Legal, Tax, and Accounting October 27, 2020

Yet another LLC post. Dont run away.

Vitukov

OK, I know these kind of posts are a dime a dozen here. But I did part of my homework and I am bringing specific numbers, I also aware that the advice received here is just informational so I am OK with that. So let's start:

Me: From a LATAM country, country is in shambles so opening a local company is a big no-no because among other things I cannot receive payments in foreign currency.

Option: An US LLC.

Why?: Large, "stable" system, I can get access to big payments providers like Stripe , limited liability, I can get an US business account, and this will simplify my business.

Cost: Original incorporation, including agent fee+bank account (Mercury)+state fee: 350 USD, this is assuming Delaware or Wyoming.(There are several companies providing this service, Stripe Atlas, Blook.io, etc)

Expected services/goods to be sold: Web development services, ebooks, saas subscription services, the usual stuff. All provided from outside of the US to worldwide customers.

So let's say I incorporate in Jan 21. And projected incomes are as follows:

Year 1: 5k-10k USD

Year 2: 50k-100k USD

Now as a sole owner foreign resident alien, my LLC would be treated as a "disregarded entity" by the IRS, that means I will not pay US taxes since none of my income was GENERATED in the US. My home country tax situation will be managed by my local accountant.

My questions are:

  1. Am I correct on my assumptions regarding the US tax situation? Does anyone have experience with this?

  2. How much would I pay after year 1 and year 2 to renew my company, file a declaration, etc, based on that supposed income? I am assuming since I am not paying US taxes, the rate will be flat, consisting on the agent fee, state fee, accountant fee. Is this correct? How much would it be? The same 350 as when it was incorporated?

Thanks

  1. 2

    I am about to start a Wyoming LLC with firstbase.io, so I had one hour conversation with a US tax lawyer about this. I am based in Europe and have the same payment headaches like you. From the conversation with the lawyer:

    1. You are right about the US tax situation. The US LLC is a pass-through entity, which means that the company doesn't pay taxes, but it passes the taxes obligation to the owner. If your LLC is a disregarded entity, then you don't pay taxes in the US (although you need to file some forms online every year). You'll pay taxes only as a natural person in your home country, but only for the money you'll get as a payment from your company for your own services (the lawyer told me to pay myself for management services at any time I want any sum I want). If you don't pay yourself, the money that stay in the LLC (or you reinvest somewhere else) should not be taxed in your country (I believe, check it out for sure).
      However, to be treated as a disregarded entity and avoid paying taxes in the US, all of the following conditions have to be met:
    • you must be the sole owner of the LLC
    • you must not hire employees in the US (freelancers/independent contractors are allowed)
    • You must not spend more than 30 days in the US per year (you can spend more than 30 days, but it will require lots of paperwork)
    • you must not have physical business location in the US (such as offices, warehouses, etc).
    1. For Wyoming LLC, you'll pay only the state fee of around $100. As foreigner, you'll need to pay registered agent fee and a fee for virtual mailing address. That's all.
      For Delaware, you'll also need to pay around $300-400 franchise tax. That's about it.
      You'll also need to keep accounting records. Wave Accounting from waveapps.com is free to use.

    The lawyer and firstbase.io advised me to start a Wyoming LLC as an independent contractor/maker, because it is cheaper.

    1. 1

      @petartod Why Wyoming instead of Delaware? Any significant advantages or just that franchise tax?

      1. 2

        In Delaware, you need to pay around $300-400 franchise tax. In Wyoming, you don't pay this tax. No other significant differences.

    2. 1

      Thanks so much, this a perfect answer an in line with my expectations. Very useful. A somewhat related question, maybe you know it or other person can chime in. I have a non-business US bank account, do you know if it is possible to receive Stripe payments there as a non-resident foreigner? That would be ideal to just start.

      1. 1

        That's a question for your US bank and for Stripe. I don't have the answer.

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