LLC Questions, then Offshore...

[expat11]

Hi


I am new so please excuse this thread if the question has previously been asked, but...


I need some advice on LLCs before I can proceed to setting up my offshore corp. I have a business here in Spain, operated in Spain, but that is now having to collect money and pay out U.S vendors. Since transferring cash to the US every week is a lot of work at this point, for convenience purposes I would like to get a US business bank account. However, I have been told that I first need to get an LLC and EIN from Nevada or Delaware. No problem, but...


My main question is this: if I am operating and set up in Spain and get an EIN and open a bank account in the US, do I have to pay taxes on those earnings for vendors? It doesn't seem logical to me.


I think the best way to look at my situation is to compare it to EBay. Let's say I have a Spanish EBay. People sell stuff on my site, then I get a cut and send them their cash. If some of those people are in the US, why would I have to pay taxes in the US if I have a foreign company? I have been getting mixed advice on this and would like to hear any suggestions so that I can finally get it sorted and then move on to getting an offshore set up as well.


I appreciate your help!


Expat11

 

[drillbill]

This is more a tax advice like, I would highly recommend to ask your agent in the US who will incorporate the corp. for this question.


The picture I have is that you won't pay any tax on the earnings of the "vendors" - I could be wrong and some will hopefully correct me.


Also a good link I'm using often for related information is Tax Information For Businesses

 

[ebaywins09]

You will never get a US Bank account without a SSN or EIN ! If you find a service offering this be careful I have been burned sooo many times while I never received any bank account

 

[JohnLocke]

It seems to be impossible for any foreigner to open a bank account in the US unless you get it through your existing bank or have someone to underwrite, the last may be of high risk for both parties and not to be recommend.

 

[SysOp]

You need a SSN or EIN in order to open a US Bank account anyone else who try to sell you this services and don't require either the SSN or EIN will try to fool you.

 

[EliasIT]

I asked Bank of America if they were able to open a bank account for foreigners and the answer was negative only if I come in person to the bank or can provide a SSN number it would be possible!

 

[Maydi]

I have the same question, regarding "Fiscally Transparent Entities" (e.g. LLCs).


With patnership tax treatment, the LLC does not exist, only the parent company. If neither the LLC nor the parent company conduct business *operations* in the jurisdiction of the LLC (but may derive income from customers in the jurisidiction of the LLC via foreign Internet-based operations of the parent company), what, if any, income is taxable by the LLC's jurisdiction?


And of course that may vary by jurisdiction.


Perhaps another less ambiguous way to handle this is to *not* elect partnership tax treatment and/or use a corporation instead, and have the subsidiary act in a fiduciary capacity for the parent company, accepting revenue on behalf, and passing that to the parent company as an expense, keeping a small commission for services rendered. Only the commission ought to be taxable locally. But again, does this make the parent company taxable on this revenue that is passed through the subsidiary?


BTW, AFAIK a foreign corporation can acquire an EIN. A foreign individual can walk into a U.S. bank and open a personal bank account without any problem (applying for a TIN at the time); not sure a foreign individual can open a bank account for a foreign corporation in the same way.

 

[Maydi]

Admin answered on another thread: "Depends where the LLC/LLP is resident."


Ok, specifically then:


Scenario 1:


Graphic Design (Seychelles) Limited does graphic design for XYZ (US) Corp. Payments are not taxable by the U.S. because the work is done in the Seychelles. It is not "income effectively connected with a U.S. trade or business".


Scenario 2:


Graphic Design (Seychelles) Limited does graphic design for XYZ (US) Corp. Payment is made to Graphic Design (Delaware) LLC, a wholly-owned LLC created for the sole purpose of opening a U.S. bank account so payments can be accepted via ACH transfer. Graphic Design (Delaware) LLC is not a taxable entity, it is a Flow-Through Entity (Fiscally Transparent Entity). Graphic Design (Seychelles) Limited is taxable by the U.S. IRS only on "income effectively connected with a U.S. trade or business". Is this income now taxable? Graphic design work is still done in the Seychelles.


Scenario 3:


Graphic Design (Seychelles) Limited does graphic design for XYZ (US) Corp. Payment is made to Graphic Design (Delaware) Corporation, a wholly-owned corporation created for the sole purpose of opening a U.S. bank account so payments can be accepted via ACH transfer. Graphic Design (Delaware) Corporation does not elect for pass-thru tax treatment and books the work as both as revenue and an equal expense (work is subcontracted to Graphic Design (Seychelles) Limited), no profit. Graphic Design (Delaware) Corporation is taxable by the U.S. IRS but shows no profit. Graphic Design (Seychelles) Limited is taxable by the U.S. IRS only on "income effectively connected with a U.S. trade or business". Is this income (subcontract) now taxable? Graphic design work is still done in the Seychelles.


Scenario 4-6, same question, change to EU client and UK LLP. Although unfortunately I think accepting payment by the UK LLP will invoke VAT.

 

[JohnLocke]

The problem is that the US (as far as what I have learned) requires any US citizen regardless to where he/she is incorporating the company to report it to the local tax authority and submit a financial report to them as well each year so they may pay tax from the corporate income the offshore company may have in the US! Thats not so in almost any other country, there it is enough that you can prove that the offshore company is managed and controlled abroad to avoid to pay local tax or you can make use of the DTA (Double Tax Treaty) which is some cases can be beneficial as well.