Here is the situation.
I'm incorporating Downtownhost LLC in USA and opening a US Business Checking Bank Account and geting a Employer Identification Number.
Since I don't live in USA, must I pay US tax?

I would say yes, since you are going to incorporate in the US. But be careful, you might get charged in your country as well.
Talk to your accountant and see what he says.

Any company "located" in the united states will pay taxes but you yourself are not responsible unless you claim residency in the US.

I think that Delaware have some tax exceptions (there is where I'm incorporating DTH)

Anybody know a site where I can read about this?

I did a quick research about this before, and this is what I concluded.

LLC's (in some conditions) are tax transparent, they as entities pay no taxes. All taxes on LLC's are payed at a personal level, personal income. If you are not a US resident, there are no taxes imposed on you. You are now tax free!

I've seen many companies advertising this service, they will get you incorporated and send you paper work over mail. Personally, I wouldn't do that without talking to an accountant first.

BTW, can anybody recommend a well priced accounting firm?

Delaware has no state income tax. This does not effect federal taxes however.

Originally posted by Ahmad
I did a quick research about this before, and this is what I concluded.

LLC's (in some conditions) are tax transparent, they as entities pay no taxes. All taxes on LLC's are payed at a personal level, personal income. If you are not a US resident, there are no taxes imposed on you. You are now tax free!

I've seen many companies advertising this service, they will get you incorporated and send you paper work over mail. Personally, I wouldn't do that without talking to an accountant first.

BTW, can anybody recommend a well priced accounting firm?

True and False - yes, LLC's get some tax breaks - but I'm pretty sure you have to be a US citizen in order to become a LLC.

I'd give a call to the US IRS and I'd also call a US Tax Lawyer.

I also wouldn't doubt if your country taxed the reveneu made in the US also.

By the way, if you have an EIN, and have employee's in the US, then you will have to pay taxes here also.

My suggestion is to contact a Tax Lawyer asap and find out what you need to know and do. It used to be if you broke tax laws you paid a fine - now you go to jail. Make sure you know exactly what you are getting into. :)

As far as I know its not neeeded to be an USA resident, so far, I'm not a US resident and I'm incorporation my company :)
I don't have employees in USA, so I don't have to worry about that :)

Simple answer-yes.

Your U. S. Business is subject to U. S. Taxes.

Talk to a tax lawyer.

My best friend's mother is a tax lawyer who defends people against breaking tax laws. She always tells me that it used to be you got fined, but now you go to jail which she doesn't think is right. Even hard working business people can make mistakes when it comes to the 400+ tax law changes made last year alone by the US Govt.

Just make sure you fully research it :)

I've done some research into this as I'm also planning to incorporate in the US as a non-US citizen.

From what I've found out so far, a US LLC can bring very high overall taxes to a non-us person depending on your country of residence and if not setup wisely.

LLCs are usually not taxed on a corporate level, the taxation is passed to its members. Non-us citizens as individuals are taxed at 30% rate on their US-based income. That income can be also taxed in your home country.

If you chose that the LLC is taxed on the corporate level, the federal corporate income tax is 35%. As an individual non-US citizen, you are also taxed at 30% rate on the dividends or whatever the company pays to yourself. This can also be subject to tax in your home country.

There may be a tax treaty between US and your country which eliminates double taxation or lowers the amount of total taxes to be paid.

The point of my post is, that you have to consult a US tax expert as well as your home country tax expert and also study the abovementioned tax treaties if there are any. You must get familiar with taxes you have to pay as LLC in the US as well as taxes you have to pay as a foreign individual for profits from your LLC in the US and in your country and reporting requirements for those taxes.

So, be careful.


Regards,
Matija

First, if you are incorporating your company the name will not end with LLC. It must end include either Corporation or Inc. or Incorporated. LLC specifically refers to a Limited Liability Company.

Second, any corporation will be subject to U. S. Federal Income Tax. Incorporating in Deleware only saves you from state income tax.

Third, you will have to register in any state in which you have a place of business-office, data center, or whatever. And, in most cases you will have to pay state income tax in that or those states. Laws differ in every state.

Fourth, do not do any of this without both the advice of a U. S. lawyer and, even more importantly, a U. S. accountant. As an accountant, I can only warn you of how costly a mistake can be. Furthermore, due to the complexity of our tax laws, particularly when dealing with a foreign owner, there is no simple, absolute answer. To advise you properly, one must know all the details of your business, your plans, and your personal situation.

As an aside to Ahmad....your conclusions are not correct. Avoiding U. S. taxes is just not that simple. The rules are structured to make sure everyone pays. Good guidance simply assists you in minimizing that tax burden.

Delaware also has an LLC. Following is some information.

Citizens of countries other than the United States are often concerned with the tax consequences of owning an entity such as a limited liability company. A Delaware LLC that (1) carries on no business in the U.S., (2) derives no income from any sources within the U.S. and (3) has not elected to be treated for tax purposes as a corporation does not need to file a U.S. tax return or a Delaware tax return.

Under the current IRS "check-the-box" rules, a Delaware LLC that does not affirmatively elect to be treated for tax purposes as a corporation will be treated for federal tax purposes as a partnership. It will be treated as a partnership for Delaware tax purposes as well.

Under current Treasury Regulations, a partnership that carries on no business in the U.S. and derives no income from any source within the U.S. does not need to file a tax return. Delaware law currently provides that a partnership need file a return only if it has income from sources within the State of Delaware.

If the LLC has only one member, then for federal tax purposes the LLC is disregarded, and the sole member is taxed as a sole proprietor. Current Treasury Regulations provide that a nonresident alien who is not engaged in a U.S. business and who does not derive any income from any source within the U.S. does not have to file a tax return.

That last sentence was the key. If you have no U. S. source income, you do not have to file a U. S. tax return. However, if you have any U. S. source income, you must file and pay. And, if you didn't intend to have U. S. source income, you wouldn't be incorporating or forming an LLC in the U. S.

The word "source" refers to the place where the work or personal services that produce earned income are performed.

I agree that it is better to get a tax lawyer to look at this ... especially those who are familar with the US environment and the double taxation treaties (if any) between US and your country.

The treaty can save you tax dollars so that your income won't be taxed twice ... once in the US and another time back home.

"Incognito", absolutely correct!

...but "if you didn't intend to have U. S. source income, you wouldn't be incorporating or forming an LLC in the U. S." - wrong - they need it to pay $0 taxes :)

Originally posted by Ahmad
I did a quick research about this before, and this is what I concluded.

LLC's (in some conditions) are tax transparent, they as entities pay no taxes. All taxes on LLC's are payed at a personal level, personal income. If you are not a US resident, there are no taxes imposed on you. You are now tax free!

I've seen many companies advertising this service, they will get you incorporated and send you paper work over mail. Personally, I wouldn't do that without talking to an accountant first.

BTW, can anybody recommend a well priced accounting firm?

That does only work if you live in the US and are a tax payer here. If you live abroad the company will be taxed - no matter what. Do you really think Uncle Sam let's you get away without paying taxes?

A visit or a call to the nearest U.S. embassy asking the list of U.S. accountants and layer can help to find someone with good knowledge to U.S. taxation and your country taxation.
The only problem U.S. accountants in your country will be expensive I'm paying $380 at hours.
About paying tax in your country you should avoid double taxation if you don't have offices,employee's, or contact directly the customers of your country.
About Delaware you need also check the pro and con of location of you U.S. mailing address and Bank Account as involve in taxation and licenses.