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Hello there! I am a European citizen who is about to start

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Hello there! I am a European...
Hello there!

I am a European citizen who is about to start an Internet-based business in the US with an American partner of mine. I'm even considering moving to the US because of this venture. I'm looking to incorporate a LLC in Wyoming, New Mexico, Nevada, or any other privacy-friendly state (privacy is very important for me). This LLC will hold 50% of the stock of the actual business I will conduct with my partner (his LLC will hold the other 50%).

My questions:

1) What would be the best state to incorporate in terms of low taxes, high privacy and easiness to incorporate?
2) How would my foreign status affect the LLC tax obligations? Does it matter where in the world I personally live in terms of the LLC tax obligation?
3) Am I better off incorporating a LLC or a S corp for tax purposes?
4) Does it actually matter tax-wise whether I move to live to US at all? Do I need to move to the actual state I incorporate in?
5) Can I incorporate through an agent (without disclosing my name) in order to increase privacy levels?

Thank you very much in advance!
Submitted: 4 years ago.Category: Tax
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5/21/2013
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

1) Any of the states you mention would be good to incorporate in. There is no difference in your tax obligation based on the state you incorporate in.

2) If you are a foreign member, you will pay your portion of the LLC tax obligation using form 1040NR, which is the non-resident tax returh. The LLC itself doesn't actually pay tax on the profit...you do at the individual level. Your partnership would need to remit quarterly 35% of your portion of the profits as tax. This is your tax rate. Read more, HERE.

3) A non-resident alien cannot be a member of an S Corp. You would have to be an LLC by default as you are not eligible to be a member of an S Corp.

4) In the grand scheme of things, the difference would be minimal. Living in the US you would pay income tax and self employment tax. You would not pay self employment taxes living abroad. You do NOT need to live in the state you incorporate in.

5) Yes, you can use a paid registered agent to keep your name private for the LLC.

Please let me know if you have further questions. If not, please rate my response as "excellent" so that I may receive credit for assisting you today. Thanks again.
Ask Your Own Tax Question
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer
Ask Your Own Tax Question
Customer reply replied 4 years ago
Hello,

Thank you for your reply. I'd love if you could clarify the following points for me. I quote below your responses and I add my further questions:

----------------

YOUR RESPONSE:
1) Any of the states you mention would be good to incorporate in. There is no difference in your tax obligation based on the state you incorporate in.

MY ANSWER:
What about in terms of privacy? I hear some states do not require to disclose the name of the owner of the LLC whereas other do. Which state allows the highest privacy standards?

----------------

YOUR RESPONSE:
2) If you are a foreign member, you will pay your portion of the LLC tax obligation using form 1040NR, which is the non-resident tax returh. The LLC itself doesn't actually pay tax on the profit...you do at the individual level. Your partnership would need to remit quarterly 35% of your portion of the profits as tax. This is your tax rate. Read more, HERE.

MY ANSWER:
So, since the LLC automatically remits 35% of the profits as my non-resident personal taxes, does that mean that I do not need to file any taxes in my home European country?

--------------

YOUR RESPONSE:
3) A non-resident alien cannot be a member of an S Corp. You would have to be an LLC by default as you are not eligible to be a member of an S Corp.

MY ANSWER:
Thank you, XXXXX XXXXX know that.

--------------

YOUR RESPONSE:
4) In the grand scheme of things, the difference would be minimal. Living in the US you would pay income tax and self employment tax. You would not pay self employment taxes living abroad. You do NOT need to live in the state you incorporate in.

MY ANSWER:
However, if I live in the US and I become a US resident (under a valid Visa, of course), then I assume my tax obligations would change and the rate would not be a standardized 35% by default. Could you tell me, should I decide to move to the US under a working Visa, what'd be my tax obligation as a US resident considering my income would be entirely generated by my LLC business?


--------------

YOUR RESPONSE:
5) Yes, you can use a paid registered agent to keep your name private for the LLC.

MY ANSWER:
Thank you.

--------------

ONE MORE QUESTION IF I MAY:

Let's say that, a few years down the road, I sell my LLC and I receive US$ 1,000,000 for it. What would be the tax applied for that sale?

--------------

Thank you very much in advance, you've been very helpful so far!
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
YOUR RESPONSE:
1) Any of the states you mention would be good to incorporate in. There is no difference in your tax obligation based on the state you incorporate in.

MY ANSWER:
What about in terms of privacy? I hear some states do not require to disclose the name of the owner of the LLC whereas other do. Which state allows the highest privacy standards?

MY RESPONSE: Any of the states you mention will not disclose your name. They are all private.

----------------

YOUR RESPONSE:
2) If you are a foreign member, you will pay your portion of the LLC tax obligation using form 1040NR, which is the non-resident tax return. The LLC itself doesn't actually pay tax on the profit...you do at the individual level. Your partnership would need to remit quarterly 35% of your portion of the profits as tax. This is your tax rate. Read more, HERE.

MY ANSWER:
So, since the LLC automatically remits 35% of the profits as my non-resident personal taxes, does that mean that I do not need to file any taxes in my home European country?

MY RESPONSE: I cannot speak to your European tax liability, only your US tax liability. You would need to refer to a local professional to determine what taxes need to be paid in your home country.

--------------

YOUR RESPONSE:
3) A non-resident alien cannot be a member of an S Corp. You would have to be an LLC by default as you are not eligible to be a member of an S Corp.

MY ANSWER:
Thank you, XXXXX XXXXX't know that.

--------------

YOUR RESPONSE:
4) In the grand scheme of things, the difference would be minimal. Living in the US you would pay income tax and self employment tax. You would not pay self employment taxes living abroad. You do NOT need to live in the state you incorporate in.

MY ANSWER:
However, if I live in the US and I become a US resident (under a valid Visa, of course), then I assume my tax obligations would change and the rate would not be a standardized 35% by default. Could you tell me, should I decide to move to the US under a working Visa, what'd be my tax obligation as a US resident considering my income would be entirely generated by my LLC business?

MY RESPONSE: You will be taxed like a citizen. Your tax rate will depend on your income, and will not be a flat 35% rate. Your obligation is impossible to calculate without filling out your actual tax return.


--------------

YOUR RESPONSE:
5) Yes, you can use a paid registered agent to keep your name private for the LLC.

MY ANSWER:
Thank you.

--------------

ONE MORE QUESTION IF I MAY:

Let's say that, a few years down the road, I sell my LLC and I receive US$ 1,000,000 for it. What would be the tax applied for that sale?

MY RESPONSE: In short, it depends. This is far too complex a question to give a simple answer. You would need to come back when you sell the LLC and tell us the terms of the sale in order to answer this question.

Thanks, XXXXX XXXXX you would please rate the response as "excellent" so that I may receive credit for assisting you today. Thanks.
Ask Your Own Tax Question
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
.
Ask Your Own Tax Question
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer
Ask Your Own Tax Question
Ask Megan C Your Own Question
Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
16,581 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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