Hi, I’m a PA to a Russian citizen, who wants to relocate to Florida and start an S corp there. We have a few questions related to that.
My boss owns a BVI company, which owns a web service (web site), which generates revenue from the users of the site (paypal and credit cards) and also from running ads. The current revenue generated by this web service is around $1.5mln/year. Now my boss wants to relocate to Florida and run the web service from there with the help of the local
employees, who will be employed by his S corp (not incorporated yet). The idea is to assign the web service ownership rights to the existing BVI company while a newly created Florida S corp will be paid a fee by the BVI for agent services (collecting money from the US customers for the BVI company) and also for software development and administration.
The full cashflow picture is the following: US customers pay to Florida S corp $1.5mln. Florida S corp takes an agent fee of 5% ($75000) from this amount and transfers money to the web service owner i.e. to the BVI company. BVI company pays $0.75mln to Florida S corp for software development and administration. Out of this money around $400k is spent as salaries for local employees + $100k will be a salary of my boss who is going to be the CEO of S corp and who will be actively involved in running it. S corp’s profit is therefore $0.25mln. BVI company’s profit is ~ $0.7mln and all of it will be distributed as dividends
with my boss being the only shareholder.
What will be the full tax
implications for my boss? Could you give a detailed breakdown?
Is there a slightest chance of IRS claiming that $0.75mln of foreign income is not in reality a foreign income, but an income received by Florida S corp?