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In order to take advantage of the benefits offered by the LLC, there are some things you need to consider before creating it. The creation, indeed, requires increased knowledge on the subject.
The Limited Liability Company (LLC) characterizes a flexible business form that merges elements of partnership and corporate structures. This legal entity has its own advantages and certain characteristics, such as:
- The liability of the partners is limited to the amount of their contributions;
- The distribution of profits that is constantly taking place. However, this one does not escape certain conditions which will be specified in the legal documents;
- The administrations have a privileged fiscal apprehension;
- There are many opportunities for tax deductions;
- Accounting is not mandatory.
If you want to take advantage of these benefits, there are a few things you should consider before creating your legal entity. It is important to note that the creation of an LLC requires specialized knowledge. Therefore, we advise you to call upon a tax specialist who will be able to accompany you throughout the life of your American LLC and will avoid you to make possible errors. An oversight or a clumsiness during the creation of your LLC can have heavy consequences such as the disqualification of your entity or the adjustment.
If you have any questions, the experts at ExpertLLCUSA.com are at your disposal to help you with your project and answer your needs.
In the United States, the income of businesses owned by non-resident aliens receives special tax treatment. Non-resident aliens are non-resident aliens, more commonly known as "NRAs".
This income will only be subject to U.S. tax if the entrepreneur is qualified as an ETBUS, i.e. "engaged in a trade or business in the United States".
In order to have this status, the company must have a "dependant agent" in the United States. This is a person who performs tasks that are critical to the continuation of your business.
According to the U.S. tax authorities, a limited liability company incorporated in the U.S. by a single-member LLC is deemed not to exist for U.S. tax purposes. Therefore, the LLC is considered a "disregarded entity".
In contrast, the IRS recognizes multi-partner LLCs as partnerships for tax purposes. Nevertheless, if your LLC is characterized as an ETBUS, you will, by operation of law, be subject to U.S. tax regardless of the purpose of your corporation.
It is advisable to consult a tax specialist to find out what kind of situation you are in. This will prevent you from making mistakes or omissions when creating your entity, and you can avoid a $25,000 fine.
In most cases, the U.S. LLC will not be liable for corporate income tax, as it will be considered by the tax authorities as a partnership. Thus, the profits earned by the U.S. entity will be taxed directly to the partners.
The advantage of the LLC is its flexibility in its operation. Indeed, the partners can freely dispose of the realized profit and save the corporate tax. Thus, the income received passes through the company and the individual is taxed at the income tax of his country of residence.
In order to optimize your taxes, it is wise to become a tax resident in a country with a low income tax. For example, it is interesting to be a tax resident in Malta, Panama, Andorra or Mauritius. One of the advantages that these countries offer is the absence of taxes on income from abroad.
The ExpertLLCUSA.com team is at your disposal to provide you with all the information necessary for the success of your project. We will be able to help you to determine if a particular tax treatment can be applied to your company in the United States, and this, by determining if your activity is likely or not to be requalified ETBUS by the American administration.
Have a question? Make a free appointment with one of our specialists. He will answer all your questions.
