Adding a US member to a non-resident single-member Wyoming LLC (solely) for banking purposes

[Lekstadt]

Hello everyone,

As everybody knows, opening a fintech/neo-bank business account for a non-resident alien beneficial owner is becoming increasingly difficult and opening a physical bank account is off the table at the moment due to personal circumstances.

So to help out with this situation, we were wondering if it's possible/legal to add a US citizen as a member to tackle this inconvenience. I know this can be done by amending the operating agreement and giving them 25% ownership. However, I am more concerned over the legality of the matter. Could doing this with the sole probable purpose of accessing banking services be problematic? It's supposed to be perfectly legal to add someone to your LLC for this purpose as far as I am aware.

There are other aspects to take into account, such as profit allocation. I've researched that it could be an issue for the IRS if the profit is allocated to 0% for the new member. Most of these banks demand a 25% ownership, 0.01% won't cut it. It almost seems like they have a problem with the arrangement being solely for the banking benefits even though it's legal.

If choosing this path, the articles of organization have to be amended, incurring the $100 filing fee for the Wyoming Secretary of State. Does this have to be done right away? Or can it wait until the annual report is due next year.

If anybody knows, another important aspect is what would happen should the new member leave his membership position before the year ends. How does that impact the annual report and would the articles of organization need to be modified at all in such case? What would be the fate of the business bank account without the US citizen member.

To provide some context, this LLC in particular, will have (mostly if not exclusively) online US-based clients/partners and its own US-domain website. However, no effectively connected income due to the online nature of the income generation and no physical location either.

What do you guys think? Is this option viable or too troublesome?

To conclude, I think it would be very beneficial for the community, specially for non-resident owners, to know the answers to some of these lesser-known intricacies. Any guidance is welcome, thank you for your help!

 

[daniels27]

Hello everyone,

As everybody knows, opening a fintech/neo-bank business account for a non-resident alien beneficial owner is becoming increasingly difficult and opening a physical bank account is off the table at the moment due to personal circumstances.

So to help out with this situation, we were wondering if it's possible/legal to add a US citizen as a member to tackle this inconvenience. I know this can be done by amending the operating agreement and giving them 25% ownership. However, I am more concerned over the legality of the matter. Could doing this with the sole probable purpose of accessing banking services be problematic? It's supposed to be perfectly legal to add someone to your LLC for this purpose as far as I am aware.

There are other aspects to take into account, such as profit allocation. I've researched that it could be an issue for the IRS if the profit is allocated to 0% for the new member. Most of these banks demand a 25% ownership, 0.01% won't cut it. It almost seems like they have a problem with the arrangement being solely for the banking benefits even though it's legal.

If choosing this path, the articles of organization have to be amended, incurring the $100 filing fee for the Wyoming Secretary of State. Does this have to be done right away? Or can it wait until the annual report is due next year.

If anybody knows, another important aspect is what would happen should the new member leave his membership position before the year ends. How does that impact the annual report and would the articles of organization need to be modified at all in such case? What would be the fate of the business bank account without the US citizen member.

To provide some context, this LLC in particular, will have (mostly if not exclusively) online US-based clients/partners and its own US-domain website. However, no effectively connected income due to the online nature of the income generation and no physical location either.

What do you guys think? Is this option viable or too troublesome?

To conclude, I think it would be very beneficial for the community, specially for non-resident owners, to know the answers to some of these lesser-known intricacies. Any guidance is welcome, thank you for your help!

The problem is that once you have a resident director, the income would be subject to taxes as the income is effectively connected to a US trade or business. That's why nobody is doing this.

You could in theory add anybody not resident who does have the ability to travel to the US and open the bank account for you in person.

For the LLC only the directors are communicated to Wyoming, while the beneficial owners are to be communicated to the government. You probably could get along appointing a director for the bank account. (If they want him to be UBO as well, you can add him at 50% and remove once the account is open.)

Just remember that you must trust him well. Also, his residency may make your LLC subject to taxation in his jurisdiction (better take somebody in the same jurisdiction as you). Furthermore, note that the bank may not want to add you as additional signer unless you show up in person too.

 

[CoinMaster]

You can find some good thought about how to find directors that don't care about to be taxed inside the mentor group gold. So I don't need to say more.

 

[12345]

maybe you can appoint the US citizen as a director instead of a member, open the account and then remove him. I don't know if that's possible

 

[daniels27]

You can find some good thought about how to find directors that don't care about to be taxed inside the mentor group gold. So I don't need to say more.

If you appoint a Swiss resident homeless guy as director, of course he will not be afraid of being taxed. They won't tax him, they will tax you!

maybe you can appoint the US citizen as a director instead of a member, open the account and then remove him. I don't know if that's possible

Yes, because the director's location is where you will be taxed. If your US citizen US living in the same country as you, you are fine. If you mean a US resident, you will be subject to US taxes.

Again. Under no circumstances do you want a US resident as director!

 

[Lekstadt]

The potential director/member is an American go-rogue living illegally in my country, so in theory, still a resident of the states, but I think he could potentially meet the criteria for bona fide residence. I don't want him to get in trouble though. These banks care about having a US residential address more than about the SSN or citizenship status in my opinion. So if we tell the bank his parents address but tell the IRS he's here, we're absolutely in trouble. I was also unaware of the resident director connecting all the taxation to the US, is that so even with a online income LLC? Would I face the federal taxes for the whole income? Would it be the case if he was just a 25% UBO and not the director?

 

[jorge]

The potential director/member is an American go-rogue living illegally in my country, so in theory, still a resident of the states, but I think he could potentially meet the criteria for bona fide residence.

It's become a beautiful company structure with an illegal person as owner of the company. I would look into mentor group and find something totally different.

 

[daniels27]

The potential director/member is an American go-rogue living illegally in my country, so in theory, still a resident of the states, but I think he could potentially meet the criteria for bona fide residence. I don't want him to get in trouble though. These banks care about having a US residential address more than about the SSN or citizenship status in my opinion. So if we tell the bank his parents address but tell the IRS he's here, we're absolutely in trouble. I was also unaware of the resident director connecting all the taxation to the US, is that so even with a online income LLC? Would I face the federal taxes for the whole income? Would it be the case if he was just a 25% UBO and not the director?

Wtf rtfm

Honestly. What is this?

A company managed in the US is subject to US taxation.

If the banks only care about the address, you can use his mother's address with your name.

If he is not in the US, he is not.. The US does not care where he is and how illegally.

 

[jorge]

The US does not care where he is and how illegally.

other instances may be interested to know

 

[clemens]

If you appoint a Swiss resident homeless guy as director, of course he will not be afraid of being taxed. They won't tax him, they will tax you!

are there homeless guys in Switzerland? I thought they were all rich in Switzerland?

 

[Lekstadt]

Wtf rtfm

Honestly. What is this?

A company managed in the US is subject to US taxation.

If the banks only care about the address, you can use his mother's address with your name.

If he is not in the US, he is not.. The US does not care where he is and how illegally.

Does having a US member automatically make the LLC managed from the US? Even as a member-managed LLC, I'd still be the main beneficial owner and CEO, a non-resident alien. As for using her address assuming she was down for it, using my name just wouldn't work. The banks don't just accept a US residential address without providing bank statements, bills, or any other evidence document.

As for the potential candidate, he operates as if he was still in the US. He's been able to open personal bank accounts online several times, uses wi-fi calling with his usual US number and so on, plays lottery and even on some casinos and uses certain government services. He is in a western European country and the police really doesn't care that he is here, our countries don't really communicate.

I really thought the worst thing that could happen is that the IRS would audit us and try to tax him on an attributed percentage of the profits, but me? I am still a NRA and the LLC, a pass-through entity. Having an American member might make it taxable at a federal level, but not if he leaves before the tax year ends? I mean, if I keep adding him and removing him from the operating agreement, what could possibly go wrong?

 

[daniels27]

Does having a US member automatically make the LLC managed from the US? Even as a member-managed LLC, I'd still be the main beneficial owner and CEO, a non-resident alien. As for using her address assuming she was down for it, using my name just wouldn't work. The banks don't just accept a US residential address without providing bank statements, bills, or any other evidence document.

Having a resident director always makes you company a local company and tax payer, unless there are treaty benefits.

If the bank does not accept it, then you open a bank account in your name and change the address to the one of your friend's mother and print out the bank account statement once it is available. Then, you pass the address proof. You can also apply for an ITIN and then open a retail bank account on that address in the US. Or travel there and open an account at Bank of America without ITIN on that address.

As for the potential candidate, he operates as if he was still in the US. He's been able to open personal bank accounts online several times, uses wi-fi calling with his usual US number and so on, plays lottery and even on some casinos and uses certain government services. He is in a western European country and the police really doesn't care that he is here, our countries don't really communicate.

Yes, but the US would know that he is not in the country. Hence, he would not be resident. He is just a travelling nomad.

I really thought the worst thing that could happen is that the IRS would audit us and try to tax him on an attributed percentage of the profits, but me? I am still a NRA and the LLC, a pass-through entity. Having an American member might make it taxable at a federal level, but not if he leaves before the tax year ends? I mean, if I keep adding him and removing him from the operating agreement, what could possibly go wrong?

If he only add him for a short period of time, there won't be many issues.

If you own a company that is managed from the US with US staff, you pay US taxes.

are there homeless guys in Switzerland? I thought they were all rich in Switzerland?

They have been put in hourses by tax payer's money. You can read about them here:
https://www.beobachter.ch/konsum/konsumentenschutz/archive-ag-das-ratsel-von-bassersdorf

 

[Lekstadt]

Having a resident director always makes you company a local company and tax payer, unless there are treaty benefits.

If the bank does not accept it, then you open a bank account in your name and change the address to the one of your friend's mother and print out the bank account statement once it is available. Then, you pass the address proof. You can also apply for an ITIN and then open a retail bank account on that address in the US. Or travel there and open an account at Bank of America without ITIN on that address.


Yes, but the US would know that he is not in the country. Hence, he would not be resident. He is just a travelling nomad.


If he only add him for a short period of time, there won't be many issues.

If you own a company that is managed from the US with US staff, you pay US taxes.


They have been put in hourses by tax payer's money. You can read about them here:
https://www.beobachter.ch/konsum/konsumentenschutz/archive-ag-das-ratsel-von-bassersdorf

My main idea was adding him, filing the BOI, trying to open a few business accounts I am interested in, removing him from the operating agreement as soon as possible and updating the BOI back to single member before generating any income. That way he shouldn't even have to report anything related to the LLC in his personal tax report. The issue with this approach is that keeping such account operational after the US member leaves without notifying the bank (which I am sure they wouldn't be okay with) wouldn't be safe at all. At best, they'd close the account, at worst, they'd consider it a bank fraud. Am I wrong?

I was also wrong about the 25% ownership requirement. These fintech banks want to know about any beneficial owner of 25% or more. So I'd assign him 1% ownership and even allocate him 1% profits. He'd still be able to have him be the main account manager as long as he also reports me. They usually ask for a residential address where the work happens, but it's just for verification purposes.

I have been researching and adding a US member didn't seem to make all of the income effectively connected, specially because his role is absolutely passive. I would make that very clear in the operating agreement, by assigning him the role of a brand representative or ambassador (lmao) without any active function in the company. Yes, his 1% would be ECI, but not my 99%. The IRS couldn't possibly allocate him more profit if his stake in the company is the exact same. It sounds risky, but I think I could pull it off.

Why would the US even care to know where he is? They haven't so far and I don't see what incentive they could have as long as he pays taxes. He wouldn't be the director, but my ambassador, a passive symbolic role in the LLC. And yes, my country of residence has a tax treaty with the US. It's doable.

 

[daniels27]

Yes, but honestly. I personally think it may not be necessary. I would first try with his US address and your name. It costs nothing than some time at no cost. If this does not work, you can still go the hard road of changing the company back and forth.

 

[Why]

Does having a US member automatically make the LLC managed from the US? Even as a member-managed LLC, I'd still be the main beneficial owner and CEO, a non-resident alien. As for using her address assuming she was down for it, using my name just wouldn't work. The banks don't just accept a US residential address without providing bank statements, bills, or any other evidence document.

As for the potential candidate, he operates as if he was still in the US. He's been able to open personal bank accounts online several times, uses wi-fi calling with his usual US number and so on, plays lottery and even on some casinos and uses certain government services. He is in a western European country and the police really doesn't care that he is here, our countries don't really communicate.

I really thought the worst thing that could happen is that the IRS would audit us and try to tax him on an attributed percentage of the profits, but me? I am still a NRA and the LLC, a pass-through entity. Having an American member might make it taxable at a federal level, but not if he leaves before the tax year ends? I mean, if I keep adding him and removing him from the operating agreement, what could possibly go wrong?

Andrew Tate?

 

[Forester]

@Lekstadt,

1) @daniels27 is very right with his explanations.

2) Learn what the concept of ETBUS means (and what implications it has for US taxing: being ETBUS => paying federal taxes).

3) Be advised that Uncle Sam does not care much about Hans Mueller not paying his DE/AT/you-name-it taxes regardless of the amount. But Uncle Sam does really care when any subject (a company or some Joe) owes a couple of bucks to the federal budget and IRS is the last institution you want to play hide and seek with. Hence, this “I have been researching and adding a US member didn't seem to make all of the income effectively connected, specially because his role is absolutely passive. I would make that very clear in the operating agreement, by assigning him the role of a brand representative or ambassador (lmao) without any active function in the company.” I really would not recommend – unless approved by some really knowledgeable person like Stewart Patton (Expert US tax planning & compliance advice - US Tax Services) (or a similar guy).

4) In addition, you really do not need all this to have an access to a reasonable banking. You can find various suitable options for a US LLC in discussions here US neo-banks List [For Non-Residents LLCs], here Mercury, TryNovel, or something else? and especially here I tried opening a US business account in 18 EMIs, here's the result.
In addition: Especially for some use-cases, Bancoli can help as well.
Also look here Mentor Group Gold - AD Thread! - I can help you to open a real US Corporate Bank Account for your US LLC remotely and here USA Expansion Packages (attn to No Travel VIP Chase Bank Account - $2,500)

 

[Lekstadt]

@Lekstadt,

1) @daniels27 is very right with his explanations.

2) Learn what the concept of ETBUS means (and what implications it has for US taxing: being ETBUS => paying federal taxes).

3) Be advised that Uncle Sam does not care much about Hans Mueller not paying his DE/AT/you-name-it taxes regardless of the amount. But Uncle Sam does really care when any subject (a company or some Joe) owes a couple of bucks to the federal budget and IRS is the last institution you want to play hide and seek. Hence, this “I have been researching and adding a US member didn't seem to make all of the income effectively connected, specially because his role is absolutely passive. I would make that very clear in the operating agreement, by assigning him the role of a brand representative or ambassador (lmao) without any active function in the company.” I really would not recommend – unless approved by some really knowledgeable person like Stewart Patton (Expert US tax planning & compliance advice - US Tax Services) (or a similar guy).

4) In addition, you really do not need all this to have an access to a reasonable banking. You can find various suitable options for a US LLC in discussions here US neo-banks List [For Non-Residents LLCs], here Mercury, TryNovel, or something else? and especially here I tried opening a US business account in 18 EMIs, here's the result.
In addition: Especially for some use-cases, Bancoli can help as well.
Also look here Mentor Group Gold - AD Thread! - I can help you to open a real US Corporate Bank Account for your US LLC remotely and here USA Expansion Packages (attn to No Travel VIP Chase Bank Account - $2,500)

Hi Forester, thank you for taking the time to read and respond to this thread. I will absolutely look into the ETBUS concept. When it comes to the LLC, I didn't go into detail earlier because adding a US person as a member was just one of the options I was considering, and no one had asked me what I did in the end.

I had applied to a number of neo-banks including Mercury, and they did not reject the application, so, in the end, there was no need to add a new member at all. However, the US person I mentioned previously is currently listed as the responsible party and third-party designee on the EIN application. This approach allowed us to expedite the process and apply online. Once I receive my ITIN, I plan to file the necessary form to change the responsible party, and as far as I'm aware, I’ll be able to keep the same EIN. This shouldn't be a problem at all, correct?

Regarding adding this person as a member, I never intended to add him as a director or any other managing role. If I were to formalize his involvement, it would be as a financial liaison with 1% ownership and 1% profit allocation, along with his role clearly defined as passive (if not symbolic?) in the operating agreement. I would specify that I would retain the ultimate authority within the company.

I hope this clarify things a bit. I am still learning a lot, as a woman in my twenties, this is my first company.

 

[Forester]

Hi Forester, thank you for taking the time to read and respond to this thread.

You're welcome.

I had applied to a number of neo-banks including Mercury, and they did not reject the application, so, in the end, there was no need to add a new member at all. However, the US person I mentioned previously is currently listed as the responsible party and third-party designee on the EIN application. This approach allowed us to expedite the process and apply online. Once I receive my ITIN, I plan to file the necessary form to change the responsible party, and as far as I'm aware, I’ll be able to keep the same EIN. This shouldn't be a problem at all, correct?

I do not recall exactly at the moment but probably it should not. Just do not overlook that you would have been able to manage it instantly by phone by yourself – check IRS webpages.

Regarding adding this person as a member, I never intended to add him as a director or any other managing role. If I were to formalize his involvement, it would be as a financial liaison with 1% ownership and 1% profit allocation, along with his role clearly defined as passive (if not symbolic?) in the operating agreement. I would specify that I would retain the ultimate authority within the company.

Well, re-read @daniels27 posts once more. The magic you are describing above would not protect your company from becoming ETBUS and paying federal taxes – just one US person exclusively engaged by your company counts, a manager or a sweeper, it does not matter. Nothing more to add.