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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7539
Experience:  15years with H & R Block. Divisional leader, Instructor
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Im a U.S. citizen living abroad in Costa Rica. Ive set up

Customer Question

Im a U.S. citizen living abroad in Costa Rica. I've set up an S.A. here (similar to an LLC) but I need to set up an LLC in the U.S. because our business is directed to North Americans (primarily U.S. citizens) traveling here and we need to be able to accept credit cards which requires us to open a US business bank account. My personal accounts in the US are with a credit union that doesn't allow business accounts and setting up business and merchant accounts here in Costa Rica has become too time consuming. We're planning on forming the LLC in Wyoming and I'm wondering if I indicate our primary/office address is in Costa Rica, does this cause any extra delays, problems or more paperwork? Also, I understand that if we were operating form another state outside Wyoming, we would still need to pay state taxes for whatever state we were operating from. Do we avoid this since we are an online business operated from abroad? Finally, this was going to be a single member LLC but I'm wondering if I can avoid additional tax and liability weaknesses by including a family member or close friend at a very low percent of interest (5-10%) with the understanding of al involved that income passes through to all of our individual taxes Thanks for any advice.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Robin D :

Hello and thank you for using Just Answer,
To have a US bank account your foreign business could apply for a US EIN and have the business account in the bank without having an LLC. As far as any delays because of the foreign address,if you mean for the bank account that would be an internal bank question. If you mean to set up the LLC then no, that would not cause delays.
You are correct about the state taxes for whatever state you were operating from statement. If you have a US LLC then you are going to be taxed by the state where you register and the federal level too. Your nexus in any state (example: selling online and dropshipping from a US state) would mean you would liable for taxes if only sales tax.
Your last question, if you have more than one member you will be a partnership and the income is passed through to all partners. You would run into a problem with on withholding if your partner is not a US person.


Robin D :

Sorry for the break in my lecture, just wanted to get that portion out to you so you would have something to start reading.

Robin D :

I said above that having a Costa Rica address is not a problem. To expand on that, every Wyoming LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC’s behalf if it is sued. The registered agent may be a Wyoming resident or business entity authorized to do business in Wyoming. The registered agent must have a physical street address in Wyoming. So you can get around that problem by having an agent in Wyoming or pick another state to form your LLC in.

Robin D :

After you read the above please respond to me so I will know that you were able to view the answer. If you have additional questions you can post them to me or rate the assistance. Rating let's Just Answer know your question was addressed.

Customer :

HiRobin,

Customer :

Hi Robin,

Customer :

Sorry for all the his--some computer issue happening

Customer :

Thanks for your response. Interesting about the business account. Are you aware how difficult that may be with banks? I would assume they would want to run a credit check which is fine because I have good credit, but I'm worried about taking a lot of time to find a bank willing to open the account with just an EIN? All of our issues are tied together bank account, merchant account and so I was thinking an LLC would just be the easiest if the costa rican aspect was going to raise any red flags or create problems. I know about the registered agent aspect you mentioned. Does that mean I can use their address on the filing with the state--meaning I can say that is my principal office for conducting business? If I use my Costa Rican address there is no difference when considering the other aspects--bank account etc?

Customer :

I just don't know what information is visible or considered when a bank or other entity asks about details of my LLC. Regarding other members on the LLC--I would get a close friend or family member (all US citizens) My question is can you split the LLC like 99% for me and 1% for the other person? Or is that a red flag. If I can do that, does it avoid self employment tax?

Robin D :

The LLC will be a partnership and if the split is 99% and 1% then that is what it is (not a red flag). No you will not avoid SE Tax by using a partnership LLC. Guaranteed payments and income allocated to a partner’s general partnership interest are classified as SE income and are subject to SE tax.
About the bank issues, I know of many nonresident companies that have US bank accounts so your US LLC should not have a problem.
The agent for you LLC would be the main contact for the state and their address could be used for everything.

Customer :

Thanks for your response. I was checking out different banks this morning and I started going through the online process with BofA (just as a test because I don't like this bank) It asked for formation state which i put Wyoming and then it asked primary location for operating the business and I put Costa Rica and it immediately said I couldn't do it or I needed to call a bank rep or something. That is why I was asking about using the registered agent address in Wyoming as my primary business address. Based on what you wrote, that would be OK? I think I understand your comment about self employment tax but how does an LLC avoid self employment tax then?

Robin D :

It doesn't. An LLC is either sole propreitor or S corp or partnership and they all have SE tax at some point

Robin D :

A C corp does not have SE tax but then the double taxtation at corp level and shareholder level is a deterrent.

Customer :

OK thanks and the address--I can use the registered agent as primary? It is an online business so I thought that might be possible

Robin D :

Yes, I did not see where the agent in Wyoming could not be the address for the business

Robin D :

You can bookmark this if you like and even after you rate you can come back to speak more.

Robin D :

Thanks again and best wishes for your new endeavor in the coming year.

Expert:  Robin D. replied 1 year ago.
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