Pass-through US LLCs (non-us) question

[legrant]

Let's suppose we have the following:
1 Delaware LLC
1 Owner of the LLC

The owner lives outside the US and it's not a US citizen, no business is conducted in the US.

The question:

Does the owner have to pay taxes on all the gains/losses the company has had no matter if the money is withdrawn or not, or does the owner have to pay taxes on the money that is withdrawn from the companies bank/s account/s? (The taxes will obviously be paid on the country the owner is a tax resident on)


I asked an incorporation agent and he told me he thought it was the first option, but that he wasn't sure at all.

 

[Sols]

Assuming everything is exactly as described, the answer would normally be that there is no scope for tax in the US for the LLC and its sole member.

Incorporation agents aren't tax advisers. If you want tax advice, you'll need to speak to someone who's qualified specifically for that task.

 

[legrant]

Incorporation agents aren't tax advisers. If you want tax advice, you'll need to speak to someone who's qualified specifically for that task.

I agree, agents aren't tax advisers, that's why I started the thread in order to try and find an answer.

Assuming everything is exactly as described, the answer would normally be that there is no scope for tax in the US for the LLC and its sole member.

Yes, there is no tax in the US, but the question is, do the taxes on the owners country (where he's a tax resident on) have to be paid for the money that has been withdrawn from the company or do they need to be paid no matter if the funds are withdrawn or not.

 

[fshore]

(The taxes will obviously be paid on the country the owner is a tax resident on)

This obviously depends on the country in question.
Often the US company will be tax resident where the owner is and the company pays taxes like local companies.

 

[Sols]

I agree, agents aren't tax advisers, that's why I started the thread in order to try and find an answer.

We're not tax advisers either.

Yes, there is no tax in the US, but the question is, do the taxes on the owners country (where he's a tax resident on) have to be paid for the money that has been withdrawn from the company or do they need to be paid no matter if the funds are withdrawn or not.

That's a question for a local tax adviser where you live. The answer is usually one of three:

1. You live in a tax haven and there's no tax.
2. The LLC is treated as a partnership and the profits are taxable as regular income for yourself directly. This often means you have to pay tax regardless of whether the funds are physically withdrawn from the LLC or stay in it, but there is variation across different jurisdictions.
3. The LLC is treated as a corporation and must pay corporation tax, and the funds withdrawn to yourself would often be considered dividends and be taxed however dividends are taxed where you live.

 

[juancho]

Hi guys, kind of related question. In the same case described above. One Person LLC (non US) with income coming from a European client: no taxes should be paid in the US.

Let's say the company gets $5000 paid into its Business Currency account each month.

1. What's the correct way to withdraw money?
   1. Transfer $5000 to my personal US Checking Account each month and fund my crypto wallet using this account.
   2. Fund $5000 into Blockfi's Business account using the Business Account directly
   3. Both are ok, wouldn't raise any issues.
2. I heard it's not very likely, but I know the IRS can audit any LLC at any point. In that case, considering the LLC is correclty formed and the income comes from genuine sources outside the US, the company doens't have any operations in the US.
   1. Would they ask for documentation related to paying taxes in the Country of Residence, e.g. Uruguay?
   2. Does anyone know what happens if you can't provide that?

Thanks!

 

[fshore]

Both ways are OK, but if you involve your personal account then you might lose the limit protection of the llc (if that's of concern to you).