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US accounts: Protect your privacy with an LLC

US accounts: Protect your privacy with an LLC

Introduction

Many people know that the USA exchange account information with German authorities. What is less well known, however, is that this exchange of information only applies to private accounts and not to Accounts of Limited Liability Companies (LLCs) takes place. This article explains why a LLC is an effective method of protecting yourself from the extensive sharing of information and how this can be achieved completely legally.

FATCA and the automatic exchange of information

The Foreign Account Tax Compliance Act (FATCA) was introduced by the USA to prevent tax evasion by US taxpayers with foreign accounts. This agreement obliges foreign financial institutions to report information about accounts held by US citizens to the US tax authorities (IRS). Conversely, the IRS exchanges information on accounts held by German citizens in the USA with the German authorities.

Exchange of information for private accounts

If you open an account in the USA as a private individual, your account details, including account balance and income, will be reported to the German tax authorities. This exchange takes place automatically and is aimed at preventing tax evasion. Further information on this can be found on the website of the Federal Central Tax Office here.

The difference: LLCs as US entities

An LLC (Limited Liability Company) is a legal entity established under US law. This structure offers a decisive advantage: as a US entity, the LLC is not considered a foreign person, which is why no data on the LLC's accounts is reported to foreign authorities, including the German tax authorities.

Advantages of forming an LLC in the USA

  1. No data transfer: Accounts held via an LLC are not subject to the automatic exchange of information. This means that your financial transactions and account balances are not reported to the German authorities.
  2. Tax flexibility: An LLC offers flexible taxation options. Depending on the structure and business activity, you can benefit from different tax regimes that can be optimized for your specific situation.
  3. Privacy and security: With an LLC, you can better protect your financial privacy while benefiting from the legal and tax advantages of the USA.

Practical implementation

To form an LLC in the USA and take advantage of the benefits, you should follow these steps:

  1. Foundation of the LLC: The incorporation process is relatively simple and can be done online or through specialized service providers. It is important to choose the right legal form and the right federal state for incorporation.
  2. Opening a bank account: Once your LLC is formed, you can open a business account with a US Bank open an LLC. To do this, you will need the LLC's formation documents, a US tax identification number (EIN) and a US address.
  3. Compliance and administration: Make sure your LLC meets all legal and tax requirements. It may be helpful to consult a tax advisor or attorney to ensure that all regulations are met.

Specific examples of the advantages of an LLC

Scenario 1: Privacy problem with private accounts

A German citizen opens a personal account in the USA. This account is automatically reported to the German tax authorities, which can lead to a possible audit and additional tax requirements.

Scenario 2: Solution through an LLC

The same German citizen establishes an LLC and opens a business account in the name of the LLC. Since the LLC is considered a US entity, there is no automatic transfer of data to the German authorities and financial privacy is preserved.

Scenario 3: Using an LLC for international business

An investor with holdings in several countries establishes an LLC in the USA to bundle international transactions. This protects him from the automatic exchange of information and preserves his financial privacy.

Conclusion

The formation of an LLC in the USA offers an effective way of protecting yourself from the automatic exchange of information and the associated tax burden. Monitoring to protect them. While private accounts are automatically reported, the financial transactions of an LLC remain hidden from the German authorities. This structure allows you to maintain your financial privacy while benefiting from the advantages of the US financial system.

Further information on the FATCA agreement and the specific regulations can be found on the website of the Federal Central Tax Office here.

 


FAQ

What is the Automatic exchange of information between the USA and Germany?

The automatic exchange of information is an agreement between the USA and Germany in which account information is exchanged between the two countries in order to prevent tax evasion.

Does the exchange of information only affect private accounts?

Yes, the exchange of information only concerns private accounts and not accounts of Limited Liability Companies (LLCs).

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a US law that requires foreign financial institutions to report information on accounts held by US citizens to the US Internal Revenue Service (IRS).

How do LLCs differ from private accounts with regard to the exchange of information?

LLCs are US entities and are not considered foreign persons. Therefore, no data on LLC accounts is reported to foreign authorities, including the German tax authorities.

Where can I find more information on FATCA?

Federal Central Tax Office: https://www.bzst.de/DE/Unternehmen/Intern_Informationsaustausch/FATCA/fatca_node.html

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Disclaimer: Please note that the above dates, tax rates and regulations may change over time. Do not make any independent decisions without first consulting an expert for your individual situation. It is in your interest to always receive individual information from an experienced expert who knows your situation. This information is for informational purposes only and does not promote illegal activities, including tax evasion.

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