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Cazorla

New member
Hi everyone,

This is my second thread. I made some desicions and would just like to have some clarifications, so i can finally start the procces of forming a US LLC.
I've decided to set up a US LLC in Wyoming. I would do truck dispatching service. I would do the job from my home country (Serbia, doesn't have a tax treaty with US).

1) I need to find out is my type of business going to be considered ETOB or not. My guessing is, I will need to pay taxes for ECI (progressive taxes(brackets), applicable if LLC is engaged in trade or bussines in US) OR I will need to pay taxes for income that is FDAP (not ECI, 30% flat). Can someone confirm me that I will need to pay one of those two taxes? (can't pay for both,right?)

2) My next question is, will I need to pay taxes on branch profit (looks like that one is 30% flat also) ? I don't know much about this, but if I need to pay taxes for ECI or FDAP income plus for branch profit, that would make me to give up on this whole idea, honestly...

3) What other taxes can be there that I would need to pay possibly? I am hoping for only ECI or only FDAP, that would mean maximum 30% going on taxes in US, which is kind of a limit for me, because of no tax treaty. Everything more than that would be too much (I am not counting progressive ECI taxes which can go to 37% one day, I am fine with that).

Everything written here is assuming that LLC is disregarded entity.

4) But, like @tomboy said in thread before, what if I choose that LLC is taxed as C-Corp? He said that I can flush all of the profit from US LLC to my Serbian company (I will have a Serbian company also) , hence I will not make any profit in the US and than I will not have to pay taxes in US (would i still need to pay ECI or FDAP income taxes??). I would never take dividends from LLC taxed as C-Corp, I would only use it to flush all of its profit to the Serbian company. After I flush the profit to Serbian company, that company would pay corporate taxes under Serbian law.
Tomboy also said that If I leave the profit in LLC, i would pay 21% flat on taxes on that profit.

Sorry for making this post too long maybe, but I really need clarification on all of this.
Thanks a lot in advance.
 

exprtadvisrdev

Silver Member
I suggest you to go and talk to a CPA in the US WHO UNDERSTANDS this kind of structures (You will have more luck in Delaware) because since you will be dealing with the US tax code it's better to do everything as it should and not blinding listening to random people in a forum (this forum has a lot of good info but every business owner will suggest you the same), the US is really aggressive with taxes
 

Vor

New member
if your not from the US I'd avoid the US. If your in serbia look more towards another EU country in the end things will probably work out to be much simpler and more cost effective, US LLCs are cheap to form compared to a lot of EU entities but by the time you add in the foreign EIN, registered agent, accounting cost, etc.. those savings disappear. If your running a truck dispatching service from serbia and not wanting a US LLC for purposes of payment processing( Stripe, Paypal, etc) what makes you want to have a Wyoming LLC in particular? You could also still get payment processing in a handful of EU countries with low taxes.

Your gonna end up needing a fairly expensive US CPA familiar with International taxation, most US CPAs I have spoke to have really only understood domestic tax issues, the ones who do deal in international and cross border tax planning are out there but they charge a lot more so just be prepared for that.
 
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TRX

Corporate Services
Mentor Group Gold
Elite Member
if your not from the US I'd avoid the US. If your in serbia look more towards another EU country in the end things will probably work out to be much simpler and more cost effective, US LLCs are cheap to form compared to a lot of EU entities but by the time you add in the foreign EIN, registered agent, accounting cost, etc.. those savings disappear. If your running a truck dispatching service from serbia and not wanting a US LLC for purposes of payment processing( Stripe, Paypal, etc) what makes you want to have a Wyoming LLC in particular? You could also still get payment processing in a handful of EU countries with low taxes.

Your gonna end up needing a fairly expensive US CPA familiar with International taxation, most US CPAs I have spoke to have really only understood domestic tax issues, the ones who do deal in international and cross border tax planning are out there but they charge a lot more so just be prepared for that.
I could not agree more.

Unless you are depending on some sort of payment processor you will end up with more trouble then solution.
 
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Reactions: Vor

Mark Rucken

Entrepreneur
Hi everyone,

This is my second thread. I made some desicions and would just like to have some clarifications, so i can finally start the procces of forming a US LLC.
I've decided to set up a US LLC in Wyoming. I would do truck dispatching service. I would do the job from my home country (Serbia, doesn't have a tax treaty with US).

1) I need to find out is my type of business going to be considered ETOB or not. My guessing is, I will need to pay taxes for ECI (progressive taxes(brackets), applicable if LLC is engaged in trade or bussines in US) OR I will need to pay taxes for income that is FDAP (not ECI, 30% flat). Can someone confirm me that I will need to pay one of those two taxes? (can't pay for both,right?)

2) My next question is, will I need to pay taxes on branch profit (looks like that one is 30% flat also) ? I don't know much about this, but if I need to pay taxes for ECI or FDAP income plus for branch profit, that would make me to give up on this whole idea, honestly...

3) What other taxes can be there that I would need to pay possibly? I am hoping for only ECI or only FDAP, that would mean maximum 30% going on taxes in US, which is kind of a limit for me, because of no tax treaty. Everything more than that would be too much (I am not counting progressive ECI taxes which can go to 37% one day, I am fine with that).

Everything written here is assuming that LLC is disregarded entity.

4) But, like @tomboy said in thread before, what if I choose that LLC is taxed as C-Corp? He said that I can flush all of the profit from US LLC to my Serbian company (I will have a Serbian company also) , hence I will not make any profit in the US and than I will not have to pay taxes in US (would i still need to pay ECI or FDAP income taxes??). I would never take dividends from LLC taxed as C-Corp, I would only use it to flush all of its profit to the Serbian company. After I flush the profit to Serbian company, that company would pay corporate taxes under Serbian law.
Tomboy also said that If I leave the profit in LLC, i would pay 21% flat on taxes on that profit.

Sorry for making this post too long maybe, but I really need clarification on all of this.
Thanks a lot in advance.
Your questions are very complex, you definitely should look for answers from professionals and not on a message board where most people have no idea what they are talking about :D

Find a good CPA in the US and pay some bucks for official opinion.
 

LoveMyLife

Active Member
If your US LLC will be doing business in US, all profits will be passed through and you will be liable to have a US ITIN and pay a US personal income tax from all profit which is coinsidered to be a US sourced. Whereas Serbia does not have a DTT with USA, you will be liable for income tax in Serbia, aftwrworda and you can not use tax paid in the USA as a tax credit. So this is not a good setup.

If you will consider to have US LLC taxed as C-Corp, you will have to pay a corporate tax in USA and dividends paid to you will be taxed by 30 % withholding tax. And everything after this tax will be taxable in Serbia as a personal income, whereas Serbia does not have a DTT with USA.

There is a good setup, which can be used:

1. Register US LLC to be taxed as C-Corp.
2. Register a company in a low tax or no tax jurisdiction, which has a DTT with USA as well as with Serbia, also.
3. Invoice your US company by that foreign company.
4. Receive dividends from that "middle" company.

There is just one problem. I can not imagine, what will you invoice by a foreign company to US company which is doing truck dispatching service in the USA...
 

Cazorla

New member
If your US LLC will be doing business in US, all profits will be passed through and you will be liable to have a US ITIN and pay a US personal income tax from all profit which is coinsidered to be a US sourced. Whereas Serbia does not have a DTT with USA, you will be liable for income tax in Serbia, aftwrworda and you can not use tax paid in the USA as a tax credit. So this is not a good setup.

If you will consider to have US LLC taxed as C-Corp, you will have to pay a corporate tax in USA and dividends paid to you will be taxed by 30 % withholding tax. And everything after this tax will be taxable in Serbia as a personal income, whereas Serbia does not have a DTT with USA.

There is a good setup, which can be used:

1. Register US LLC to be taxed as C-Corp.
2. Register a company in a low tax or no tax jurisdiction, which has a DTT with USA as well as with Serbia, also.
3. Invoice your US company by that foreign company.
4. Receive dividends from that "middle" company.

There is just one problem. I can not imagine, what will you invoice by a foreign company to US company which is doing truck dispatching service in the USA...
I will be invoicing US company for some kind of consulting.
 

LoveMyLife

Active Member
I will be invoicing US company for some kind of consulting.
Just "some kind of consulting" will be not accepted by IRS in case of inspection.

And as you mentioned - you plan to invoice a US company by Serbian company. Serbia does not have DTT with USA. So every cinsulting fees will be taxed by 30 % withholding tax in the USA.
 

Cazorla

New member
Just "some kind of consulting" will be not accepted by IRS in case of inspection.

And as you mentioned - you plan to invoice a US company by Serbian company. Serbia does not have DTT with USA. So every cinsulting fees will be taxed by 30 % withholding tax in the USA.
Why would IRS have a problem with the company which is legally paying its money to the other company(with different owner, my friend) for some reason which will improve that company? Ofcourse, I will find a proper name for that consultation and it will sound better than "some kind of consulting". I just don't see why the IRS would have a problem with that, there are plenty of spots in trucking industry which are changing every day, so consulting for that seems like a logic way to improve your business.

Also, as you say, if US LLC is paying $1000 to Serbian company for consulting, like $300 of that will go to IRS? Is that really true? Would that change if owners of those two companies are different? Because i didn't hear for that.

Thanks.
 

LoveMyLife

Active Member
Why would IRS have a problem with the company which is legally paying its money to the other company(with different owner, my friend) for some reason which will improve that company? Ofcourse, I will find a proper name for that consultation and it will sound better than "some kind of consulting". I just don't see why the IRS would have a problem with that, there are plenty of spots in trucking industry which are changing every day, so consulting for that seems like a logic way to improve your business.

Also, as you say, if US LLC is paying $1000 to Serbian company for consulting, like $300 of that will go to IRS? Is that really true? Would that change if owners of those two companies are different? Because i didn't hear for that.

Thanks.
Yes. it is true. It is called withholding tax.

IRS will examine if:

1. Consulting service was necessary for the company
2. Consulting service value was privovided in usual market price and conditions

There has to be a direct tie between costs and income. So if services are provided just not to increase a company profit or decreas a loss, it is so call non taxable cost.
IRS will inspect reports, emails, consulting reports, etc.. And will consider if consulting was provided as a real existing activity, or if you are simulating this only. If they will find that activity was pretended only, you will be prosecuted for a tax fraud. IRS inspectors are not idiots.

If you do not want to apply withholding tax, you will have to invoice US company from foreign company which is resident in a country which has a DTT with USA.
 

Cazorla

New member
Yes. it is true. It is called withholding tax.

IRS will examine if:

1. Consulting service was necessary for the company
2. Consulting service value was privovided in usual market price and conditions

There has to be a direct tie between costs and income. So if services are provided just not to increase a company profit or decreas a loss, it is so call non taxable cost.
IRS will inspect reports, emails, consulting reports, etc.. And will consider if consulting was provided as a real existing activity, or if you are simulating this only. If they will find that activity was pretended only, you will be prosecuted for a tax fraud. IRS inspectors are not idiots.

If you do not want to apply withholding tax, you will have to invoice US company from foreign company which is resident in a country which has a DTT with USA.
As far as I know for US source income, my income would not be US sourced, many CPAs have confirmed me that. If thats the case, there is no withholding taxes on non US sourced income.
 

LoveMyLife

Active Member
As far as I know for US source income, my income would not be US sourced, many CPAs have confirmed me that. If thats the case, there is no withholding taxes on non US sourced income.
Where will be your customers? Where will be your suppliers?
 

Cazorla

New member
Customers will be in US but thats where people are making mistakes, its important from where are services performed. Almost every CPA told me that.
 

LoveMyLife

Active Member
Customers will be in US but thats where people are making mistakes, its important from where are services performed. Almost every CPA told me that.
It can be real mistake. Many CPAs just believe that just having customers in USA is not making profit taxable in the USA. Problem is, that law sets rules:
If you are doing activity perpetualy, and if the most of your customers are in USA, company will be taxed in USA. So it is not about only having customers in the USA. If the most of customers are in the USA and you are doing activity for US customers periodicaly, not occasionaly only, company is considered to be a USA tax resident.
 

Cazorla

New member
It can be real mistake. Many CPAs just believe that just having customers in USA is not making profit taxable in the USA. Problem is, that law sets rules:
If you are doing activity perpetualy, and if the most of your customers are in USA, company will be taxed in USA. So it is not about only having customers in the USA. If the most of customers are in the USA and you are doing activity for US customers periodicaly, not occasionaly only, company is considered to be a USA tax resident.
Alright, but looks to me that you are speaking now about being engaged in US trade or business. But for withholding taxes, a US tax resident is not require to withhold taxes when making payments to non resident aliens (to person who is owner of Serbian company). So if we follow that, even if my LLC will pay some taxes in US, there shouldn't be withhold taxes because LLC is paying to a non resident alien.
 

LoveMyLife

Active Member
Alright, but looks to me that you are speaking now about being engaged in US trade or business. But for withholding taxes, a US tax resident is not require to withhold taxes when making payments to non resident aliens (to person who is owner of Serbian company). So if we follow that, even if my LLC will pay some taxes in US, there shouldn't be withhold taxes because LLC is paying to a non resident alien.
US tax resident IS REQUIRED to withhold taxes when making payments to non resident.. This is how withholding tax works. Withholding of tax is not done in case if person who will receive a payment is resident in a country which has a DTT with USA. In that case, withholdin tax is applied on DTT rate or not applied if DTT says so.
 
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