What Are the Main Practical Challenges of Having Non-U.S. LLC Members?
There are several areas you will want to be aware of.
LLC Formation Rules
LLC formation rules vary from state to state . For example, some states will require you to have your company formation documents signed, witnessed and notarized. Some other states may have minor restrictions on ownership. Always check LLC rules for company formation on your state’s website.
LLC Registered Agents
Every LLC must have a Registered Agent that is resident in the U.S. state(s) where the LLC operates. If you are not a resident there yourself, you can use a Registered Agent service to meet these requirements.
Professional Certification and Requirements
If your LLC provides certain professional services, then LLC members may be required to be certified in the U.S. to provide such services. For example, if you’re running a physician business, then all members may require a U.S.-based medical certification. These requirements do vary between states and professions, so always check with official sources.
Taxpayer Identification
Every LLC owner must have a Taxpayer Identification Number (TIN). For individual U.S. citizens and residents, that will typically be a Social Security Number (SSN). For U.S.-based businesses, it will often be an Employer Identification Number (EIN).
You can request an EIN for a business through Bizee or directly on the IRS website. Non-resident aliens will need to get a Taxpayer Identification Number from the IRS.
Certain states will also have taxpayer-identification rules that you will need to follow.
Visa to Work in the U.S.
If a non-resident alien or foreign citizen wants to work in the U.S. for a business, including one they own, they will require a working visa. Speak with a business attorney to learn more.
No S Corporation Tax Election
Some LLCs may choose to be taxed as an S Corporation to reduce the amount of self-employment tax they pay. One of the restrictions is that an S Corporation cannot have non-U.S. resident alien owners. This means an LLC with foreign owners cannot choose this tax election.
What Are the Tax Implications for Non-U.S. Resident Owners of an LLC?
Normally, an LLC member, wherever they are located, will need to pay U.S. taxes on any LLC profits earned in the U.S., specifically if they are “engaged in a trade or business in the United States.” This means:
Filing the relevant tax returns and forms with the IRS and states where you do business, including Form 5472, Information Return of Foreign-Owned U.S. or Foreign Corporation Engaged in a U.S. Trade or Business.
Paying taxes on income earned in the U.S. These taxes may include federal taxes, state taxes and other taxes.
Paying estimated taxes on expected and actual earnings, four times a year.
Reviewing tax treaties between their country and the U.S. to see what agreements there are on double taxation or other compliance.
Please bear in mind that there can be exceptions to these guidelines. Always check your circumstances with a specialized attorney or accountant.
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