QUESTION: I am a UK citizen living in Vietnam, and I am thinking of forming a limited liability company (LLC) in the U.S. to sell furniture to U.S. customers. I want to know what the tax implications are and filing requirements for my LLC, and whether I would have to pay any U.S. income tax on my profits. I am also looking for a reliable and affordable accounting service that can help me with my LLC’s tax needs. Can you please advise me on these matters?
EXPERT’S RESPONSE: As someone who is a UK citizen based in Vietnam and looking to form a foreign-owned Limited Liability Company (LLC) to sell furniture in the United States, you may be wondering about the tax compliance challenges you could face. It’s essential to have a clear understanding of the tax implications and filing requirements, and this is where O&G Tax and Accounting comes in. Our aim is to break down these aspects and provide you with actionable information through this guide.
Assessing Tax Liability
One of the most common questions for foreign entrepreneurs like yourself is whether you have to pay U.S. income tax. You’ll be glad to know that you’re typically exempt from U.S. taxes if your LLC or its owner meets the following conditions:
- No Physical Presence in the U.S.: Simply having a bank account or forming an LLC does not constitute a physical presence.
- No Employees or Agents in the U.S.: If your LLC operates without U.S.-based employees or sales representatives.
- No U.S. Warehouses or Offices: The absence of physical business locations such as warehouses or offices in the U.S. further exempts you from certain tax obligations.
Despite these exemptions, your LLC must adhere to specific filing requirements. Proforma 1120 and 5472 are key among these. Proforma 1120 and 5472, an information return, give an overview of your LLC’s financial activities and report transactions between your foreign-owned LLC and foreign-related parties.
The Corporate Transparency Act: Foreign-owned LLCs must also be aware of the Corporate Transparency Act (CTA), which establishes uniform beneficial ownership information reporting requirements for certain corporations, limited liability companies, and other similar entities created or registered to do business in the U.S. The CTA is part of the Anti-Money Laundering Act of 2020 and aims to prevent criminals, terrorists, and corrupt individuals from hiding illicit money or property in the U.S.
For reporting companies created or registered before January 1, 2024, the initial beneficial ownership information report must be filed by January 1, 2025. If your company is created or registered on or after January 1, 2024, you have 90 days to file the initial report starting January 1, 2024.Learn more and seek guidance here.
Procedure and Documentation
We understand that this process can be complicated, which is why we offer a fixed-rate service for preparing both Forms 1120 and 5472. Our procedure involves completing an organizer to gather all necessary information. For guidance, a walkthrough video is available, and for any clarifications, we invite you to schedule a consultation with us through this link.
Our Services at O&G Tax and Accounting
We specialize in serving foreign-owned single-member LLCs, and offer services such as:
- Preparation of Forms 1120, 5472, BOI and FBAR
- Monthly bookkeeping and accounting.
- Personalized accounting software recommendations.
- General accounting services and tailored consultations.
We have extensive experience working with foreign-owned single-member LLCs in the U.S. and can help you navigate the complexities of U.S. tax laws. We can also help you save time and money by providing efficient and affordable solutions for your tax needs.
We charge a fixed rate to prepare both Form 1120 and Form 5472 for each entity. You can see our pricing page here.
To initiate our services, please follow these steps upon establishing contact with our team:
1. Complete the Organizer: We will provide you with an organizer document. It is designed to gather essential information about your business. Please fill it out meticulously.
2. Gather Necessary Documentation: Along with the completed organizer, please compile and send us the following crucial documents:
- LLC Formation Documents: These are the official papers that mark the establishment of your LLC.
- EIN Confirmation Letter from the IRS: This document serves as proof of your LLC’s Employer Identification Number.
- Copies of All Previous Federal Returns: If your LLC has filed federal returns in the past, we require copies of these for our records and review.
Once we receive your information, we will bill you and proceed with preparing your tax returns. We will send you a draft of the returns for your review and approval. After you sign the returns, you can choose to fax or mail them to the IRS, or we can assist you with faxing them at your request.
Addressing State Taxes and Compliance
Please note that this guide does not cover state taxes. The U.S. is made up of 50 states, each with its own tax regulations. Depending on your business activities, you may need to comply with state-specific taxes, including sales tax and state income tax. Always consult with a competent tax advisor to understand your obligations.
Complying with U.S. tax laws is critical for the success of your foreign-owned LLC. We hope that our guide has simplified the process for you and provided you with a clear path to compliance. At O&G Tax and Accounting, we’re committed to helping you navigate these requirements and ensure that your business thrives. If you need more detailed assistance or want to explore how we can help you further, please don’t hesitate to contact us