Start an LLC (non-us resident - swedish citizen) - Need advice!

[oskare100]

Hello,
Because of the Swedish laws and tax regulations I need to start a company where I sell most of my items (to avoid a 52 % tax on all income). You don't need to answer all of my questions, I'm really, really greatful for all answers I get.

I'm selling digital items (downloads) at Ebay and about 70 % of my customers are from the US, therefore to start a company in the US seams to be the best option. However, I've a few questions I havn't managed to find answers to.

The best option seams to be to start an LLC in Delaware. I base that on that it seams like you aren't required to be a US citizen or reside in the US to be the sole owner of an LLC there.

According to the companies I've talked to the only thing I'll need to file is a personal tax return for a non resident with U.S. source income to the IRS. That seams to be too simple, aren't you requred to file something about the income for the LLC to the state of Delaware?

It also seams like I must get an ITIN to be able to get an EIN for the LLC and to be able to file the personal tax return for a non resident with U.S. source income to the IRS, is that correct?

Should I use some kind of accounting software like QuickBooks? Or should I use some kind of more personal tax preparation software like Turbo Tax? Or both combined maybe? What kind of bookkeeping am I required to do? For how long am I required to save the records and would I still have to save them if I close down the LLC? What do I need to include in the personal tax return for a non resident with U.S. source income when I have the LLC?

Would I have to pay US income taxes or would it be enough with the swedish income taxes? Am I required to pay any VAT when selling digital items to people in other states on Ebay (it seams like Delaware has no VAT)?

How hard is it to manage to do all this? I mean, do you think I, a person with no knowledge of US LLC's and US tax filing and bookkeeping, will be able to do it? Do you know any good guide on the internet?

Apart from that, according to the companies I've talked to, the only thing I need to do is to make sure that I pay the Franchise Tax on time and that I pay for a Registered Agent. Can you think of anything else? As I understood it I woun't need to pay any annual Income Tax, what do you think?

Is there anything else I should think of that you can think of?

Really thanks in advance,
Best Regards
Oskar R

 

[clueless3]

Geez! Come to the US and incorporate and pay your taxes here!! We have a LOWER tax rate than many countries in Europe!!

Do you have a valid US work visa?

According to the companies I've talked to the only thing I'll need to file is a personal tax return for a non resident with U.S. source income to the IRS. That seams to be too simple, aren't you requred to file something about the income for the LLC to the state of Delaware?

Every year, the LLC needs to file a tax return with the IRS AND with the state of Delaware (8.7% of income generated in Delaware).

It also seams like I must get an ITIN to be able to get an EIN for the LLC and to be able to file the personal tax return for a non resident with U.S. source income to the IRS, is that correct?

That's correct, if you have a valid US work visa.

Should I use some kind of accounting software like QuickBooks? Or should I use some kind of more personal tax preparation software like Turbo Tax? Or both combined maybe?

You need at least Quickbooks. And if you're not familiar with US tax laws, instead of TurboTax you'll need a good accountant.

What kind of bookkeeping am I required to do? For how long am I required to save the records and would I still have to save them if I close down the LLC?

Keep all your receipts. Save the records for 10 years if you have room, even after you've closed down the LLC.

What do I need to include in the personal tax return for a non resident with U.S. source income when I have the LLC?

You'll get a K-1 from the LLC. File it with your personal tax return. The CPA should be able to do it for you.

Would I have to pay US income taxes or would it be enough with the swedish income taxes?

Yes, if you incorporate in the US then you'll have to pay US income tax. Does Sweden tax its citizens on their world-wide income? (The US does.) If so, then you'll ALSO need to pay Swedish income tax.

Am I required to pay any VAT when selling digital items to people in other states on Ebay (it seams like Delaware has no VAT)?

FOR NOW, you don't need to collect (and pay) sales tax. But this might change in the future.

How hard is it to manage to do all this? I mean, do you think I, a person with no knowledge of US LLC's and US tax filing and bookkeeping, will be able to do it?

No, it's not hard. Get yourself a good CPA (and a good business lawyer if you feel like it).

Apart from that, according to the companies I've talked to, the only thing I need to do is to make sure that I pay the Franchise Tax on time and that I pay for a Registered Agent. Can you think of anything else? As I understood it I woun't need to pay any annual Income Tax, what do you think?

Yes, you DO need to pay annual income tax to the IRS!! Else you'll find yourself VERY wanted!

 

[oskare100]

Hello,
Really thanks for your reply. This is the reply I got from Harvard Business Services, Inc.:

Generally a Delaware LLC with NO U.S. Source income and NO U.S. Members does not pay Federal income tax. Payments collected which are categorized as U.S. source income are typically not taxed at the LLC level, but will be taxed to the members themselves, by filing a personal tax return for a non resident with U.S. source income. All foreign source income is typically not taxed in the USA.

I thought that ment that I didn't have to pay US income tax, but that's wrong then? I will have to pay both US and Swedish income tax? I'm sorry for asking the question again, please forgive me for that, but I need to be sure that I havn't missunderstood anything.

When I read it again it seams like it could also mean that when I sell things to people outside of the United States then I wount have to pay any US income tax...

I don't have any US work visa, since I woun't actually work or be present in the USA it seamed like I wouldn't need a USA work visa, but that isn't correct either then?

Thanks,
Best Regards
Oskar R

 

[oskare100]

Hello,
I would really appreciate if someone could help me with the questions in my last reply. I'm not only planning to start an LLC in the US because of the taxes but because of that 80 % of my customers are from the US and they feel more secure with an US company.

I found this at an FAQ at Valis International (http://www2.valisinternational.com/?pg=faq#19):

LLC TAX ISSUES:
Any single member LLC, where that sole member is a foreign person for U.S. tax purposes (meaning he or she is not a US citizen, does not have a U.S. green card or who does not reside in the U.S. for more than a month or so each year) - the LLC is ignored for U.S. and most states income tax purposes. Accordingly, any income earned is treated as earned directly by the foreign person. Such income is not subject to U.S. taxation so long as the foreign person did not perform his services or sales activity in the U.S. himself or thru an employee or agent. This means no person (the foreign person, employee of the foreign person or agent thereof) is physically present in the U.S. while earning the income. It is apparent that many, if not most of the single member LLCs are conducted purely over the internet with no physical presence in the U.S.

For example: If a French citizen, the owner of Internet business that sells goods over the internet receives an order from a U.S. citizen. The order is received, goods shipped and invoice sent by the French sole member of a U.S. LLC. The Sole member never sets foot on U.S. soil - nor did he have any employees or agents conducting his business on U.S. soil.

Would the income earned be taxable in the U.S. or require a return to be filed in the U.S.?

The answer is NO...no reporting of the income nor are payments of any taxes required. I hope this is clearer. This rule only applies to the Single Member LLC.

TAX ISSUES SUMMARY:
You would not have to file a federal LLC tax return if there is no activity in the USA and you meet the rest of the criteria discussed above. If there is more than 1 owner/member then this rule doesn't apply and you will have to file a U.S. LLC return.

If you anticipate 2 or more owners, then you can form either an LLC or a CORPORATION. You will have to file a US LLC or Corporate income tax return each year even if the profit is $0. However, there are several tax mitigation strategies you can employ to legitimately reduce any U.S. taxable income. Paul will be happy to discuss these with you on a client by client basis.

We can recommend an accountant for you if you are interested in having help with your year end statements (or anything else), just email us with this request and we'll send you the details and cc. the accountant so they are expecting you.

This FAQ answer was provided by Paul Phillips, of Consulting Sciences, Inc., paul @ eoag.com.

Can anyone confirm or say something about that? Would that mean that I don't have to have a valid US work visa?

Best Regards
Oskar R

 

[oskare100]

Someone who can help?