An exempt LLC (tax-exempt LLC) without a physical presence in the USA

What is an exempt LLC?

An exempt LLC, also known as a foreign LLC or non-domestic LLC, is a limited liability company (LLC) in the USA that is exempt from US tax liability and regulation. The key is that the LLC has no physical presence in the USA and is not considered "Engaged in a Trade or Business in the United States" (ETBUS). This structure is particularly attractive to non-US citizens seeking to do business globally without a physical presence in the US.

Tax advantages of an exempt LLC

Tax exemption in the USA: If the LLC does not have a physical presence in the USA (no employees, no fixed place of business), the profits of the LLC be tax-free in the USA, even if they originate from US sources. This significantly reduces the tax burden.

Pass-through taxation: As a single member LLC, the company is treated as a "disregarded entity". This means that profits are attributed directly to the owner and are not taxed at the level of the LLC. This simplifies the tax return and can lead to a lower tax burden.

Taxation in the EU country of residence: EU citizens often only pay personal income tax on income from the LLC in their country of residence if the company is domiciled in the EU. Social contract is defined as a pass-through entity (partnership). This is much more favorable than the combination of corporation tax and income tax in a local company structure with limited liability.

Avoidance of double taxation: In many cases, only the tax is payable in the EU country of residence, which is a Double taxation and further reduces the tax burden.

Important aspects of an exempt LLC

No separate Independence required: In most EU countries, it is not necessary to register a separate self-employment. The income can be declared directly in the personal tax return, which minimizes the administrative effort.

Avoidance of a Dependent Agent: It is important that the LLC does not conduct business through a contractor in the US that could be considered a dependent agent. A dependent agent could trigger a tax liability in the USA, which should be avoided.

Tax documentation: Even if the LLC in the USA is tax-exempt, Form 1040NR may need to be filed to report income from US sources. This documentation requirement should be followed carefully.

International aspects: The Tax exemption only applies in the USA. In other countries, such as the EU, VAT obligations may arise if your country of residence taxes foreign income. Find out about your tax domicile.

Additional advantages of an exempt LLC

Flexibility and limitation of liability: The LLC structure offers a flexible corporate form with limited liability for the shareholders. This protects the shareholders' personal assets from company liabilities.

Anonymity: In many US states, shareholders are not publicly registered in the commercial register. This offers a higher degree of Anonymity and data protection.

No automatic exchange of information: The USA does not participate in the international exchange of information under OECD CRS part. This means that information about the LLC's income is not automatically passed on to other countries.

Fast foundation and good Reputation: The formation and account opening of a US LLC is relatively straightforward and it enjoys a good reputation as a US company. This can facilitate international business operations.

Conclusion

An exempt LLC without a physical presence in the The USA undoubtedly represents a major challenge for EU citizens and international represents an attractive option for tax optimization. The structure offers considerable tax advantages and enables flexible and legally secure corporate management. However, it is important to carefully examine all legal and tax aspects and to meet the compliance requirements both in the USA and in the country of residence.

FAQ about the Exempt-LLC

What is an exempt LLC?
An exempt LLC is a Limited Liability Company in the USAwhich may be exempt from US tax liability under certain conditions, in particular if it has no physical presence in the USA.

What tax advantages does an exempt LLC offer?
The main advantages are the Tax exemption in the USA in the absence of a physical presence, the pass-through taxation of income and the avoidance of double taxation in the country of residence.

Do I need a separate Independence register in my country of residence?
This is not necessary in most EU countries. The income from the LLC can be declared directly in the personal tax return.

What documentation requirements do I need to observe?
Even if the LLC is tax-exempt in the U.S., Form 1040NR may need to be filed to report U.S. source income.

Can the LLC be taxable in other countries?
Yes, the tax exemption only applies to the USA. VAT obligations and other taxes may apply in other countries.

Why is it important to work with a tax advisor?
A tax advisor will help meet all legal and tax requirements and make the best use of the LLC structure to maximize tax benefits.