Q: As a non-US citizen, I am considering the formation of a US LLC, but I do not anticipate generating any US-based income. I have a few questions regarding the tax implications of forming a US LLC. Specifically, I am interested in having the US LLC be owned by a low-tax company from a country such as Seychelles or Belize, for tax planning purposes. Could you please advise me on any potential issues or concerns I should be aware of with this approach?
A: First, it’s worth noting that it is not uncommon for a US LLC to be owned by a foreign entity, whether it’s located in a high or low tax jurisdiction. Almost every state in the US allows foreign individuals and entities to own US LLCs without any issues.
However, it’s important to be aware that the LLC may need to file different types of federal tax returns and information returns depending on its tax classification and ownership structure. Here are some of the forms that may be required:
- Proforma 1120 and 5472: If the LLC is a foreign-owned single-member LLC, it may need to file a proforma 1120 and Form 5472 with the IRS.
- Form 1065: If the LLC is treated as a partnership for federal tax purposes, it will need to file a final Form 1065 with the IRS. This form should cover the period from the beginning of the tax year to the date of dissolution.
- Form 1120: If the LLC has elected to be treated as a C corporation for federal tax purposes, it will need to file a final Form 1120 with the IRS. This form should cover the period from the beginning of the tax year to the date of dissolution.
It’s important to consider not only the US tax and information reporting obligations of owning a US LLC, but also the consequences of US LLC ownership in your home country, country of residence, or country of the parent company’s domicile. Therefore, it is always advisable to seek help from a competent local expert within that jurisdiction.
As a CPA, I stand ready to help with any issues you may encounter when forming a US LLC or navigating tax and information reporting obligations. Please don’t hesitate to reach out if you have any further questions or would like assistance with your US LLC formation.