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Wyoming llc federal taxes

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nomad16

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May 13, 2021
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#1
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I am thinking of forming a Wyoming llc. But are unsure of how federal taxes work. I am living in Europe, and will be doing business with us based companies.

i will pay myself as an independent contractor, and obviously pay personal income taxes here in Europe.

But is the llc taxed on each US sale, or on profits after all expenses?

Also can the llc purchase shares, and would this only be possible with profits after tax?
 
#2
You'd need to talk to a US CPA who deals in cross border tax compliance because the answer to your questions is most likely a lot of "it depends" along with accountants in your EU countryo_O Your question of the LLC being taxed on each sale or on profit after expenses, of course its profit after expenses or no one would ever setup a US company.

You will have bigger problems on the Europe side of the equation if your EU country has measures in place to prevent profit shifting and base erosion. You'll need to be able to stand up to CFC regulations. If your not hoping to reduce EU taxes but are just worried about owing American ones I'd imagine the answer is once again "it depends" and your gonna need a much deeper look by professionals at your individual situation then what anyone can broadly tell you. The IRS has bigger priorities though of US citizens paying their taxes and as a non-resident your likely the last priority unless your making massive sums of money.
 
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#3
US LLCs can be taxed as disregarded entities (taxed on the personal level, as if the company did not exist) or as corporations (paying corporate income tax on profits).
If you live in Europe, it's very likely that the country you live in will tax the company either way, and then you would have to find out how to get a refund for taxes you've already paid in the US, if applicable.
It's very unlikely that it would save you any taxes, so unless you need the LLC for marketing purposes, you might be better off just registering a company in your home country instead.
 
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#4
Im planning to use the company to passthrough US sourced income - as thats where most of my business is located. So the company will essentially have no income, as I'll pay myself as a contractor - and pay taxes here in Germany.

Another bonus is that its easier to setup than setting up a company here in Germany. I don't speak German very well, so trying to wade through German bureaucracy in German is a mostly impossible task for me, as opposed to setting up in my native language.

I also like the idea of using the LLC to protect assets, which ill figure out how to do next.
 
#5
I believe you're confusing things. If the company is a disregarded (passthrough) entity, then the US will tax it as if you had done business under your own name as a sole proprietor. So you paying yourself as a contractor doesn't make a lot of sense to me - but I could be wrong.
If you elect for the LLC to be taxed as a corporation, then you could be a contractor, but you'd have to be aware of transfer pricing rules. You should talk to a CPA to find out about the rules and obligations.
In any case, Germany could decide that the LLC is taxable in Germany. They could even decide to tax it as a corporation, even though you have explicitly chosen not to have it taxed as a corporation in the US.
It may all seem very simple in theory, but you really need good advisors for such a structure.
 
#6
I should mention I am not a US citizen, so would not be liable for US taxes right? just the LLC tax, which would be 0, and my own personal income tax here in Germany.

at least that's how it all works in my head.
 
#8
No, you lack basic understanding of how taxes and holding companies work, sorry.
It's not unlikely that your US company would be treated as a corporation by German tax authorities, so it would be taxed like a German company, i.e. ~30% corporate income tax + ~25% capital gains tax on dividends (if I remember correctly). Or, alternatively you could pay out a salary, and then it would be your personal income tax rate + social security, so probably 50%+ in taxes, too.
You really need to talk to a good tax advisor who has experience in the taxation of US companies in Germany.

This is what a quick Google search turns up:
https://www.winheller.com/en/busine...-advice-germany/taxation-llc-usa-germany.html
 
#9
the bit you are missing is that you're supposed to owe taxes on the country from where you run your company. So if you run a US company primarily from Germany, by law you owe german corporate taxes.

some EU countries already enforce this, others do not, I know a lot of people do it, but it's always a risk, and german tax authorities do have a reputation from being some of the stricter ones in Europe.
 
#11
nomad16 said:
But if the company makes no profit, what’s to tax? Because I’ll be paying out all money to myself, and will pay income tax on it.

that’s what I expect is how it works
Click to expand...

I think you should be okay, but don't do it before consulting a german accountant with a lot of experience doing US expat taxes since I believe a lot of americans living in Germany would be in a similar situation. The accountant will know exactly if this will work for you.
 
#12
nomad16 said:
But if the company makes no profit, what’s to tax? Because I’ll be paying out all money to myself, and will pay income tax on it.

that’s what I expect is how it works
Click to expand...
The company needs to pay social security/payroll taxes in Germany. You need to do accounting etc following German rules. And you might have to register the company as a branch in Germany.
 
#14
Vince said:
the bit you are missing is that you're supposed to owe taxes on the country from where you run your company. So if you run a US company primarily from Germany, by law you owe german corporate taxes.
Click to expand...

Only if the company is seen as a corporation by German tax authorities. Which is possible, but not necessarily the case.
 
#15
nomad16 said:
ill be paying myself as a freelancer, not as an employee.
So, as far as I know - social/payroll taxes aren't required...
Click to expand...

Good luck with that, lol. This would probably be regarded as a hidden employment during an audit.
Or it could be seen as a profit distribution, which would be taxed at 40-50% or more.

Seriously, with such a setup you can royally shoot yourself in the foot both in the US and Germany. Don't do it without proper legal counsel all along the way.
 
#17
Sure, do that and risk 30% branch profits tax and possible double taxation.
Dude, just contact a good tax law firm in Germany that has experience with such structures and have them set everything up for you.
It'll cost you a few thousand euros, but then you'll know that it will work as intended.
 
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#18
I understand what OP is asking & i'm in the same predicament, i'm not a US citizen but I have a personal US Bank Acct. I'm looking into forming a Wyoming Corp(privacy) so that I can pass money made outside the USA to Wyoming Corp, use the online banking to make some international payments then pass on the balance to my Personal US Account.

I don't see how would the Corp owe any substantial amount of Federal Taxes if majority that comes in is spend on paying international suppliers (expenses) & the balance to a personal US bank Acct with zero US tax obligations.

I know it may have been easier to send from overseas directly to my personal US Acct but it would raise too much red flags in my home country to see me send large amounts straight to a personal US acct instead of a Commercial one
 
#19
nomad16 said:
I am thinking of forming a Wyoming llc. But are unsure of how federal taxes work. I am living in Europe, and will be doing business with us based companies.

i will pay myself as an independent contractor, and obviously pay personal income taxes here in Europe.

But is the llc taxed on each US sale, or on profits after all expenses?

Also can the llc purchase shares, and would this only be possible with profits after tax?
Click to expand...
If your US LLC is engaged in a US Trade or Business and has US Source income effectively connected to it, then you will need to pay US Federal taxes on your profits. LLC does not have the concept of shares like corporations.
 
#20
Akeem868 said:
I understand what OP is asking & i'm in the same predicament, i'm not a US citizen but I have a personal US Bank Acct. I'm looking into forming a Wyoming Corp(privacy) so that I can pass money made outside the USA to Wyoming Corp, use the online banking to make some international payments then pass on the balance to my Personal US Account.

I don't see how would the Corp owe any substantial amount of Federal Taxes if majority that comes in is spend on paying international suppliers (expenses) & the balance to a personal US bank Acct with zero US tax obligations.

I know it may have been easier to send from overseas directly to my personal US Acct but it would raise too much red flags in my home country to see me send large amounts straight to a personal US acct instead of a Commercial one
Click to expand...
US is not in the CRS, if you are sending from US to US. i think your local government wouldn't know by default ;)
 
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