Tax issues with hiring a US based contractor

[yngmind]

Let's imagine a guy who owns a disregarded entity, US LLC, is a tax resident of nowhere or a low-tax country (e.g., UAE), and wants to hire a new employee who resides in the US.

I know it can potentially create tax issues, which is why this smart guy (or not) established a work agreement with this person in the form of a ”˜self-employed contractor.'

Could there still be any issues?

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I'm not a tax advisor, so please don't consider my posts here as tax advice. Always seek a professional opinion.
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Business Bank Account for your US LLC Remotely

 

[aniglo22]

It doesn't really matter for the IRS if he calls himself a self-employed contractor .‌ The Relationship matters , if the contractor is solely relying on you for income and‍ also degree of control over the worker . The IRS will see through it and⁠ will classify him as an employee , therefore creating PE . And also if he⁤ makes significant business decisions it can also create PE see case InverWorld, Inc. v. Commissioner⁣ (1996)

 

[yngmind]

So hiring him for the company in another country⁢ would be a smart move.

 

[aniglo22]

Some countries , often with comprehensive social security have laws for‍ false self-employment . So watchout ! But I don't know to which extend they are⁠ enforced .

 

[daniels27]

Hiring him in France will give him all French labour rights. There⁠ have been cases with companies paying 24 months of salaries after laying them off. You⁤ definitely want to watch out and possibly stay out of EUSSR.

And as @aniglo22 pointed out, never contact people in the US for anything more than a simple job from⁣ fiverr.

 

[jafo]

I only do business with other companies...NOT individuals! 😉
This way, it's‍ NOT my problem!
I deal with several US LLCs. I suspect some are one-person entities,⁠ but I'll never ask, much less put something like this in writing to them.

I hope the people I do business with are sophisticated enough to know this.

PS. Also,⁤ I do NOT help people who need a job or something to do. I've witnessed⁣ way too many tragedies that started like this to ignore them and drive myself into⁢ this wall of eternal damnation. damn_(

 

[yngmind]

I have an Estonian company and wanted to use it to hire⁣ him there. I’ll explore the solutions with a lawyer and update you on that.

How is it going to work with those ‘freelance payment services,’ if you know what I⁢ mean. I don’t want to advertise anyone here, but something like Remote.com.

 

[yngmind]

What would be a reasonable jurisdiction to incorporate for staffing, with good EMIs available?

 

[aniglo22]

Toy stuffing ? You can just use services like plane, remote‍ ,rippling ,playroll . You don't need a new legal entity

 

[yngmind]

staffing* for sure, lol‍
Thanks

 

[daniels27]

They are no issue in terms of US taxes. Because they are⁠ small in terms of amount, there is no risk of them being considered "dependent" on⁤ you and also you won't hire director/managers there, normally.