Company Credit Card for Personal Use?

[Ethernity4ever]

Hello,

I recently opened up a LLC as a foreign citizen, U got a mercury bank account and issued myself a card.

My question is, can I use this card to purchase personal items? Since the company is in the US and there are no tax obligations to the US for foreign citizens anyway, will it matter if I use this card for my everyday purchases?

 

[Sols]

Never mix personal and company money, not even for pass-through entities.

It's not that it will matter. It's that it might matter. And when it does (audit, tax investigation, criminal investigation), you're going to wish you never had done it.

It's much easier to just distribute profits from the company to yourself and use your own personal money, account, and card.

Keep in mind that your US LLC has to comply with the local laws of where you live. What does local law say about using company credit card for personal spending? Is it allowed? Is it a taxable event?

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This is the probably the answer to your question.

 

[Scratch]

Sols said:
Never mix personal and company money, not even for pass-through entities.

It's not that it will matter. It's that it might matter. And when it does (audit, tax investigation, criminal investigation), you're going to wish you never had done it.

It's much easier to just distribute profits from the company to yourself and use your own personal money, account, and card.

Keep in mind that your US LLC has to comply with the local laws of where you live. What does local law say about using company credit card for personal spending? Is it allowed? Is it a taxable event?
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I'm a newbie when it comes to companies, but what is the usual way people distribute profits? Wire transfer to their personal bank account? Are there other ways as well?

 

[Sols]

Scratch said:
I'm a newbie when it comes to companies, but what is the usual way people distribute profits? Wire transfer to their personal bank account? Are there other ways as well?
Click to expand...

The first thing you do is draft a board resolution or equivalent where the amount of profit to be distributed is calculated and states. When you know how much to pay, you just pay that amount.

The most common is indeed a wire transfer from the company bank account to the recipient's personal bank account.

There are other ways such as distribution in kind, in the form of assets or crypto. But you have to be very careful with this and make sure it's in line with local law.

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This is the probably the answer to your question.

 

[Scratch]

Got it, thanks @Sols!

And the drafting of this document is also required for single-member US LLCs? Do I need to register it? Seems the registered agent didn't explain those things, basically just said to wire any amount as needed (but don't mix personal expenses in the company account), and file the form 5742 with a list of all the transactions between the LLC and foreign entity, and the pro forma 1120.

 

[Ethernity4ever]

Sols said:
Never mix personal and company money, not even for pass-through entities.

It's not that it will matter. It's that it might matter. And when it does (audit, tax investigation, criminal investigation), you're going to wish you never had done it.

It's much easier to just distribute profits from the company to yourself and use your own personal money, account, and card.

Keep in mind that your US LLC has to comply with the local laws of where you live. What does local law say about using company credit card for personal spending? Is it allowed? Is it a taxable event?
Click to expand...

Here you can use the company card for pretty much anything. That's why I'm not worried about the LLC that much, however, where can one open up a personal account to stay off the radar since payoneer is no longer an option for me.

Last edited: Nov 10, 2022

 

[Sols]

Scratch said:
And the drafting of this document is also required for single-member US LLCs? Do I need to register it? Seems the registered agent didn't explain those things, basically just said to wire any amount as needed (but don't mix personal expenses in the company account), and file the form 5742 with a list of all the transactions between the LLC and foreign entity, and the pro forma 1120.
Click to expand...

For an LLC, you have a lot of freedom under US law. You can dictate in the Operating Agreement how and when profits are distributed. Things might get tricky where you live, though, depending on how income from a US LLC is considered.

Most US registered agents are just registered agents, which doesn't require any knowledge of law or accounting.

Ethernity4ever said:
Here you can use the company card for pretty much anything.
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But is it a taxable event?

Ethernity4ever said:
That's why I'm not worried about the LLC that much, however, where can one open up a personal account to stay off the radar since payoneer is no longer an option for me.
Click to expand...

Realistically, nowhere. It's 2022. Time to accept CRS and reciprocal FATCA. Forget secrecy. What most people interested in this are doing nowadays is relocating to a place with low/zero tax. Relying on secrecy is not sustainable.

Toggle signature
This is the probably the answer to your question.

 

[Ethernity4ever]

Sols said:
For an LLC, you have a lot of freedom under US law. You can dictate in the Operating Agreement how and when profits are distributed. Things might get tricky where you live, though, depending on how income from a US LLC is considered.

Most US registered agents are just registered agents, which doesn't require any knowledge of law or accounting.


But is it a taxable event?


Realistically, nowhere. It's 2022. Time to accept CRS and reciprocal FATCA. Forget secrecy. What most people interested in this are doing nowadays is relocating to a place with low/zero tax. Relying on secrecy is not sustainable.
Click to expand...

Nop, not taxable, here we only pay tax based on income, there are no tax reductions if we buy something for the company or invest in the company. Basically, you pay 20% tax, and you're done. You can use the company money however you want, withdraw it, purchase anything, etc.

As a foreign-owned LLC as far as I know I don't have to keep any bills or do any bookkeeping regarding my LLC spending, this was told to me by the bank as well.

 

[SWinja]

Ethernity4ever said:
Nop, not taxable, here we only pay tax based on income, there are no tax reductions if we buy something for the company or invest in the company. Basically, you pay 20% tax, and you're done. You can use the company money however you want, withdraw it, purchase anything, etc.

As a foreign-owned LLC as far as I know I don't have to keep any bills or do any bookkeeping regarding my LLC spending, this was told to me by the bank as well.
Click to expand...

What do you mean by you pay 20% tax and you're done?
Example, your US LLC has revenue 10K, expenses = 4K
Your profit = 10 - 4 = 6K

So you will have to pay 20% from 6K, right?
What you want to achrieve is to increase expenses from 4K to greater value and pay less taxes in the end.

 

[ShillGates]

look at that kid SBF , he did it loooooooool