US single member foreign owned LLC, can you accumulate the profit in the company account?

[netizen]

Hi folks,

I am looking into pass-through single member US LLC. There are tons of info on this platform about it, but I don't see anything mentioned about profit accumulation.
Can the LLC accumulate the profit, or does it have to be passed to the owner 100% at the end of the year? Or is there an alternative way to accumulate the profit without paying hefty corporate taxes?

Asking this because currently I do not need the money and would like to keep in the company.

 

[inector]

netizen said:
Hi folks,

I am looking into pass-through single member US LLC. There are tons of info on this platform about it, but I don't see anything mentioned about profit accumulation.
Can the LLC accumulate the profit, or does it have to be passed to the owner 100% at the end of the year? Or is there an alternative way to accumulate the profit without paying hefty corporate taxes?

Asking this because currently I do not need the money and would like to keep in the company.
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As you mentioned, they are pass-through entities, meaning they don't accumulate anything, but immediately pass all the profits the owner.

Regarding other alternatives, you can look into Estonia. You have tax until distribution, meaning you can accumulate as much as you want, and only after you decide to withdraw the profits you will pay 22% (new income tax I believe, it was 20% before). There are many ways you can withdraw "salary", and not "dividend", with less taxes, but it's for another topic.

Another option is Poland, but you have requirements to have employees and overall it's much more difficult there.

Make sure to check for withholding taxes, because dividends are subject to them. Although foreign-owned US LLC might have 0% tax, you can be subject up to 30% (depending on whether there is a treaty).

Hope it helped.

 

[bubbledouble]

All US LLC's are taxed to where their owned are resident.

 

[Marzio]

bubbledouble said:
All US LLC's are taxed to where their owned are resident.
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LLC's are taxed where they are managed.

Almost always LLC's are managed by the owner so your statement is true 99% of the times.

inector said:
As you mentioned, they are pass-through entities, meaning they don't accumulate anything, but immediately pass all the profits the owner.
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That's true only IF the country where the UBO is resident sees the LLC as transparent.

There are countries like UK where a US LLC is seen as an opaque entity, it's considered like a UK LTD.

This leads us to the conclusion that IF the US LLC is managed from a tax free country the LLC will be tax resident there paying 0% taxes AND the UBO is resident in a country where LLC is seen as opaque entity or territorial tax country or a country where personal income taxes are exempt (like UAE) he could happly live tax free.

That will not work with UBO resident in a country with strict CFC rules so EU is out.

 

[bubbledouble]

Marzio said:
LLC's are taxed where they are managed.

Almost always LLC's are managed by the owner so your statement is true 99% of the times.
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if you don't have address and management but only your self which is what OP clearly says, I'm 100% right

 

[Marzio]

bubbledouble said:
which is what OP clearly says
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He isn't an accomplished tax planner like you and most likely he doesn't know what he doesn't know.

Infact...

netizen said:
is there an alternative way to accumulate the profit without paying hefty corporate taxes
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... he explicitly asked about alternative ways to accumulate profits and that's extactly what i told him.

bubbledouble said:
I'm 100% right
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Ok but don't cry

 

[CyprusLawyer101]

netizen said:
Hi folks,

I am looking into pass-through single member US LLC. There are tons of info on this platform about it, but I don't see anything mentioned about profit accumulation.
Can the LLC accumulate the profit, or does it have to be passed to the owner 100% at the end of the year? Or is there an alternative way to accumulate the profit without paying hefty corporate taxes?

Asking this because currently I do not need the money and would like to keep in the company.
Click to expand...

Were the money generated already?
Maybe tax is already due. If you are talking about future profits, I should be able to help.

 

[OffshorePhantom]

Marzio said:
This leads us to the conclusion that IF the US LLC is managed from a tax free country the LLC will be tax resident there paying 0% taxes AND the UBO is resident in a country where LLC is seen as opaque entity or territorial tax country or a country where personal income taxes are exempt (like UAE) he could happly live tax free.
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I guess the new job of 2024 would be to offer nominee manager services for US LLCs with a Dubai-resident single member, lots of demand those days 😀

 

[Marzio]

OffshorePhantom said:
I guess the new job of 2024 would be to offer nominee manager services for US LLCs with a Dubai-resident single member, lots of demand those days
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You nailed it my friend! 😛

 

[netizen]

Ok, yea I understand that the tax has to be paid where the owner is resident.

However, my question was slightly different. Let's say the owner lives in a county like Dubai where there is no income tax, or low income tax like Singapore (and pays the owed income tax), would the profit accumulation in LLC work? Or does the LLC have to transfer all the profit to the owner by the end of the year?

Last edited: Dec 13, 2023

 

[OffshorePhantom]

netizen said:
Ok, yea I understand that the tax has to be paid where the owner is resident.

However, my question was slightly different. Let's say the owner lives in a county like Dubai where there is no income tax, or low income tax like Singapore (and pays the owned income tax), would the profit accumulation in LLC work? Or does the LLC have to transfer all the profit to the owner by the end of the year?
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If you are also the manager of the LLC, the LLC will be effectively managed from Dubai even if you do not distribute any profits and you have to register for Corporate Tax and pay 9% tax.

We suggested appointing a manager of the LLC who lives in a tax-free country or territorial taxation so that the LLC is managed from there and for example, is not in the scope of Dubai Corporate tax, then you can distribute the profits tax-free to Dubai since there is no income tax.

 

[Cloudbanck]

netizen said:
Ok, yea I understand that the tax has to be paid where the owner is resident.

However, my question was slightly different. Let's say the owner lives in a county like Dubai where there is no income tax, or low income tax like Singapore (and pays the owned income tax), would the profit accumulation in LLC work? Or does the LLC have to transfer all the profit to the owner by the end of the year?
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You can choose whether to leave funds/profits with the US LLC, or whether to distribute them to the owner. The owner reports how much distributions have been made each year to US authorities. There is no requirement from the US to distribute everything - the owner chooses how much to distribute. Then the owner does personal tax returns/registrations/corp tax returns in the country he/she is tax resident in as per that country's rules.

 

[inector]

netizen said:
Or does the LLC have to transfer all the profit to the owner by the end of the year?
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LLC doesn't have to transfer all the profit to the owner by the end of year. It only has to be reported in the country of the owner. You can keep the funds there for as long as you like.

netizen said:
where there is no income tax
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Let's say you manage it from Dubai. Legally, all profit from US LLC would be subject to 0%. Perfect. However, as Marzio mentioned, since you manage it from Dubai - UAE can consider it to be a UAE company. Because of something called "Permanent Establishment (PE)" (there is a lot of info on the forum). Hence, your profit accumulation at 0% tax wouldn't work (since UAE has 9% tax now).

OffshorePhantom said:
We suggested appointing a manager of the LLC who lives in a tax-free country or territorial taxation so that the LLC is managed from there and for example, is not in the scope of Dubai Corporate tax, then you can distribute the profits tax-free to Dubai since there is no income tax.
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This would work, but at high volume once Dubai starts to investigate, paying 9% would sound like a better idea.

 

[noname]

I'd like to ask a few question on US non resident LLC if someone willing to answer. It seems like the best option for me compared to other locations. I have 10% tax in my country of residence Bosnia.

Are you allowed to withdraw money to yourself from LLC as soon as you earn something, or you must wait end of the year to distribute profit?

Do you withdraw profit as dividend or I must issue invoice to my US LLC?

Can I use my main country company as the LLC ubo or must be individual person?

I am not even sure if its legal here to own LLC but they probably woudn't even know, and if they do as long as you pay tax where you live I see no problem with it both in the US or home country.

Hope you have a great Christmas friends that celebrate hap¤#"

 

[Alexmorgan]

netizen said:
Ok, yea I understand that the tax has to be paid where the owner is resident.

However, my question was slightly different. Let's say the owner lives in a county like Dubai where there is no income tax, or low income tax like Singapore (and pays the owed income tax), would the profit accumulation in LLC work? Or does the LLC have to transfer all the profit to the owner by the end of the year?
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Simply you pay 0 taxes

I have US LLC and live in Bahrain and i pay 0 taxes

 

[Cloudbanck]

noname said:
I'd like to ask a few question on US non resident LLC if someone willing to answer. It seems like the best option for me compared to other locations. I have 10% tax in my country of residence Bosnia.

Are you allowed to withdraw money to yourself from LLC as soon as you earn something, or you must wait end of the year to distribute profit?
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Yeah, you can withdraw whenever you like,

noname said:
Do you withdraw profit as dividend or I must issue invoice to my US LLC?
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From the US perspective it's called a distribution which technically isnt a dividend. How it's treated from the Bosnian perspective I dont know, but what's best to do depends on how Bosnian tax authorities treat US LLCs.

noname said:
Can I use my main country company as the LLC ubo or must be individual person?
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Another company can own the US LLC, but a ubo must be the - well - ultimate beneficial owner and this must be an individual person I believe (or is a trust possible?)

Last edited: Dec 24, 2023

 

[Alexmorgan]

As im US LLC owner

I live in Bahrain and i pay 0 taxes but mercury pushing me to do business in US so im doing a very big one they will be happy from it

I just log in to the company bank account and i do owner draw what ever i want as im the only owner and at any time and of course salaries and expenses are the priority so as i know my income and expenses

2 years now and going to the third on this way with no problems

 

[Cloudbanck]

Alexmorgan said:
As im US LLC owner

I live in Bahrain and i pay 0 taxes but mercury pushing me to do business in US so im doing a very big one they will be happy from it

I just log in to the company bank account and i do owner draw what ever i want as im the only owner and at any time and of course salaries and expenses are the priority so as i know my income and expenses

2 years now and going to the third on this way with no problems
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Yeah, Bahrain has no corporate tax (yet) and I presume no rules about tax on foreign companies effectively managed and controlled from Bahrain, so that's fine. Bosnia has a corporate income tax of 10%, so the situation is different. However, how Bosnia in practice handles residents of Bosnia owning foreign companies might not be so clear - could very well be that one gets away with 0%, (or that one has to pay 10%).

 

[Alexmorgan]

Cloudbanck said:
Yeah, Bahrain has no corporate tax (yet) and I presume no rules about tax on foreign companies effectively managed and controlled from Bahrain, so that's fine. Bosnia has a corporate income tax of 10%, so the situation is different. However, how Bosnia in practice handles residents of Bosnia owning foreign companies might not be so clear - could very well be that one gets away with 0%, (or that one has to pay 10%).
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I live in Bahrain but i dont have company in it so basically im individual who own a company outside of Bahrain which they dont ask about it and they dont have income taxes too

Even if you lived in Qatar , Kuwait, Saudi Arabia, UAE and Oman you dont pay income taxes if you earn money inside as salaries, outside the country as salaries or company revenues.

Just corporate tax 9% if you have company inside UAE or 20% corporate tax in Saudi Arabia if you have company inside it

 

[Cloudbanck]

Alexmorgan said:
I live in Bahrain but i dont have company in it so basically im individual who own a company outside of Bahrain which they dont ask about it and they dont have income taxes too

Even if you lived in Qatar , Kuwait, Saudi Arabia, UAE and Oman you dont pay income taxes if you earn money inside as salaries, outside the country as salaries or company revenues.

Just corporate tax 9% if you have company inside UAE or 20% corporate tax in Saudi Arabia if you have company inside it
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Well, I don't know about the other gulf countries, but with the new UAE corp tax rules, if you live in the UAE and manage a foreign company from the UAE, it is taxed just like a local company.

So you can take a salary from it tax free, but the salary has to be reasonable market level. Then you pay 9% tax on profits above 375k AED.