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advice for foreign-based businesses incorporation


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#1 iamsmall

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Posted 24 October 2012 - 10:31 PM

Good Day Everyone!

I am staying in Southeast Asia and looking for incorporate a new company in the United States but not plan to have a physical presence in the United States. I have some question hope you could advice :

1. ) I'll operate solely from overseas. Do i need to pay any taxation if all my clients are not from the United States?

2. ) Which state is the most taxation friendly for foreign-based businesses?

3. ) If my clients from overseas, bank in their payments to our bank in United States, does this clarify as transact business in the state and taxable?

4. ) Is there any personal income tax if our company pay salary to the owner?

5. ) Which type of company give us the best tax benefit for our situation?

Thanks in advance.

#2 pg1067

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Posted 25 October 2012 - 06:48 AM

I am staying in Southeast Asia and looking for incorporate a new company in the United States but not plan to have a physical presence in the United States.


If you do not plan to have any physical presence in the U.S. and expect all of your clients will be outside the U.S., why do you want to incorporate in the U.S.?


I'll operate solely from overseas. Do i need to pay any taxation if all my clients are not from the United States?


I imagine this depends on the laws of the state of incorporation. At the very least, you'll have to pay various fees to maintain the corporation's good standing.


Which state is the most taxation friendly for foreign-based businesses?


Answering this question would require that one know how all 50 U.S. states treat "foreign-based businesses" from a taxation perspective. It would also require that each state treat all such businesses uniformly. The topic is way beyond the scope of an Internet message board.


Is there any personal income tax if our company pay salary to the owner?


If you're asking whether the owner -- who presumably does not live in the U.S. (?) -- would have to pay U.S. income taxes solely because the coporation is incorporated in the U.S., the answer is no.


Which type of company give us the best tax benefit for our situation?


Since you've told us virtually nothing about your situation, it would be impossible to answer this question.


Again, I have to ask why you want to incorporate/organize a business entity in the U.S. when the business apparently will have no other connection with the U.S.

#3 Guest_FindLaw_Amir_*

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Posted 25 October 2012 - 08:31 AM

This is a matter you may want to discuss with a local Business Organizations Lawyer to advise you further in detail about your options on incorporating in the U.S.

Best of luck.

#4 Tax_Counsel

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Posted 26 October 2012 - 07:19 PM

1. ) I'll operate solely from overseas. Do i need to pay any taxation if all my clients are not from the United States?

Thanks in advance.


At the federal level, it will depend on how the company is organized. If the company is organized as a corporation, it will be domestic corporation and domestic corporations are taxed on their worldwide income. If you do not plan to do business at all in the U.S. then that is likely not what you want (except if you are located in a country with even higher taxation, in which case it might still be helpful).

If you organize as a single member (owner) limited liability company (LLC), then under federal tax law the LLC is disregarded. If the LLC has no activity in the U.S. and the owner is not (directly or indirectly) a U.S. person/entity, then no federal taxation would occur.

States each have their own tax laws, and you'd need to look at the laws for the state where you'd set up the entity to determine what taxation would occur.

2. ) Which state is the most taxation friendly for foreign-based businesses?


There are a number of states that you could organize the LLC and have little or no state tax to pay, including Delaware, Nevada, Wyoming, and Colorado.

As for your other questions, the details matter, and I don't have all the details here. I suggest you consult a tax attorney in the U.S. for advice on how best to organize this — a tax attorney in one of the four states I mentioned would probably be a good choice, as there are a number of foreign persons who set up companies in those states to transact business outside the U.S. so you should be able to find attorneys with experience in the tax issues that arise.

#5 iamsmall

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Posted 27 October 2012 - 04:51 AM

If you do not plan to have any physical presence in the U.S. and expect all of your clients will be outside the U.S., why do you want to incorporate in the U.S.?


Dear pg1067 and Tax_Counsel,

Thank you very much for your kind advice. I'm looking for incorporate a new LLC in the U.S. for tax saving purpose, i heard that if the LLC does not conduct business in state such as Delaware, the only tax paid for a foreign-based LLC is an annual tax of $250.00, but i'm not sure how true it is? In my case of all income and business activities from overseas, i assume that none of my company income is taxable in Delaware? and If my clients in oversea, bank in their payments to my bank in Delaware, does it clarify as my Delaware LLC income and taxable?

If you're asking whether the owner -- who presumably does not live in the U.S. (?) -- would have to pay U.S. income taxes solely because the coporation is incorporated in the U.S., the answer is no.


Does it means if an LLC in Delaware pay the salary to owner who does not live in the U.S, the owner doesn't need to pay U.S. income taxes?

Thanks again for taking your time replying my post and sorry for my English.

Regards
George

#6 Tax_Counsel

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Posted 28 October 2012 - 09:05 AM

If you're asking whether the owner -- who presumably does not live in the U.S. (?) -- would have to pay U.S. income taxes solely because the coporation is incorporated in the U.S., the answer is no.


If it was organized in the U.S. as a corporation, then (1) the corporation would be taxed on its worldwide income, which as I indicated before is typically not what a foreign person doing no business in the U.S. wants and (2) the foreign shareholder would indeed be subject to U.S. income tax for any dividends he received from the corporation as that is U.S. source income. Moreover, the corporation would have the requirement to withhold 30% of the dividend payment to remit to the Internal Revenue Service (IRS) to ensure that the tax gets paid.

#7 Tax_Counsel

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Posted 28 October 2012 - 09:15 AM

Dear pg1067 and Tax_Counsel,

I'm looking for incorporate a new LLC in the U.S. for tax saving purpose...


Since you plan to do no business in the U.S., I assume that you mean you wish to use the U.S. LLC to save tax in your home country and/or whatever country it is in which you do conduct business. You'd need to ask tax advisors in those countries what would work to save you tax in those countries. Obviously, if you didn't organize the entity in the U.S. and did no business in the U.S. you'd have no U.S. tax to pay.

But if you organize the entity in the U.S., you must be careful how and where you do it to ensure that you pay no tax on your business activities. It is possible to avoid pretty much all tax in the U.S. when the business entity does no business activity in the U.S., has no U.S. source income, and the owner is not a U.S. citizen or resident. You do, however, typically pay annual fees to the state of organization to maintain the entity in good standing with the state. These fees are usually not very large. You also typically have to file annual reports with the state. These are generally very short and not a difficult burden to meet.

As I suggested before, you probably ought to consult a tax attorney familiar with taxation of foreign persons in the U.S. who practices in the state you are interested in organizing the entity (e.g. Colorado, Delaware, Nevada, Wyoming, etc.) to make sure you get it set up properly so that you avoid unnecessary tax and organize it properly.




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