Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Hello again Lev, the info you gave me yesterday was very helpful,

yet I am unable to...
Hello again Lev, the info you gave me yesterday was very helpful, yet I am unable to make a decision. Being a foreigner wanting to engage in online business in the US. Which of the following is better in my case, having my BVI company form a Delaware LLC or form it under my name as an individual? I need to know the advantages and disadvantages of each option please i.e. tax, liabilities and bank relationships. I assume they will require me to sign on behalf of the company anyhow.

Once the LLC is formed under any of the above, will I be legally able to wire the profits from a US bank to my bank that is located outside of the US? wouldn't that require me to file for taxes anyway since it is made from onshore business?

Also, I am not sure if having a SSN in the US will make a difference in the decision. I do have one but not valid for employment. Please let me know if I would still need to apply for ITIN in that case.

I would greatly appreciate it if you could guide me to the best practice so I can be confident in making my decision.
Thank you.
-R
Show More
Show Less
Ask Your Own Tax Question
Answered in 12 minutes by:
7/17/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,692
Experience: Taxes, Immigration, Labor Relations
Verified

LEV :

Hi and welcome to Just Answer!
Which of the following is better in my case, having my BVI company form a Delaware LLC or form it under my name as an individual?
These are two different ways to structure the business - none is better.
If you want to compare your possible tax liability - it will depend on your expected business income - so you may estimate your net business income and possible tax liability with each scheme.
If you want to compare complications for tax filing - please be aware that corporate tax return would generally be more complex.
In additional - you may choose your LLC to be treated as a corporation - in this case the LLC itself will file a corporate income tax return.
Having a Delaware LLC would be advantageous if it will NOT sell to Delaware customers - in this case there will not be Delaware income tax liability.

LEV :

Once the LLC is formed under any of the above, will I be legally able to wire the profits from a US bank to my bank that is located outside of the US?
The issue with opening a bank account is a separate issue. I assume that most banks would not take you as a customer for internal security reasons. So be prepared to spend some time contacting different banks. Most banks require your personal tax ID - either SSN or ITIN if you are not eligible for SSN. If you have SSN - you may use it - but may not apply for ITIN in additional to your SSN.
After the bank account is open - you may transfer funds without any limitations.
In additional - you may have an account in alternative (not banking system) - for instance PayPal account which is very popular in online commerce.

Customer:

can you give me some examples on advantages and disadvantages? the above statement doesn't help me make up my mind on who will form the LLC having a little knowledge about the laws.

Customer:

when you said that most banks will not take me as a customer for internal security reasons, is this in the case of the BVI owning the LLC or in both cases? I do have a personal bank account in the US if that has anything to do with it.

LEV :

can you give me some examples on advantages and disadvantages?
Assuming you will have income from US sources - which will be taxable in the US - and income will not be distributed to you as a shareholder - instead will be used for business purposes - corporate income tax rates are generally lower.
If income will be distributed to you - it will be taxed twice - on corporate level and for you when you will receive dividends.
When you are filing as individual - income will be taxed based on individual tax rates. However - most likely you will be able to claim a credit for foreign taxes in your country of residence - thus will eliminate double taxation.
You may want to estimate your expected tax liability - but that will be based on estimate income amounts. From tax liability prospective either way may be more advantageous.
However - as I mentioned above - filing corporate income tax returns is more complex - so if your will just start and your income will be relatively low - you might want to avoid overhead and keep paperwork as simple as possible.
I might suggest to avoid BVI company in this scheme - open a single member LLC (disregarded entity) owned by you as an individual - let the business to take off - and if your business profit will grow - you may select the LLC to be treated as C-corporation for tax purposes.

LEV :

when you said that most banks will not take me as a customer for internal security reasons, is this in the case of the BVI owning the LLC or in both cases?
Most banks do not want to serve foreign. That include as non resident alien individuals as well foreign corporations. There is additional compliance overhead and banks (especially small banks) are trying to avoid. If you already have a bank account - you may continue to use it.

Customer:

thanks for clarifying

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,692
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 4 years ago

hi Lev, I am forming single member LLC (disregarded entity) owned by me as an individual per your advice. Filling the SS-4 form to obtain an EIN for the LLC has a request for SSN except in the case for foreigners. I am a foreigner and non-resident but do have a SSN. Should I skip? below is their instructions that I don't understand:


 





You must enter an SSN, ITIN, or EIN on line 7b unless the only reason you are applying for an EIN is to make an entity classification election (see Regulations sections(NNN) NNN-NNNN1 through(NNN) NNN-NNNN3) and you are a nonresident alien or other foreign entity with no effectively connected income from sources within the United States.


 


and if you don't mind, could you tell me which tax forms I will need to file in the future and if that would be for me or the LLC?


 


Thank you




If you choose a single member LLC as a disregarded entity - and the LLC will have NO employees - there is no need for EIN.
Instead - you need to apply for ITIN for yourself - and will use it for all purposes related to LLC's business transactions.
You may verify the chart on this page Do You Need an EIN?
- http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Do-You-Need-an-EIN%3F

In the future - you would need to file ONLY personal tax return as a nonresident alien - form 1040nr - www.irs.gov/pub/irs-pdf/f1040nr.pdf
and you will report only income from US sources (and corresponding deductible expenses) on schedule C which should be attached to form 1040NR - www.irs.gov/pub/irs-pdf/f1040sc.pdf‎
Net taxable income will be calculated on schedule C - and will be transferred to form 1040NR line 13.
Please be aware these are forms for 2012 - and will be updated for 2013.

Appreciate you asked for clarification.
Ask Your Own Tax Question
Customer reply replied 4 years ago

Please let me know your answer to the above questions in the case where EIN has been applied for (and did not enter my SSN).

 

yesterday you said: If you have SSN - you may use it - but may not apply for ITIN in additional to your SSN.

 

so how are you saying that i should apply for a ITIN? I am completely lost

You may apply for EIN only if the LLC is treated as a corporation - for disregarded entity - you do need to provide either SSN or ITIN.
When you apply for EIN for the disregarded entity - that is NOT for making classification election. That would be a classification election if you choose the LLC to be treated as a corporation.
The line 7b is related to a responsible party. If you as a physical person are responsible party - your tax ID is required.
Ask Your Own Tax Question
Customer reply replied 4 years ago

forgive my amateur questions but this really complicated. I guess I better do what's right and forget about learning the system for now.


 


1- l call the registered agent and have them stop the EIN request since I want the LLC to be a "disregarded entity"


 


2- I have a SSN that is of course NOT valid for employment. I just use that when I file the 1040NR


to be sure, I don't file for ITIN?


 


thanks again.

I agree with you that you do not need EIN - at least at this point.
You may apply for EIN any time in future - if you would need to have it.

Your SSN is not valid for employment - but because you are physically outside the US - you are not working in the US - and there is no violation.
Still - because you have SSN - it is a valid SSN - and it should be used as your tax ID.
Because you already have SSN - you may not apply for ITIN.
See here - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies

An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship.

For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or EIN for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN.

 

Specifically for your question about ITIN - see here - http://www.irs.gov/Individuals/Additional-ITIN-Information

Once you receive a SSN, you must use that number for tax purposes and discontinue using your ITIN. It is improper to use both the ITIN and the SSN assigned to the same person to file tax returns.

 

Ask Your Own Tax Question
Customer reply replied 4 years ago

thank you, XXXXX XXXXX what the bank had requested. I assumed that the "US Person" in the W9 form apply to my case although I am a foreigner. Should I also request to submit a W8 form or not necessary?

Sorry - I overlooked your last question.
You should not use W9 form for nonresident aliens, but should use W9 form.
There are several forms W8 that are used for different occasions - mainly W8BEN and W8ECI.

Abbreviation in the form name Form W-8ECI – stands for effectively connected income (ECI) – thus this form is used if the person or entity is a recipient of U.S. source income which that is (or is deemed to be) effectively connected with the conduct of a trade or business within the United States.

The form Form W-8BEN is used for income that is not effectively connected.

Please see for reference instructions for these forms:

http://www.irs.gov/pub/irs-pdf/iw8eci.pdf

http://www.irs.gov/pub/irs-pdf/iw8ben.pdf

Also in instructions there is a definition of effectively connected income.

A foreign person may be engaged in a trade or business in the United States regardless of his/her residency, but depending on how the business is organized.

Please feel free to ask for clarification. I might not be immediately available, but will surely respond.

Ask Your Own Tax Question
Customer reply replied 4 years ago

hi Lev, is this a typo?


"You should not use W9 form for nonresident aliens, but should use W9 form."


Just to simplify things, as I am a foreigner and formed a one member LLC "disregarded entity" and wanted to open a bank account. Which form should i sign? i am confused.

Sorry for type. Following should read - "You should not use W9 form for nonresident aliens, but should use W8 form."
For your bank account - use W8BEN.
Ask Your Own Tax Question
Customer reply replied 4 years ago

Lev, the bank is asking that I sign the authorization for information and certificate of authority. On the second page, it reads






"I am a U.S. citizen or other U.S. person (as defined in instructions)." so I am afraid to sign since I am not a US resident. Shouldn't the W8BEN be a substitute in my case? and if it is ok to sign, should I check the individual/sole proprietor or LLC or other and write disregarded entity? using my SSN. should i strike any language on the form? kindly help me fill it out. Even on the signature it reads: " signature of a US person".





You are a nonresident alien - according to your information - that authorization is for US citizens and for resident aliens - and signing that statement would be incorrect representation of facts.
You are NOT an US person.
I do not see the forms and do not see all possible option - thus may not advise.
Ask Your Own Tax Question
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,692
30,692 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Taxmanrog: Must a foreign individual owned single-member LLC
Customer Must a foreign individual owned single-member LLC (formed several years ago before 2017) file Form 5472 under the new tax law effective 1/1/2017?… read more
taxmanrog
taxmanrog
Master\u0027s Degree
776 satisfied customers
What are the forms for reporting Rental Income to the IRS on
What are the forms for reporting Rental Income to the IRS on foreign properties - we collect each month? Is this filed separately from our personal returns?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Changing being taxed as an LLC sole proprietor to an LLC
changing being taxed as an LLC sole proprietor to an LLC taxed as an S-corp, do they need to file Form 8832 or Form 2553 or both?If both, in what order?THANKS… read more
abci168
abci168
Principal
27 satisfied customers
Executor signed multiple corporate tax returns as deceased.
executor signed multiple corporate tax returns as deceased. is this legal if he also has power of attorney? there is a will that hasn't been probated in almost 3 years. … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis) - I would like to pay my son to help me with the business. The LLC has no employees by design so my son (under 18) would be an ou… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Does the reduction in the Corporate tax return from 35% to
Does the reduction in the Corporate tax return from 35% to 21% apply to Professional Corporation's (i.e. - a dental practice)?… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
64 satisfied customers
With the new tax laws, if I'm a sole proprietor, would it
With the new tax laws, if I'm a sole proprietor, would it make sense for me to become an LLC? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Lev, I am doing a final corporate tax return for a C
Good evening Lev, I am doing a final corporate tax return for a C corporation and the business had a carryover NOL from prior years. This year was a final year and short year for the 100 percent share… read more
Lev
Lev
Tax Advisor
30,692 satisfied customers
A law firm (which is a Schedule C filer) has gross income of
A law firm (which is a Schedule C filer) has gross income of 1,000,000 & Net Income 0f 280,000. In the tax reform just passed, there is a 20% deduction for law firms that have income less than 315,000… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Penalty for late filing of partnership LLC tax return, not
Penalty for late filing of partnership LLC tax return, not eligible for Rev Proc 84-35 relief because one of the partners is a foriegner… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis). I need to know if I can deduct the finance expense tied to a line of credit for my LLC from income. I generally understand that … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
If you are a sole proprietor llc and contributing to a SEP
If you are a sole proprietor llc and contributing to a SEP should it be contributed from a personal account or business account? I would think personal since on your tax return it is deducted on the 1… read more
abci168
abci168
Principal
27 satisfied customers
Is income from an LLC passed through to personal tax return
Is income from an LLC passed through to personal tax return considered earned income, enabling me to contribute to a traditional IRA?… read more
abci168
abci168
Principal
27 satisfied customers
A foreign individual is a member of a US LLC. Are there any
A foreign individual is a member of a US LLC. Are there any extra requirements for filing when it comes to the partnership return?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
Does a non-resident alien need to file a tax return on
Does a non-resident alien need to file a tax return on interest income received from a US business loan?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can my LLC with US and Foreign members be a shareholder in
Can my LLC with US and Foreign members be a shareholder in an S Corporation? The K-1 would go to the LLC.… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
Lev
Lev
Tax Advisor
30,692 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x