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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29654
Experience:  Taxes, Immigration, Labor Relations
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I am exploring how to set up my legal entity in USA. JA: The

Customer Question

I am exploring how to set up my legal entity in USA.
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: The purpose is- Provide a consultancy services and received origination fee in the entity. This service I would like to do with my friend who is not a US citizen, he will have 50% stake in any fees we earn. My question - what is the best entity - LLC or LP I should create. I understand the entity will have to pay the taxes but when we distribute after tax proceeds of the entity, can I transfer 50% stake to my non US friend?
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Customer: I would do pay you but have I provided my enough information?
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Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
My understanding is that you are an US person - correct?In this case - you may simply have a single member LLC - and hire your friend - who is not US citizen and nonresident alien as a contractor to perform services for that LLC.I assume that the LLC will not have any assets and you do not plan to keep the money in that business entity.Will that work for you?
Expert:  Lev replied 1 year ago.
A Limited Liability Company (LLC) is a business structure allowed by state statute.Each state has its own business law - and Delaware just one option while that is a very popular option.Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC owner s tax return (disregarded entity).So - if that is a single member LLC - all income and deductions must be reported on your individual tax return.However - the LLC with several members is classified as a partnership.That is an US partnership - and because of that - that is an US taxable entity.The partnership files its own tax return - form 1065 - but do not pay income tax - instead all taxable income is passed to partners. That is regardless if partners are US persons or nonresident aliens.Because that is US partnership - all its worldwide income is taxable for that partnership - and as such it is passed as taxable income to partners.In additional - for partners who are nonresident aliens - withholding is required. The LLC must pay 39.6% withholding because that LLC is classified as an US partnership.Questions?