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TexLaw
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4258
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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Hi, My name is XXXXX XXXXX I have a question regarding a business

Customer Question

Hi,

My name is XXXXX XXXXX I have a question regarding a business problem. I'm a foreign citizen and I have a company in Belize islands. I would like to open a company in US, in Delaware to be more exact. What I need to know is what is the legal way to do this? I would like to have a monthly contract between my US company and my Caraibbean one and pay the money through this contract and invoice to my company from Belize. Is this legal? If yes, what are the taxes I need to pay and what's the procedure?

Thank you,
Vio
Submitted: 1 year ago.
Category: Legal
Expert:  TexLaw replied 1 year ago.

Hi,

Thank you for your question.

Your proposition is legal. Here are the steps you need to follow:

1. File an articles of incorporation in Delaware: http://corp.delaware.gov/incstk09.pdf

2. Pay the filing fees

3. Hire a Delaware Agent for Service of Process - this person will maintain your office address and act as your agent if you are ever sued (this is a requirement). You can locate these by simply googling "Delaware Agent for Service of Process".

After the State of Delaware issues your certificate of formation for your company, you may open a corporate bank account. You would then need to set up a simple written contract to keep between your Belize Co. and the US Co., which will form the basis of your transfer of money between the two.

All money which is transferred through the Delaware Co. will be subject to Delware Franchise taxes and US corporate income taxes. When the money gets to your Belize Co., the money will once again be subject to Belize taxes depending on how you take the money out of the corporation (there are no capital gains taxes in Belize).

Please let me know i fyou have further questions. Please also remember to rate my answer positively as I am not compensated for my work on your question until you do so.

Thanks,

ZDN

Customer: replied 1 year ago.

Hi,


 


My question was about the tax part. To be more precise about this part:


 


All money which is transferred through the Delaware Co. will be subject to Delware Franchise taxes and US corporate income taxes. When the money gets to your Belize Co., the money will once again be subject to Belize taxes depending on how you take the money out of the corporation (there are no capital gains taxes in Belize).


 


IF I pay my Belize company, through monthly payment, what taxes are going to be paid to US? Let's take an example. I get a check of 5000 USD in a month and I pay 4500 to my Belize company. How much money do I need to pay in taxes if this would be the situation for each month?


 


Vio

Expert:  TexLaw replied 1 year ago.

If the Delaware company receives $5,000 a month, which is $60,000 per year, then the franchise tax will be between $75.00 - $350.00 per year. If you are then paying out $4,500 under a valid contract for actual services performed, this reduces the US Corporate income tax basis to $6,000.00 and the yearly income tax on this would be $900 per year.

Customer: replied 1 year ago.

I see,



One more question and I'm out. If I understood correctly, if I reduce the monthly income to 500, then the yearly tax would be for $6,000 and I would have to pay 900, which is around 15%. Now, the rest would be profit. That's around 5100. Because I'm a foreign citizen do I need to pay any extra tax? I read somewhere that I need to pay a 30% tax on the profit, because I'm a foreign citizen. Also, is it possible to reduce the income even more, to 100/month? Or?


 


Thank you very much. I'll give an excellent rating

Expert:  TexLaw replied 1 year ago.

You've got it backwards. If your US Company is paying your Belize Company for work performed in the amount of $4,500 per month, that is not counted as profit for the US Company. The US Company is profiting only $500 per month.

If you are not a US citizen or a resident alien of the US, then your income in Belize is not subject to US income taxes.

The biggest issue you will face is that you are transferring money outside of the US, which draws scrutiny from the IRS and could potentially result in an audit. If it is determined that the transfer of money is not for the actual payment of services performed for the US company, then you could find that the entire $60,000 would be subject to corporate income taxes in the US, which would be $10,000.00.

TexLaw, Attorney
Category: Legal
Satisfied Customers: 4258
Experience: Lead trial/International commercial attorney licensed 11 yrs
TexLaw and 13 other Legal Specialists are ready to help you
Customer: replied 1 year ago.

Ok, Thank you. Then can you advise about the best way to do this, without the audit attention? I will have some business partners from US and I believe they'll feel more confident about paying the amount to a US bank account and to a US company, so I'd like to have all my business covered and not loose any clients

Expert:  TexLaw replied 1 year ago.

We cannot draft a contract for you here, but I can tell you that you will need to be performing services for the US Company. So the US Company will have to pay your Belize Company as an independent contractor who performs the services that the US Company was hired to do by your partners/clients.

Another tip is that the IRS reporting threshold is $5,000 for potentially suspicious transactions and $10,000.00 for all others. So if you limit all your monthly transfers to $4,999 or less, they should not be reported to the IRS. Then the IRS will only have your tax return as evidence of how much money your US Company is making.

After you've got it all set up, the best way to avoid an audit would be to run it through a Certified Public Accountant who offers audit protection. However, if you are truly only talking about $60K per year, this is unlikely to draw IRS attention.

Customer: replied 1 year ago.

ok, Thank you very much. I got it now and it helped a lot.

Expert:  TexLaw replied 1 year ago.

You are welcome. Good luck with your business endeavour!

-ZDN

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TexLaw
TexLaw
Attorney
2718 Satisfied Customers
Lead trial/International commercial attorney licensed 11 yrs