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LLC Tax Returns
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Forming an LLC in the United States for a French resident is very advantageous from a tax point of view. Nevertheless, the income generated by the LLC must be declared at the risk of being requalified by the tax authorities.
Our formal experts are committed to giving you all the keys to understanding the tax system that applies to you according to your activity, as well as to accompany you, if necessary, in your LLC USA declaration.
The fact that you are a French or foreign tax resident (non-resident of the United States) does not exempt you from making a declaration to the American tax authorities. These declarations are made by means of various tax forms that must be filled out and submitted to the IRS (US tax authorities). Moreover, the profits made by the LLC must also be declared in France (or in your country of tax residence).
The U.S. LLC is a semi-transparent entity for tax purposes, meaning that the partners are personally liable for the tax on the profits of the company, corresponding to the share held by each in the capital of the LLC.
Please note that although the taxpayer is not liable for U.S. tax (in the case of a non-ETBUS LLC), this does not prevent him from having to declare his LLC income as a non-resident.
In practice, the income of companies owned by non-U.S. residents (called NRAs or "nonresident aliens") is subject to a special tax regime. Specifically, income earned by an LLC owned by a non-resident will only be subject to U.S. tax if the company is considered ETBUS ("Engaged in a Trade or a Business in the United States"). And to be considered as such, the LLC must have a "dependant agent" in the United States; a notion we explained in the following article (click here) .
A tax treaty was established between France and the United States in 1994, the main purpose of which is to avoid double taxation for taxpayers. However, the elimination of double taxation does not mean that taxpayers do not have to file their income tax returns in both countries.
Regarding single shareholder LLCs, for the treatment of income earned, a distinction must be made depending on whether the LLC is ETBUS or not. This status has serious consequences for the US taxes that the LLC holder is liable for. Indeed, if the LLC is considered to be ETBUS, this can, in principle, subject the taxpayer to US tax. The same rules apply to the income earned by a multi-partner LLC, with a distinction being made as to whether or not ETBUS status applies.
Expert LLC USA's specialists will help you determine which regime is applicable to you and will accompany you to file your LLC USA tax return as a non-resident.
When income is earned through an LLC, it must be reported to the IRS, which is the U.S. tax authority, even if the LLC is not liable for U.S. tax.
You must therefore fill out different forms (Form 5472, Form 1120, Form 1040NR, Form 1065, Form K-1). Therefore, to declare your income in France and in the United States, it is advisable to be accompanied by a tax preparer, since in case of omission or error in a U.S. tax form, a penalty of 25,000 dollars could be imposed (per year and per form).
As experts in LLC USA companies, we believe that it makes more sense to trust us with your LLC tax returns for several reasons:
Firstly, the assistance of our collaborators allows you to validate your tax operations, since, without you realizing it, your management actions could possibly make you involuntarily switch to the ETBUS status. This would lead to you being liable for U.S. taxes and putting you in a double taxation situation. As a result, you would have new obligations and would have to file new forms, a situation that would not be optimal financially speaking.
Moreover, this procedure is technical and complex, constituting another argument in favor of outsourcing your tax obligations. Indeed, the declarative forms are numerous and an error in the filling of one of the forms could lead to prejudicial consequences for you.
Our specialists are trained in this task and using their services will help you secure your operations and prevent mistakes on your part. The experience of our expert formalists is due to the hundreds of cases they have had to deal with, making them unquestionable on the subject. Their assistance would save you time on your tax returns as a non-resident.
In case of omission in your declarations, the penalty will be heavier than in case of inaccuracy of the information, so the American Tax Administration is sometimes more lenient towards someone who made a mistake in his LLC USA declaration. On the contrary, voluntary fraud when a taxpayer forgets to declare his LLC income or delays to do so, will be sanctioned in a very severe way. Therefore, in order to avoid these damaging situations, our formalists are committed to reminding you to file your LLC income as the deadline approaches.
Our specialists will also help you identify deductible expenses in order to reduce the amount of your taxes. Indeed, their solid experience on the matter will allow you to identify a deductible expense from one that is not deductible with the French tax authorities.
Finally, in addition to their experience and mastery of formalities, their assistance is a real asset in setting up schemes that will allow you to significantly reduce the amount of your LLC USA taxes as a non-resident. Contact our specialists for free.
