Offshore Corp for E-comm (US CITIZEN)

[skatercrew1234]

Hey all! I am a US citizen, and currently have no means of renouncing my US Citizenship. I currently own a 50% stake in an e-commerce business, and I think it's about time to incorporate. Now, my partner (other 50% shareholder) is not a US citizen, although it would still make an offshore company a CFC in the eyes of the IRS.

I was looking to open up a Dubai FZ company, and to my understanding I would be just subject to a 10% GILTI tax by the IRS since it is a CFC. I have no need of paying myself out from the business, and have no issue in keeping most of the money in the FZ company. What do you guys think? Is my thinking here correct? Am I truly better off incorporating offshore for tax advantages? Feedback is appreciated!

 

[Sols]

If you trust your partner, the probably most efficient structure you can do is to incorporate wherever your partner is based, give them controlling stake (majority of votes) in the company and make them director, and position your role as a passive, minority shareholder. Hold the shares personally or through a Delaware S or C corp. You can appoint yourself as an adviser or consultant to the company if you want to be remunerated on a recurring basis.

You can play around with preference shares or different share series to ensure equal payout, while your partner (at least on paper) has effective control over the day to day.

An offshore structure is just going to look really bad. And there are no tax savings anyway. With the structure proposed above, the company pays corporate income tax where your partner is based and for all intents and purposes is a company domiciled and resident there. When it's pay day (i.e. dividends), you receive your share and pay taxes on it.

If your partner is resident in the US, then just bite the bullet and start the business in the US. Unless your partner is willing to relocate.

Of course, double check with a US tax adviser.

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This is the probably the answer to your question.

 

[skatercrew1234]

Sols said:
If you trust your partner, the probably most efficient structure you can do is to incorporate wherever your partner is based, give them controlling stake (majority of votes) in the company and make them director, and position your role as a passive, minority shareholder. Hold the shares personally or through a Delaware S or C corp. You can appoint yourself as an adviser or consultant to the company if you want to be remunerated on a recurring basis.

You can play around with preference shares or different share series to ensure equal payout, while your partner (at least on paper) has effective control over the day to day.

An offshore structure is just going to look really bad. And there are no tax savings anyway. With the structure proposed above, the company pays corporate income tax where your partner is based and for all intents and purposes is a company domiciled and resident there. When it's pay day (i.e. dividends), you receive your share and pay taxes on it.

If your partner is resident in the US, then just bite the bullet and start the business in the US. Unless your partner is willing to relocate.

Of course, double check with a US tax adviser.
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Hey brother, thanks for the feedback. My partner currently resides in the UAE, with a Dubai passport.