Taxes are one of the biggest questions people have when forming a business. It can be very confusing at first, but it is actually quite simple.
Foreign owners of Wyoming or Delaware will only pay taxes if one of the following conditions applies:
Do any of these statements apply to you? If not, you will most likely not pay income tax in the US if you form a US LLC.
Notice that none of the statements above mention having customers inside the US. Where you provide the services from is the important thing, not where you provide them to.
Even if you do not owe taxes, you will need to make a simple tax declaration to the IRS once per year by April 15th. You can read more about the procedure below!
IRS Form 5472
Foreign owned single member LLCs have to file Form 5472 to the IRS once per year. Originally Form 5472 was meant only for United States corporations, however, as of 2017, the IRS adjusted the form to make it usable for LLCs. You also have to attach a pro-forma 1120, which is a cover page to your 5472 form.
Your LLC MUST have an EIN to be able to file both these forms.
To fill out this form, you’ll need to provide the following information:
To get this form filed correctly, we recommend Bookmate. Bookmate is an affordable accounting firm that specializes in filing non-resident tax returns. The average return costs $350-$400 and needs to be filed once per year.
Why form in Wyoming?
Wyoming is the most popular and least expensive state to form in. Wyoming is also very convenient for business owners and has strong privacy protections.
I am a single owner of a U.S. LLC, a non-U.S. person and my company provides remote services. Do I need to file a tax return and pay income tax?
Because the LLC is providing services remotely, there's no income connected to the US as the owner of the LLC is not physically present in the US. This means that the LLC would owe no US tax, except for the annual registration fee in the state of LLC registration, and there is no requirement to file income tax either. But keep in mind, though you might not be producing your income in the U.S., you still could be liable to income tax on this income in your home country.
What if I import and sell goods in the U.S.? Does anything change?
If you are selling goods in the US, you are required to report your business’s income to the IRS. If you are a non-resident, you report your US income on the 1040NR form which is then sent to the IRS. This form can be difficult to understand so we recommend hiring a CPA to manage your tax issues.
What if the LLC has multiple owners?
Any LLC that has more than one owner (partnership or S or C Corporation), must file a federal tax return, even if it has zero income.
What if my company is a corporation, not an LLC?
A corporation is much different than an LLC and it files its tax return and pays its tax liability because it is a separate tax entity from its owners. One cannot freely transfer money between the owners or shareholders and the corporation. The corporation can pay the owners for expenses they pay on behalf of the business, and the corporation can pay owners for services they provide to the corporation. The only way for the shareholders to gain funds from the business is if the corporation pays them dividends.
How and when do I file a tax return?
By hiring a knowledgeable U.S. CPA to file your tax return. The deadline in most cases is April 15. For multi-member LLCs it is March 15th. You can file an extension by that date, and the new extended due date becomes September 15 for companies and October 15 for individuals.
What about state income tax?
This tax is only applicable to C Corporations located physically with a state, and not LLCs. It applies to income earned by the corporation in the state, unlike federal income that applies to all U.S. sourced income.
Though LLCs don’t pay income tax, it is always smart to check with your CPA if there are any filing requirements for the LLC in the state of registration.
If you'd like to learn more, you can book a call with Bookmate!
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