Set Up LLC in California and Apply for US MID

[BREWTFORZ]

I have been offering essay writing services for over 12 years using PayPal primarily as our payment gateway. Since our clients are all in the US, we recently decided to set up LLC in California and apply for a bank account and MID through a nominee who is a friend.
Upon checking, I noticed that most of companies offering similar services as mine are either registered in Cyprus, Malta, Bulgaria or UK. Could it be because they want to save on tax? or there are other reasons?

 

[Sols]

Why California? Are you based in the US? Nothing wrong with it as such, although California is heavily regulated. As long as the setup works for you, that's what matters.

The countries you mentioned are more popular because of greater access to payment processors and banking/EMIs. Corporate taxes are lower there than in the US, but a US LLC does not pay corporate tax. Instead, income (profit) for the LLC falls on the members who become liable for personal income tax.

If your nominee friend is a member of the LLC, they will have to pay full income tax on your company's profits. But if the members are non-US residents, you might be able to avoid taxes.

However, it's quite possible that your income is considered having a US nexus and thus be taxable as personal income in the US for yourselves, even if you're non-resident aliens.

 

[RealDude]

The LLC can become a tax trap if it is not recognized as a partnership but as a corporation by the tax authorities in your country of residence.

 

[BREWTFORZ]

Why California? Are you based in the US? Nothing wrong with it as such, although California is heavily regulated. As long as the setup works for you, that's what matters.

The countries you mentioned are more popular because of greater access to payment processors and banking/EMIs. Corporate taxes are lower there than in the US, but a US LLC does not pay corporate tax. Instead, income (profit) for the LLC falls on the members who become liable for personal income tax.

If your nominee friend is a member of the LLC, they will have to pay full income tax on your company's profits. But if the members are non-US residents, you might be able to avoid taxes.

However, it's quite possible that your income is considered having a US nexus and thus be taxable as personal income in the US for yourselves, even if you're non-resident aliens.

Yes, the set up works because I have lawyer-friends in the US who can help with the formation and the office set up and opening of bank accounts. With Cyprus, Malta and Bulgaria, everything is hazy that it is almost impossible to make decisions.
My nominee friend is not a member of the LLC. Its a single-member LLC

Does anyone here have referrals for company formation in Cyprus or Bulgaria with bank account?

 

[Golden Fleece]

California is notoriously the most aggressive jurisdiction out of all the fifty states when it comes to the collection of income tax. If there is a way to tax you, the FTB will find it. Good luck.

 

[startfleetio]

1) Don't go for California. You will regret your decision. For a non-us resident, you have no reasons to register in California. You just need a Wyoming LLC
2) You do not need a nominee to have US bank accounts. Having a nominee will likely change your tax position. Unless this nominee is a US citizen living abroad.

Read our guide on US LLC for foreigners (in signature)

 

[BREWTFORZ]

The US nominee has an office in California. She will open an account for the LLC.
The nominee is a resident of California.
Specifically, what is it that makes California a bad decision other than taxes.

 

[CaptK]

Tax is the one of the highest and California want their money.
Your friend will be liable for tax because she is a resident. How is she going to explain where all the profits went. There is no way round it using her.

You are better off to as stated earlier to register it yourself or use a UK LTD/LLP especially if your not a UK resident

 

[sujoe]

The fact that you need to pay $800 at the fourth month after registration and another $800 every year for franchise tax alone is already a big turn-off. Compare that to $100 first year and $60 subsequently every year in Wyoming.

Not to mention if you pay corporate income tax, you will be looking at around 30% on the corporation level, and another 30% (depending on tax treaty availability) on the dividends that you draw. Compare that to 0% if you structure your Wyoming LLC correctly.

Choosing the wrong jurisdiction alone is a disastrous decision.

 

[BREWTFORZ]

You are right @sujoe. i will consider that