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BizIPEsq.
BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience:  I am a business attorney. I represent individuals and companies with all business related matters.
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i intend to open llc in usa but not sure which state is good

Resolved Question:

i intend to open llc in usa but not sure which state is good for me.
Submitted: 1 year ago.
Category: Business Law
Expert:  BizIPEsq. replied 1 year ago.

TheLegalistEsq :

Hello I will be assisting you.

TheLegalistEsq :

What state will you do business in?

TheLegalistEsq :

Will have you partners or will it just be you?

Customer:

hi...

TheLegalistEsq :

hello

Customer:

i need to form an llc and prior to this, i would like to know some detail for example bank account opening for foreigner and other general issues, if you can help.

Customer:

What have you tried so far?: we recently grant an educational license to a usa company and intend to register usa llc. we want to get the best advise to decide which state and also get a minimal tax. for your info, this is only one time payment from the client and after that we dont have further business in the state. please guide

TheLegalistEsq :

If you are outside the US, does anyone in your company have a US social security number? If not, does anyone intend to travel to the US in the near future?

Customer:

no..

Customer:

no us ssn number.. no recent plan to visit usa.

TheLegalistEsq :

As a foreign national you can form a company in any state. Many choose Delaware or Nevada. Both states do not impose state corporation tax so as far as state taxes you will not need to pay. As far as paying taxes over all you will need to see if there is a treaty between the US and your country.

TheLegalistEsq :

As far as being able to open a corporate bank account, unfortunately the US has been imposing very strict restrictions on the ability of foreign national to open an account without physically visiting the US. As general information, in order to open a company bank account the bank needs the information of at least one person who would be the signor that person has to have a social security number SSN or a TIN (Tax identification number)

Customer: When a USA llc pay a one time royalty to our USA llc, so is this taxable and deductible?
TheLegalistEsq :

If you are present in the IS you can obtain a TIN and open the account sometimes in one day (depending on the bank) other times you first need to file for a TIN and then open the account

Customer: no I don't have plan to fly USA
TheLegalistEsq :

however since you will not be present in the US you will need to obtain a TIN using a registered agent in your home country (there is a short list of agents and countries that can do that. Many of the large multinational accounting firms like Deloitte can be an agent for that purpose) but then you would need to find a bank that will be willing to open an account without presence in the US and currently I am not aware of a bank that permits this.

TheLegalistEsq :

As noted the regulations in this particular area have changed dramatically in the past couple of years and overall since September 11, 2002

TheLegalistEsq :

Realistically your other option is to find a US person who would be willing to open an account on your behalf

TheLegalistEsq :

but the person of course needs to be trust worthy since they will control the bank account

Customer:

i see. so this US person does not mean a shareholder or interest in the llc , right?

Customer:

for example she/he could be my friend who is is PR in usa?

TheLegalistEsq :

correct

TheLegalistEsq :

they should have a company title (like VP or some other company title) but this title does not correlate to equity

TheLegalistEsq :

anyone can be a VP not anyone can be a shareholder...

Customer:

so once the llc is completed, so i will appoint my US friend as a business director and to open the account under the LLC name. then i will be able to control the accout online, may i right ?

TheLegalistEsq :

correct

Customer:

wonderful..

TheLegalistEsq :

(sorry for the bold)

TheLegalistEsq :

Please rate me positively. good luck!

Customer:

ok. now we can narrow to the llc .. which i

Customer:

sorry..i need some qs.

Customer:

so now it is the royalty when we receive, is it non deductable ?

TheLegalistEsq :

when you say deductible what do you mean?

Customer:

i mean the fdap issue

TheLegalistEsq :

also can you explain what you mean by royalty (the US has other terms)

Customer:

when we form llc and collect a royalty from usa llc, i m not sure if this is called FDAP

Customer:

http://www.irs.gov/Individuals/International-Taxpayers/Fixed,-Determinable,-Annual,-Periodical-(FDAP)-Income

Customer:

as mentioned in my question, we are going to receive a one time royalty about 400k from a usa llc.

TheLegalistEsq :

As noted, the LLC itself does not pay taxes. All the profits and losses flow personally to the shareholders. Since the shareholders are foreign national you will be subject to taxes in your home country AND in the US unless your country has a tax treaty with the US (most countries do)

TheLegalistEsq :

therefore you need to consult a tax professional who is familiar with the tax treaty between your home country and the US to properly answer this question

Customer:

malaysia does not have a double tax treaty.to my knowledge

Customer:

so this case, when i form a llc, which will be the better choice this my case, i only receive one time royalty from another usa llc and there will no further business transaction in usa after that...please guide

TheLegalistEsq :

In such case, generally speaking, there will be a mandatory 30% withholding tax on profits for foreign nationals.

Customer:

yes. does it mean 30% on the net profit or the gross profit?

TheLegalistEsq :

the 30% is on the distributions to the members of the company which would be net profits

Customer:

follow this, so i can deduct those expenses or purchases before the 30% tax , right?

Customer:

Tax Treatment of FDAP Income Which is Not Effectively Connected Income (ECI)


Tax at a 30% (or lower treaty) rate applies to FDAP income or gains from U.S. sources, but only if they are not effectively connected with your U.S. trade or business. The 30% (or lower treaty) rate applies to the gross amount of U.S. source fixed or determinable, annual or periodic gains, profits, or income. Deductions are not allowed against FDAP income.

Customer:

does it apply to usa llc when the shareholders/members are foreigner ?

TheLegalistEsq :

your question concerned which state the LLC should be opened while this is a fairly complex tax question

TheLegalistEsq :

let's start a new question. Please rate this one positively and request me for the next one

Customer:

sure...thanks...

TheLegalistEsq :

looking forward

BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience: I am a business attorney. I represent individuals and companies with all business related matters.
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