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I am looking for information to help me decide on which type

of business between LLC and...
I am looking for information to help me decide on which type of business between LLC and a C-Corp is the best for my given scenario.
I am NOT a US citizen or resident, I live in South America.
My wife and I would like to open a US company. This will be a marketing / e-Commerce business, based online and without any physical presence in the US (just a street address to receive post mail).
Our revenue will come from the sale of advertising and affiliate products. These will come from advertising networks like Google or MSN and affiliate product networks as Commission Junction, Share a Sell, Clickbank, etc.
Our expenses will be web related (hosting, etc) and services like web design, article writing, advertising, etc.
Why we need the company? Because we need an US business bank account to qualify to most of these networks and we need to be a US person (issue W9 forms with company name and not the owner’s name).
We have chosen Wyoming as the state to incorporate for public known reasons.
I understand that in order to achieve those goals we need to open a C-Corp or a LLC treated as C-Corp by the IRS.

What I need to know is the difference between those 2 entities in terms of:

- Taxes-CPA (how much are the associated CPA costs to fill taxes for each entity)
- Taxes-IRS (In both cases the same 15% federal income tax applies up to 50k income? Are our expenses deductible regardless of being a US service or paying for non-US services as web design, etc?
- Taxes-Individuals (We, the owners, being non-residents, need to pay any tax when receiving profits from the company? How electing one or the other entity type will affect this?)
- Are there any other difference between LLC’s and C-Corp’s we need to be aware of in order to make an informed decision?

Thanks!
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Answered in 32 minutes by:
6/9/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,870
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D :

Hello and thank you for using Just Answer,
If you have an LLC treated as a C Corp, the taxation will not be different at all. The C Corp will file and pay tax on it's income. The CPA would set their own fee. This is normally a hourly rate but I would not be able to advise on a set amount because there is no set amount that a CPA could charge.
The rate would not change because the LLC that is treated as a C Corp would be the same. An LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation.
The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation. The corporation would be required to withhold tax on the dividend payments to you.
An LLC owned by a husband and wife would be a partnership. Partners pay tax on the income that is passed through to the partners. As Nonresident partners the partnership would be required to withhold tax on any profits before it was

passed to each of you. This will require additional work by your US accountant or CPA.

Customer:

Thanks.

Customer:

So, if i understood correctly, C-Corps and LLC tht elects to be treated as C-Corps will work the same way in terms of federal income tax and dividend tax withholding. What I dont understand is why tax is withholded if I am a non-resident... Do i need to file a 1040NR each year to get that withholding credited to me or I loss that money every time I get dividends?

Robin D :

It is withheld because you are a Nonresident and the company is a US company. The dividends are taxed normally a 30% this is so unless there is a tax treaty between your home country and the US>

Robin D :

If there is a tax treaty that states the dividends are taxed at a lower rate then you would have to complete the W8BEN form and the C corp would keep that showing the lower rate. This protects the C corp form noncompliance for it's part.

Robin D :

I did not respond to your other post and have left it for any other expert. They will be able to advise that US corp dividends paid to nonUS persons are subject to withholding.

Customer:

ok, I have used W8-BEN several times before for opening brokerage accoutns and receiving payment for publishing services at my name with 0% tax withholding. Will this work the same way for dividends? How can i see if my country (Uruguay) has a tax treaty with the US?

Robin D :

I will check, one sec please

Robin D :

There is no tax treaty at present between the US and Uruguay, unfortunately.

Customer:

so i have to pay 30% on dividends

Robin D :

They will be withheld, correct.

Robin D :

The corporation will withhold and remit the amount to the US.

Customer:

withheld and paid to the IRS on the annual filling, right?

Robin D :

If the dividends are distributed annually, yes.

Customer:

I suppose that i can also charge the corporations for a management/consulting fee, but perhaps that is a separate question.

Robin D :

It is a separate question but yes you can charge the C copr for your services.

Customer:

thanks Robin, i will open new questions if i need more info

Robin D :

Those services not performed in teh US would not be taxable to you. That is when you would complete the W8BEN to show you do the work for the US copr but in anothe rcountry.

Robin D :

another country* sorry

Customer:

but are deductable from the corp income tax, correct?

Robin D :

Correct

Customer:

thanks Robin, we can close this Q.

Robin D :

Your positive rating is always thanks enough.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,870
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
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