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If your business is profitable - using S-corporation as a business structure might provide you some saving.
A single member LLC is disregarded entity - for federal tax purposes all income and expenses are reported on the owner's individual tax return - schedule C - as for solo proprietorship.
The LLC wit several members is generally treated as a partnership - while a partnership is filing a tax returns - all taxable income is passed through to members and also taxes on individual tax returns.
In both situations - the income is a subject of self-employment taxes.
In case of S-corporation - shareholders are employees and receive wages - the IRS required that reasonable wages are paid.
The remaining income is distributed as dividends - without self-employment of FICA taxes - that is a main advantage of having S-corporation.
However - you might expect additional overhead for filing S-corporation tax return and employment tax returns - so your business income should be more than additional overhead to enjoy the tax saving.
In most situation - if you net income is $40,000 or more - S-corporation is preferable.
For tax purposes, people living in Japan are classified into following categories:
-- Non-Resident - is a person who has lived in Japan for less than one year and does not have his primary base of living in Japan. Non-residents pay taxes only on income from sources in Japan, but not on income from abroad.
-- Non-Permanent Resident - is a person who has lived in Japan for less than five years, but has no intention of living in Japan permanently. Non-permanent residents pay taxes on all income except on income from abroad that does not get sent to Japan.
-- Permanent Resident - is a person who has either lived in Japan for at least five years or has the intention of staying in Japan permanently. Permanent residents pay taxes on all income from Japan and abroad.
Note that there is a tax treaty between Japan and the USA which take precedence over the tax law. Here is the tax treaty document - www.irs.gov/pub/irs-trty/japan.pdf
You might qualify for the foreign earned income exclusion - because you worked and resided outside the United States for at least 330 days during the year - thus you may exclude up to $91,500 (2010 in foreign wages -- plus housing allowances
To receive that exclusion - the taxpayer should file either form 2555 or 2555EZ.
Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable - income from wages and self-employment. For instance - dividends, investment income, rental income, pensions, etc - are not excludable.
Please also be aware that this credit is not granted automatically - you need to file a tax return and claim the credit.
In additional - if the same income is taxable in Japan and in US - you may claim a credit for taxes paid - so the same income would not be taxed twice. Use the form 1116.
Let me know if you need any help.