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Wallstreet Esq.
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I am licensing the German distribution rights to a motion

Customer Question

I am licensing the German distribution rights to a motion picture I own through a single partner LLC.
I need to send necessary IRS documents to licensee: certification and double taxation.
I have these IRS documents for a previous license that are dated in 2002. However, at that time my company was a corporation. In 2012 I changed it to an LLC with the exact same name.
Must I get new certifications from IRS? Company location has not been changed.
Submitted: 10 months ago.
Category: Tax
Expert:  emc011075 replied 10 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Single member LLC doesn't need certification from the IRS. A single member LLC (without corporate election) is disregarded entity, meaning the owner and the LLC is the same taxpayer, the same entity for tax purposes.

What you must do, however is to correctly file your final 1120 (corporate tax return) to notify the IRS that the corporation ended and is not operating as corporation anymore. You will also need a new EIN number for your LLC.

Expert:  emc011075 replied 10 months ago.

Only corporations are affected by double taxation. It because the profits are taxed on corporate return and then again as dividends on shareholders' tax return.

Profit from a single member LLC is only taxed on the owner's individual tax return. The profit is not subject to corporate or business tax.

Customer: replied 10 months ago.
What about the double taxation issue? In 2002 I also had to send an IRS letter that said in part, 'We certified your request for relief from double-taxation.' I presume this enables the licensee to send the gross proceeds without deducting German taxes?
Expert:  emc011075 replied 10 months ago.

'We certified your request for relief from double-taxation' only means that the IRS received the request. It doesn't mean that the IRS is telling German authorities not to deduct any taxes. The IRS does not have such power.

According to US-German tax treaty:

"The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the business profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment."

" For the purposes of this Convention the term “business profits” includes income derived from the rental of tangible personal property and the rental or licensing of cinematographic films or works on film, tape, or other means of reproduction for use in radio or television broadcasting. "

It means that the profit is only taxed in the state/country it was generated. If you are US citizen/resident the profit will be taxed in country of your resident.