US Citizen with high income investment business looking for offshore structure

[littleLordBusiness]

Hi there,

I am a US citizen/resident looking for either an offshore/mainland company structure to "reduce" paying US taxes on a high income investment business (stocks, commodities, crypto). My goals are:

1. Needs to look good for clients/brokers (I work with Interactive Brokers/Binance)
2. I keep seeing comments on Wyoming/Delaware LLC but personal taxes would be HIGH
3. Ideally a zero-tax jurisdiction, willing to pay taxes on any distributions to my personal bank account
4. Any jurisdiction/locale setup for both company + account works fine as long as its not shady as crap
5. Willing to go for deductions and credits here in the US.
6. NOT willing to got for tax residency
7. Best way to reduce income taxes here in US
8. Ideally any offshore jurisdiction that could work with a US based LLC (if going offshore and not just a US based LLC altogether)
9. Most of all, this is NOT crypto specific. Its just one of our alternative investments
10. Budget is NOT a problem. Cost effectiveness is no issue. (not to sound like a douchebag)

Thank you for all help!

 

[JohnnyDoe]

You need a good U.S. tax advisor. I can recommend one.

 

[johnwickert]

There is a lot to recommend, you would need a personalized consultation. But I can give a few insights, you could consider setting up an offshore company in a zero-tax jurisdiction such as the Cayman Islands or the British Virgin Islands. Another option is to use a trust structure, which can provide some tax benefits. You could also consider using a hybrid structure, such as a US-based LLC with an offshore subsidiary.

 

[littleLordBusiness]

There is a lot to recommend, you would need a personalized consultation. But I can give a few insights, you could consider setting up an offshore company in a zero-tax jurisdiction such as the Cayman Islands or the British Virgin Islands. Another option is to use a trust structure, which can provide some tax benefits. You could also consider using a hybrid structure, such as a US-based LLC with an offshore subsidiary.

Would you see a solution where I implement an offshore company in say the BVI combined with the trust structure to pay out to me personally in the US? I also wonder what deductions I could take personally since I'm not doing a tax residency but that's for another question.

 

[johnwickert]

Would you see a solution where I implement an offshore company in say the BVI combined with the trust structure to pay out to me personally in the US? I also wonder what deductions I could take personally since I'm not doing a tax residency but that's for another question.

Yes, combining an offshore company in the BVI with a trust structure to pay out to you personally in the US could be a possible solution. As for the deductions, it really depends on many factors

 

[littleLordBusiness]

Yes, combining an offshore company in the BVI with a trust structure to pay out to you personally in the US could be a possible solution. As for the deductions, it really depends on many factors

How would I report income from the trust?

 

[johnwickert]

How would I report income from the trust?

In the US the trust income should be on Form 1041, and the beneficiaries report their share of the income on their personal tax returns.

 

[littleLordBusiness]

In the US the trust income should be on Form 1041, and the beneficiaries report their share of the income on their personal tax returns.

Doesn't Form 1041 only apply to domestic trusts, what if the trust is offshore like in the BVI or Cayman?

 

[johnwickert]

Doesn't Form 1041 only apply to domestic trusts, what if the trust is offshore like in the BVI or Cayman?

It seems that typically it is used for reporting income, deductions and credits of a domestic trust. Checking online it seems that in the US, foreign trusts may have additional reporting requirements such as Form 3520 and Form 3520-A.

 

[littleLordBusiness]

It seems that typically it is used for reporting income, deductions and credits of a domestic trust. Checking online it seems that in the US, foreign trusts may have additional reporting requirements such as Form 3520 and Form 3520-A.

Yeah, thats what it seems like. These type of foreign trust structures are used all the time but they seem incredibly complicated and less flexible with distributions. It seems as if holding it in a Delaware LLC might be both better for clients and tax purposes, but I guess a tax lawyer could tell me that...

 

[mok]

There is a lot to recommend, you would need a personalized consultation. But I can give a few insights, you could consider setting up an offshore company in a zero-tax jurisdiction such as the Cayman Islands or the British Virgin Islands. Another option is to use a trust structure, which can provide some tax benefits. You could also consider using a hybrid structure, such as a US-based LLC with an offshore subsidiary.

I'm not exactly sure what setup you're recommending, but registering a company or trust in an offshore tax haven won't help him since his personal tax residency is in the US.

He will thus be paying the same tax as if he had a US corp since the offshore entity will be ran from US soil. Nominee local directors can help to fool tax offices in some underdeveloped countries, but not in the US.

Also, even if you can prove that the offshore entity is managed from outside the US you will still run into CFC rules since the beneficial owner of the offshore entity is a US citizen.

@littleLordBusiness If you want to reduce/eliminate your tax rate without taking on significant risk, I would suggest renouncing as a valid option.

 

[johnwickert]

Yeah, thats what it seems like. These type of foreign trust structures are used all the time but they seem incredibly complicated and less flexible with distributions. It seems as if holding it in a Delaware LLC might be both better for clients and tax purposes, but I guess a tax lawyer could tell me that...

Yeah generally foreign trusts are complex but can offer good tax advantages. I'd recommend you to contact a tax lawyer.

 

[littleLordBusiness]

I'm not exactly sure what setup you're recommending, but registering a company or trust in an offshore tax haven won't help him since his personal tax residency is in the US.

He will thus be paying the same tax as if he had a US corp since the offshore entity will be ran from US soil. Nominee local directors can help to fool tax offices in some underdeveloped countries, but not in the US.

Also, even if you can prove that the offshore entity is managed from outside the US you will still run into CFC rules since the beneficial owner of the offshore entity is a US citizen.

@littleLordBusiness If you want to reduce/eliminate your tax rate without taking on significant risk, I would suggest renouncing as a valid option.

Yeah, Renouncing is unfortunately too close to changing my tax residency and as I stated above, that isn't an option for me. At that point, I would rather start a US C corp and probably pay the 33%+ tax. Like I said, I am WILLING to pay US personal income taxes, and I even think a Delaware LLC could work for these purposes, but there are several advantages in my field to going offshore. What do you think?

 

[mok]

Yeah, Renouncing is unfortunately too close to changing my tax residency and as I stated above, that isn't an option for me. At that point, I would rather start a US C corp and probably pay the 33%+ tax. Like I said, I am WILLING to pay US personal income taxes, and I even think a Delaware LLC could work for these purposes, but there are several advantages in my field to going offshore. What do you think?

My opinion is that you cannot go offshore without renouncing. If you try to do that, you're undertaking significant risk because the US tax authorities are aggressive. If you want to remain a US resident/citizen, you'll have to pay the price.

 

[johnwickert]

I'm not exactly sure what setup you're recommending, but registering a company or trust in an offshore tax haven won't help him since his personal tax residency is in the US.

He will thus be paying the same tax as if he had a US corp since the offshore entity will be ran from US soil. Nominee local directors can help to fool tax offices in some underdeveloped countries, but not in the US.

Also, even if you can prove that the offshore entity is managed from outside the US you will still run into CFC rules since the beneficial owner of the offshore entity is a US citizen.

@littleLordBusiness If you want to reduce/eliminate your tax rate without taking on significant risk, I would suggest renouncing as a valid option.

Yeah you're right obviously, there is no way to skip US personal tax except fraud. You can lower corporate tax but at the end there is always the personal tax.

 

[littleLordBusiness]

My opinion is that you cannot go offshore without renouncing. If you try to do that, you're undertaking significant risk because the US tax authorities are aggressive. If you want to remain a US resident/citizen, you'll have to pay the price.

I keep hearing this on these forums, but this is not what offshore tax consultants have told me at all. I have talked to groups like Fidelity Corporate Services and other legal advisers and they have told me nothing like this. Hundreds of wealthy individuals and businesses live in the US and avoid most of their taxes through itemized deductions and offshore setups, and it seems that I could do the same. Nothing illegimate is going on here, and this goes on all the time, what is going on?

Yeah you're right obviously, there is no way to skip US personal tax except fraud. You can lower corporate tax but at the end there is always the personal tax.

I know, I am not trying to avoid US personal taxes. My family members and partners would actually chastise me for this idea. I am just trying to setup an advantageous corporate structure.

 

[boy20hki]

I keep hearing this on these forums, but this is not what offshore tax consultants have told me at all. I have talked to groups like Fidelity Corporate Services and other legal advisers and they have told me nothing like this. Hundreds of wealthy individuals and businesses live in the US and avoid most of their taxes through itemized deductions and offshore setups, and it seems that I could do the same. Nothing illegimate is going on here, and this goes on all the time, what is going on?


I know, I am not trying to avoid US personal taxes. My family members and partners would actually chastise me for this idea. I am just trying to setup an advantageous corporate structure.

Have you tried consulting with US-based tax lawyer firms?

I asked the same question like you weeks ago for a friend of mine in another thread. Here people all said its very hard and cannot escape IRS. Mostly true I think, if you just DIY the setup and not use any professional service.

Tho I did receive a PM from a Cyprus corp. provider here, suggesting US C Corp as holding company of 2 Cyrpus company, with IP licensing between them. His provided details seem complex to set up and may be costly to maintain. I calculate the % tax and does not really seem to save that much, compared to just do tax optimization with a legit US C Corp.

Agree with you that you should ask US-based tax lawyer firms, they may know about this better. Most providers here are European-based or non-US descent so they may not know all US tricks. I do think that its possible to have offshore setup to minimize most of US tax, tho it seems to best fit for super HNWI (like assets 100M+)

 

[littleLordBusiness]

Have you tried consulting with US-based tax lawyer firms?

I asked the same question like you weeks ago for a friend of mine in another thread. Here people all said its very hard and cannot escape IRS. Mostly true I think, if you just DIY the setup and not use any professional service.

Tho I did receive a PM from a Cyprus corp. provider here, suggesting US C Corp as holding company of 2 Cyrpus company, with IP licensing between them. His provided details seem complex to set up and may be costly to maintain. I calculate the % tax and does not really seem to save that much, compared to just do tax optimization with a legit US C Corp.

Agree with you that you should ask US-based tax lawyer firms, they may know about this better. Most providers here are European-based or non-US descent so they may not know all US tricks. I do think that its possible to have offshore setup to minimize most of US tax, tho it seems to best fit for super HNWI (like assets 100M+)

Yeah, that whole Cyprus corp with the C Corp parent is not very efficient and is really just intended to help them rather than you.

Thank you, though, I did see your post from a couple of weeks ago. Tax advisors that I have spoken to have not advised using a C-Corp in my circumstances, and the use of a C-Corp in the modern day US financial landscape is extremely rare as opposed to an LLC. Many people on here have tried to suggest a tax-residency, but I am not trying to avoid US personal taxes.

Looking at the details with my professionals, I think I might go with a Delaware LLC parent with an offshore subsidiary in either Seychelles/BVI. Either bank or EMI for the offshore, definently a reputable US bank for the parent considering I am a US citizen with a multitude of clients.

What do you think about this?