What company structure to use

[Topcat]

The tax (or no tax) situation when you sell to US based customers, even without any US citizenship and without physical presence in the US, really isn't clear cut!

From the IRS website: Effectively Connected Income (ECI) | Internal Revenue Service

• If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income.

To me it looks like it could be interpreted that a foreign owned US LLC is supposed to pay US taxes. Man it's so complex. There's no perfect setup I'm sure of that.

I'm also concerned that wherever I'm asked for proof of residence somewhere (be that by the IRS or Stripe or a bank), the only place I can "prove" residence is in the UK using a UK bank statement, even though I don't live in the UK and am long established as non resident non dom there. If I give my parents UK address as my place of residence when asked about that during application for US LLC EIN, or by Stripe or by a bank, if they then inform HMRC that I told them I'm UK resident...potentially that opens a completely new can of worms, right?

 

[Cloudbanck]

The tax (or no tax) situation when you sell to US based customers, even without any US citizenship and without physical presence in the US, really isn't clear cut!

From the IRS website: Effectively Connected Income (ECI) | Internal Revenue Service

• If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income.

To me it looks like it could be interpreted that a foreign owned US LLC is supposed to pay US taxes. Man it's so complex. There's no perfect setup I'm sure of that.

It says own and operate though, and you dont operate it in the US. But yeah, it is a bit murky, but the standard interpretation of the (murky) rules by the IRS and US courts is that as long as you dont have an office or dependent agent in the US, and dont spend too much time in the US, even if you sell to US clients, there is no US tax.

Startfleet has the best walk through of this I think, see US LLC for Non-US Residents (Foreigners) 2023 Guide , and espcially the quote from the Treasury Dept. Office of Tax Policy

I'm also concerned that wherever I'm asked for proof of residence somewhere (be that by the IRS or Stripe or a bank), the only place I can "prove" residence is in the UK using a UK bank statement, even though I don't live in the UK and am long established as non resident non dom there. If I give my parents UK address as my place of residence when asked about that during application for US LLC EIN, or by Stripe or by a bank, if they then inform HMRC that I told them I'm UK resident...potentially that opens a completely new can of worms, right?

Yeah, you do not want to give your UK address. Just rent a place in a third world country and get a bill in your name, to have something. Or get residency in Paraguay or somewhere where it is easy.

 

[Sols]

To me it looks like it could be interpreted that a foreign owned US LLC is supposed to pay US taxes. Man it's so complex. There's no perfect setup I'm sure of that.

It's a mess. AFAIK, IRS wants to simplify the US tax code but companies that provide tax software and tax advisory lobby against it.

I'm also concerned that wherever I'm asked for proof of residence somewhere (be that by the IRS or Stripe or a bank), the only place I can "prove" residence is in the UK using a UK bank statement, even though I don't live in the UK and am long established as non resident non dom there. If I give my parents UK address as my place of residence when asked about that during application for US LLC EIN, or by Stripe or by a bank, if they then inform HMRC that I told them I'm UK resident...potentially that opens a completely new can of worms, right?

Yes, being a permanent traveller without a good place to call home (and be tax resident in) is some late 1990s hocus pocus that doesn't work anymore if you want to scale up a business. People do it, but they limit themselves.

Pick a place whose tax laws (and life in general) are in line with your values, and make it your bonafide primary home and place of economic interest. You can still travel around a lot, but having a good place to call home will make running a business easier.

 

[Topcat]

Just rent a place in a third world country and get a bill in your name, to have something.

Doing just that right now but the monthly bill is in a foreign language and doesn't even say my name lol. This is easily fixed though

Pick a place whose tax laws (and life in general) are in line with your values, and make it your bonafide primary home and place of economic interest.

I've spent plenty of time in Thailand in recent years. Getting tax residence in Thailand however is much easier said than done unless you want to pay a boat load of tax. Finding this place you suggest, where the taxes are low or non-existent and the lifestyle suits you...easier said than done.

However, basic accounting for an LLC is very easy if it's just a single-member LLC with simple inflow and outflow of funds.

Any idea if wave or quickbooks can be automated for accounting with Stripe and Paypal? So when a customer makes a purchase, the accounting for that purchase is done automatically by connecting the payment gateways up to the accounting software.

Not done this before lol

Looks like quickbooks is now a payment gateway in its own right, potentially circumventing the need for Stripe. Wow, all new to me lol

A little research and I can see Wave accounting software can be connected up with Stripe, Paypal, bank accounts etc using Zapier, so it looks like accounting can mostly be automated.

 

[Sols]

Any idea if wave or quickbooks can be automated for accounting with Stripe and Paypal? So when a customer makes a purchase, the accounting for that purchase is done automatically by connecting the payment gateways up to the accounting software.

Some have integrations to PSPs and banks to more or less automate the whole flow. Try them out and see what works for you. The market is full of apps and services like Wave and Quickbooks. Xero is another big one with a lot of integrations.

 

[Topcat]

Thank you!!

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Alright, I am settled on a solution. Wyoming LLC formed via wyomingllcattorney.com - they are a little more expensive than some of the other agents, but their email support is better and reviews are better, so I guess you get what you pay for.

Bank account with Mercury

Payment gateway with Stripe, and paypal as a side option for customers if they want to use it

Accounting with quickbooks, wave or xero and I'll file the annual federal return and anything else that needs filing each year, myself.

Only thing I'm undecided on is whether to bother charging UK and EU customers VAT. Given my relatively low sales volume, I'm angling towards not bothering, as I am a very small fish, you could say, so I don't think any trouble would come of it. Very unlikely.

Does anyone see any major holes in or see any major issues with the above approach?

 

[jafo]

I've spent plenty of time in Thailand in recent years. Getting tax residence in Thailand however is much easier said than done unless you want to pay a boat load of tax. Finding this place you suggest, where the taxes are low or non-existent and the lifestyle suits you...easier said than done.

My two cents that I acquired with boots-on-the-ground-in-the-trenches-on-the-battlefield-scarred experience:

I was like you since 1997 for more than 2 decades. I travel at least 11 months out of the year. Most times, I won't return to the same place for three years or more. Read my bio.

The KISS OF DEATH wrapped & repackaged as "for my own good and to conform with 'laws'":
I made the HORRIBLE mistake to entertain private bankers' cries to consult with attorneys, accountants, and "consultants".
I became the cash cow for these state-sponsored vultures albeit during a very short time. I "divorced" all those private bankers, attorneys, accountants, and consultants and blocked them all!

Anything or anyone that decreases your wealth is destructive and is your mortal enemy!

Anything or anyone that increases your wealth is constructive and must be cherished & loved.

There is a saying in football (CR7 & Messi football): If you are winning, don't change anything related to the team.

I'm going to stop here. Some things in life are obvious!

Of course, Your Mileage May Vary. (YMMV)

For me with currently low sales volume under $10k USD per month, I think the chances of the IRS targeting me, with that low volume, and as a non-US person who never goes there (but does sell to US residents), I think those chances are so remote that I won't be losing any sleep over this while running a US LLC. If anyone agrees with that position or disagrees, would be keen to know.

I know several people with US setups doing millions of dollars per month since the early 2000s and as long as you don't become an "Andrew Tate", and you stay under the radar, nobody cares.

Good luck!

 

[zzzzzz]

My parents address in the UK where I grew up. I’m long since established as non resident non domicile in the UK with HMRC, so I’ve never seen it being an issue to use that address. If you know of a reason it is an issue though, of course I’d be interested to know.

Is this UK specific thing - you can still have residential ties as long as you don't spend time in UK? In high tax EU countries you would be still considered tax resident (no permanent home abroad, using citizenship country address and tax residency, not cutting ties - residential ties still in country of citizenship...etc.).

I've spent plenty of time in Thailand in recent years. Getting tax residence in Thailand however is much easier said than done unless you want to pay a boat load of tax. Finding this place you suggest, where the taxes are low or non-existent and the lifestyle suits you...easier said than done.

I'm also thinking about Thailand tax residency. What problems have you encountered? They have a remittance rule for foreign income (if brought in 1-year after earning it, it's 0% tax), works OK with capital gains and dividends from what I have read.

 

[Topcat]

Some have integrations to PSPs and banks to more or less automate the whole flow. Try them out and see what works for you. The market is full of apps and services like Wave and Quickbooks. Xero is another big one with a lot of integrations.

Thank you for your help.

I am just now setting up my Wyoming LLC. However the agent is offering me the chance to set up an "LLC" or a "Close LLC". Both are same price.

Agent claims on their website: "If you are the only owner, or this is a family business, then we generally recommend a Close LLC since they have reduced maintenance requirements."

I am the sole owner. Non-US based, no presence in the US, no employees there etc. Even though they're recommending setting up a Close LLC if I am the only owner (which I am), I guess it's still better to just form the standard normal LLC, and not this "Close LLC"?

I did some research on what a Close LLC is and it seems they are difficult to dissolve should I wish to do that one day. So my instinct is to just form the standard LLC but if anyone has a view on this please let me know.

Many thanks

 

[zzzzzz]

@Topcat how much is going to be your total cost of setting up US LLC and then annually with filing form 5472?

 

[Topcat]

@Topcat how much is going to be your total cost of setting up US LLC and then annually with filing form 5472?

Should be $200

 

[Ancova]

I use a great agent for US LLC Formation for our clients who want to combine their UAE Business (which we opened) with a US LLC. They are called StartGlobal and the cost is around 150 USD.

In one month everything is done, including corporate bank account.