LLC owned by Non-Resident

[raheel]

What is the name of your state (only U.S. law)? Delaware

I am an Indian and own a small software business. I sell software online to customers all around the world.
Now, I wanted to know if I start a LLC in the US in the state of Delaware, and I accept all payments in this company. Will I be liable to pay Federal Taxes in the US ? I will live in India itself.

Also this company will have certain revenues from the US and certain from the rest of the world (non-US).

 

[OHRoadwarrior]

All businesses in the US must file returns and pay taxes due.

 

[raheel]

It means I will have to pay double taxes right ? In India and the US.

 

[FlyingRon]

You'll owe US tax. You'll have to talk to some Indiocentric forum for whether India will also tax you.

 

[davew128]

All businesses in the US must file returns and pay taxes due.

LLCs by default are not taxed, and a one member LLC doesn't file a federal return for itself.

 

[OHRoadwarrior]

LLCs by default are not taxed, and a one member LLC doesn't file a federal return for itself.

Actually, not correct. You do tend to disagree with the IRS on their laws though.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies

 

[davew128]

Actually, not correct. You do tend to disagree with the IRS on their laws though.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies

Did you actually read your link? I would refer you to the part where it says I am correct.

Owner of Single-Member LLC
If a single-member LLC does not elect to be treated as a corporation, the LLC is a “disregarded entity,” and the LLC’s activities should be reflected on its owner’s federal tax return.

By the way, it's not the "IRS's laws". The IRS doesn't have its own laws. In fact tax law doesn't reference LLC's. At all.

I don't expect a self proclaimed genius like you to understand the difference.

 

[OHRoadwarrior]

I suggest you read your own answer again. Earlier, I said "All businesses in the US must file returns and pay taxes due." A private owners tax return is not a business tax return. It is a private tax return. Further I will quote you IRS Regs "If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner’s federal tax return as a division of the corporation or partnership". Give you a clue here Dave ol buddy. A corporation/partnership is not one person. I do so love when you parse words incorrectly to attempt to make yourself appear to be smart. Try again next time. OK Dave we will parse words again, IRS Regulations. Speaking of self proclaimed geniuses, you are a dismal failure in your attempts.

Had you actually addressed the question instead of hijacking another thread, you would have questioned OP as to how he planned on handling the ownership of the llc. Instead as usual, you want to appear to be superior and parse words totally hijacking the thread from the OP's original question. OP you are required to pay taxes in the US. How were you planning on handling the ownership of the llc as a sole proprietor or as foreign corporation ownership?

(I edited my response so you would not go upstairs with a tale of woe)

Did you actually read your link? I would refer you to the part where it says I am correct.

Owner of Single-Member LLC
If a single-member LLC does not elect to be treated as a corporation, the LLC is a “disregarded entity,” and the LLC’s activities should be reflected on its owner’s federal tax return.

By the way, it's not the "IRS's laws". The IRS doesn't have its own laws. In fact tax law doesn't reference LLC's. At all.

I don't expect a self proclaimed genius like you to understand the difference.

 

[raheel]

How were you planning on handling the ownership of the llc as a sole proprietor or as foreign corporation ownership?

It will be owned by me. But I also wanted to make one thing clear :
I am an employee of an organisation which makes the software. Our organisation uses PayPal and PayPal in India is expensive and there are compulsory 2.5% rates charged on foreign conversion fees. So my company lands up with 6.5% of net charges with PayPal.
I was browsing the US PayPal rates and found the rates to be very cheap 2.9% vs 4.7% in India. Secondly the foreign conversion fees doesnt apply as my company wants dollars only.

So I told my boss that "I will open a company and set a PayPal account in the USA and you give me 3.9%"
He told me if its legal he doesnt mind to do that.

So this is the plan. I own the company and process payments for my bosses company here in India and earn a 1% commission.

 

[LdiJ]

I suggest you read your own answer again. Earlier, I said "All businesses in the US must file returns and pay taxes due." A private owners tax return is not a business tax return. It is a private tax return. Further I will quote you IRS Regs "If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner’s federal tax return as a division of the corporation or partnership". Give you a clue here Dave ol buddy. A corporation/partnership is not one person. I do so love when you parse words incorrectly to attempt to make yourself appear to be smart. Try again next time. OK Dave we will parse words again, IRS Regulations. Speaking of self proclaimed geniuses, you are a dismal failure in your attempts.

Had you actually addressed the question instead of hijacking another thread, you would have questioned OP as to how he planned on handling the ownership of the llc. Instead as usual, you want to appear to be superior and parse words totally hijacking the thread from the OP's original question. OP you are required to pay taxes in the US. How were you planning on handling the ownership of the llc as a sole proprietor or as foreign corporation ownership?

(I edited my response so you would not go upstairs with a tale of woe)

Dave was correct. An LLC by default, is not taxed. A single member LLC by default is a disregarded entity and is taxed as a sole proprietorship.
A multiple member LLC by default, is taxed as a partnership and the income flows through to the individual returns of the members, be those members individuals or corporate entities. An LLC that makes an election to be an S-corp (which an LLC with foreign ownership cannot do) would have the income flow through to the tax returns of the members. Only an LLC making a C-corp election would file and pay taxes itself, and in that instance why open an LLC at all?...just open a C-corp.

OHR is correct in that there will be tax consequences, in one form or another, of generating income in the US. In addition based on OP's description of what he actually wants to do, it appears that the entity could be considered to be a financial services company which complicates things further.

In my opinion the cost of such an endeavor is likely to be greater than the benefits.

 

[OHRoadwarrior]

OP, I'm going to temporarily hijack your thread. I apologize for it in advance.

Dave, LdiJ and I spuriously go round and round debating tax related issues. To some extent we all have tax, education finance and management experience on the issues. We have these debates, because for some reason standard discourse on these topics has not been workable and snark always ensues. I need to let LDiJ and Dave know I can no longer engage in "heavy debates". I suffer from an increasing degradation of memory and cognition. Its true severity I have masked for several years by my high IQ. I have discovered that the recent decline I suffered is severely affecting my ability to contribute on this and other forums in the superfluous manner I have before. I won't be engaging in "debates". I would appreciate them taking any discourse to a non personal, fact seeking level in the future.

END HIJACK

 

[LdiJ]

OP, I'm going to temporarily hijack your thread. I apologize for it in advance.

Dave, LdiJ and I spuriously go round and round debating tax related issues. To some extent we all have tax, education finance and management experience on the issues. We have these debates, because for some reason standard discourse on these topics has not been workable and snark always ensues. I need to let LDiJ and Dave know I can no longer engage in "heavy debates". I suffer from an increasing degradation of memory and cognition. Its true severity I have masked for several years by my high IQ. I have discovered that the recent decline I suffered is severely affecting my ability to contribute on this and other forums in the superfluous manner I have before. I won't be engaging in "debates". I would appreciate them taking any discourse to a non personal, fact seeking level in the future.

END HIJACK

I am truly sorry for your troubles. I know that it must be difficult for you. However, there was nothing of snark in my response.

 

[raheel]

Dave was correct. An LLC by default, is not taxed. A single member LLC by default is a disregarded entity and is taxed as a sole proprietorship.
A multiple member LLC by default, is taxed as a partnership and the income flows through to the individual returns of the members, be those members individuals or corporate entities. An LLC that makes an election to be an S-corp (which an LLC with foreign ownership cannot do) would have the income flow through to the tax returns of the members. Only an LLC making a C-corp election would file and pay taxes itself, and in that instance why open an LLC at all?...just open a C-corp.

OHR is correct in that there will be tax consequences, in one form or another, of generating income in the US. In addition based on OP's description of what he actually wants to do, it appears that the entity could be considered to be a financial services company which complicates things further.

In my opinion the cost of such an endeavor is likely to be greater than the benefits.

So what would I need to do if I were to do it ?

 

[davew128]

I suggest you read your own answer again. Earlier, I said "All businesses in the US must file returns and pay taxes due." A private owners tax return is not a business tax return. It is a private tax return.

A business tax return is ALSO a private tax return. Your initial comment was incorrect. Not all businesses file tax returns and not all businesses pay taxes.

Further I will quote you IRS Regs "If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner’s federal tax return as a division of the corporation or partnership".[/QOUTE]Those aren't IRS regs.

Give you a clue here Dave ol buddy. A corporation/partnership is not one person.

A partnership is not, a corporation IS.

I do so love when you parse words incorrectly to attempt to make yourself appear to be smart. Try again next time. OK Dave we will parse words again, IRS Regulations. Speaking of self proclaimed geniuses, you are a dismal failure in your attempts.

When you actually quote IRS regs, get back to me.

Had you actually addressed the question instead of hijacking another thread, you would have questioned OP as to how he planned on handling the ownership of the llc. Instead as usual, you want to appear to be superior and parse words totally hijacking the thread from the OP's original question. OP you are required to pay taxes in the US. How were you planning on handling the ownership of the llc as a sole proprietor or as foreign corporation ownership?

The answer was in the link you posted. By default the LLC is a disregarded entity.

 

[davew128]

Dave, LdiJ and I spuriously go round and round debating tax related issues.

No, you post incorrect information constantly. There is no debate. If there were, like most of Mike Tyson's opponents back in the 80's, you would have been out in the first round.