral entity (like a partnership) or as a taxable corporate entity?

What if I simply do not pay myself out and use the card/money from the company (either use a credit card or withdraw the funds) and argue that these are business-related expenses?
Depends on how Czech law treats US LLCs and whether your expenses are acceptable under both US and Czech law. You can argue all you want, but if those arguments have no legal foundation, you're just wasting time and energy.

Under US law, it doesn't matter. The profits of an LLC fall on its members relative to their membership interest. There are ways around this, but it varies some by state and probably only affects US residents.

Would I be exposed to tax either way, as they would consider the LLC a Czech company given that it is controlled by a Czech citizen?
Yes, that is 100% the case.

Speak with an tax lawyer.
 
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