We have prepared a guide for those who do not live in the USA but have an LLC company in the USA to understand the US tax system. What you will learn in this guide:
- Why should you start an llc in the United States as a foreigner?
- How is a non-resident business owner taxed in the US?
- Frequently asked questions and answers
Why Do Non-US Citizens Form Companies in the USA?
There are a few reasons why foreigners who do not live in the USA form an llc in the USA;
- Access to more than 300 million customers
- The privilege of using Stripe and Paypal legally
- Opening a corporate bank account for the company in USD currency
- Giving confidence to potential customers and reassuring the company owner
The United States has a reputation for having one of the best economies in the world, with highly trusted companies registered within it.
Accessing business services offered in the USA is crucial for any individual looking to grow their business. It is essential for all businesses, and especially online businesses, to access services such as Stripe, PayPal and US banking to receive payments from their customers.
To access Stripe, PayPal and US banks that offer digital services, it is necessary to form an LLC company, otherwise these services cannot be used individually.
Tax System for Non-U.S.-Owned Corporations
How are LLCs whose owners are not U.S. residents taxed? Do You Have to Pay Tax in Usa?
Foreign-owned companies pay taxes only on business done in the United States. It ECI Enabled Connected Revenue . Effectively Connected Income (ECI)
We can concretize this with a small example;
For example, consider a Turkish citizen who owns a US LLC that makes software for a client in Louisiana. Let's assume that the software was developed by one or more engineers from Turkey or from another country other than the USA. In most cases, there is no obligation to pay income tax on money earned from this software service.
If the engineer who developed the software in the above scenario was in the USA, the Turkish entrepreneur who owns a US LLC company would be liable for taxes.
However, this may vary depending on some limits. Because every state in the USA has some limits on income and per transaction. If these limits are exceeded in any state, this time the ECI (Effective Linked Income) mentioned above comes into play.
For example, the limits in the state of Louisiana are as follows: Annual turnover from Louisiana residents is $100,000 or 200 transactions (200 checkouts or 200 invoices). An LLC that exceeds these limits has an active connection with this state.
Let's explain a little more based on the example;
The developed software is sold to the state of Louisiana. At this stage, the turnover limit of the state of Louisiana is $100,000, and if the cost of the software exceeds $100,000, the limit is exceeded and the company now has an active connection in the USA. If the software cost was $99.0000, there would be no effective connection as it would remain within the limits. In this scenario, the company owner would not pay any income tax.
In which state, which turnover and number of transactions constitute ECI for the company owner?
To find the answer, you can check out the list on US State Limits for Aliens
You generally do not have to pay tax in the United States unless you do extensive business in the United States and do not fall prey to any of the reasons that create an ECI in the United States.
For your US LLC to be exempt from federal tax in the US, it must meet the following criteria:
- LLC company owner must not be a US citizen
- The LLC company owner must not have any assets in the United States. For example, office, warehouse, branch, shop, payroll personnel, real estate, real estate, etc.
- The company's revenue must not be "effectively connected" (ECI)
An individual who meets any of the following criteria is unconditionally taxable in the United States:
- United States citizen
- Permanent resident or green card holder
- People who have lived in the US long enough and can meet the “substantial assets test”
- Those who are in the USA temporarily on an “F”, “J”, “M” or “Q” visa
- Members of a partnership doing business in the United States at any time during the tax year
- People who have lived in the United States for a certain period of time
If none of the above apply to you, you are a nonresident alien (NRA) by the IRS definition.
to the relevant page of the IRS for all the details on the subject .
Filing and Reporting Requirements for Foreign-Owned LLCs
Now that you know whether or not you have formed effective U.S. related income (ECI) as a foreign LLC owner, let's talk about what to do in both cases.
What to Do If ECI Occurs
If your company is in US actively linked income (ECI) status, you must report your income to the IRS at the end of tax season. To do this, 1040-NR must be filled out and a tax declaration submitted. For this process, it is necessary to receive services from a CPA (financial advisor) licensed in the USA.
Bookkeeping and Accounting for LLCs to File 1040-NR
LLCs are required to keep a preliminary accounting before a tax return can be filed. A profit and loss statement must be kept showing the amounts coming in and out of the LLC so accountants can file taxes. This is called bookeeping.
If you keep your preliminary accounting properly, your consultant will have solid data in his hands. Cloud-based software is generally used to easily keep these preliminary accounting records. If the costs of the software seem high to you, you can keep these accounting records in an Excel template in a suitable format, but if you have a large number of transactions, you can make things easier by connecting these software to your marketplace account or e-commerce store.
The most well-known among these software are Quickbooks or Freshbooks. If you use these software, all you have to do at the end of the year is to authorize your consultant from your software. All consultants who follow accounting processes in the USA are familiar with these software.
What to Do If ECI Has Not Occurred
If your company is not in active linked income (ECI) status from the US (you have not received a 1099K form from any marketplace or payment gateway), you do not need to pay taxes, but in any case, it is necessary to document the company's business activities throughout the year to the IRS. To do this, Forms 5472 and 1120 must be filled out.
To complete Forms 5472 and 1120, the following information must be provided to the CPA (consultant). Or if you are going to fill out the form yourself, you will still need this information.
- The amount of money transferred from a non-U.S. owner to the LLC during the tax year
- Amount of money transferred from the LLC to its non-U.S. owner during the tax year
- The value of the LLC as of December 31 of the tax year.
- Expenses, expenses, expenses for LLC
A statement of these is completed in the appropriate format and mailed or faxed to the IRS. Your company must have an EIN number when filling out this form.
Frequently Asked Questions
A single-member LLC that chooses to continue its operations as a disregarded entity pays or does not pay taxes depending on the status of the LLC owner. If the LLC provides services remotely, the owner of the LLC may not pay income taxes unless he or she is physically present in the United States or has effectively connected income (ECI) in the United States. This means that the LLC will not owe U.S. taxes and is not required to file an income tax return, except for the annual report payment in the state where the LLC is registered. However, keep in mind that if you do not derive your income from the United States, you may still be subject to income tax on that income in your home country.
If you sell goods to the United States, you must report your business income to the IRS. If you are a nonresident, you report your U.S. income on form 1040NR sent to the IRS. This form can be difficult to understand, so we recommend hiring a CPA (consultant) to manage your tax issues. You will also need an ITIN number at this stage.
Any LLC with more than one owner must file a federal tax return, even if it has zero income. This issue is interpreted by many consultants and different opinions emerge on the subject. At this stage, it is useful to declare income tax every year in order not to risk things.
Because a Corp company is a separate tax entity from its owners, it pays its own taxes. Money cannot be freely transferred between owners or shareholders and the company. The company may pay the expenses paid on behalf of the business to its owners. The only way shareholders make money from the business is if the company pays them dividends. Dividends are not a tax deduction, they are taxable income for shareholders.
In order to prepare and submit your tax return to the IRS, you need to hire an experienced CPA (financial advisor) in the USA. For the most part, returns must be completed by April 15. If you cannot meet this date, you can apply for an extension.
Remember, Corp companies must file quarterly reports, while LLCs file annually.
This type of tax only applies to Corp companies, not LLCs. Unlike federal income, which applies to all income sourced in the United States, it applies to income earned in the state by corporations in the Corp.
Although LLCs do not pay state income taxes, you should check with your counsel if there are any filing requirements depending on your state.
This does not matter for LLC, but it is important for Corp companies. For example, if you have a Delaware Corporation and your business has no income from Delaware, then you will have no corporate taxes payable to the state of Delaware, only federal corporate taxes.
Stripe knows where your customers' card payments come from on your website and keeps a real-time report of this. Stripe has a software algorithm that can understand the tax systems of all countries. 099-K when your LLC reaches the tax threshold . This report may mean that your company has now reached a certain turnover and this income needs to be taxed. If you use Stripe and they sent you a 1099-K, you should show it to your advisor and get information about the tax return due.
This form may appear if you have exceeded state turnover and transaction limits in the USA (ECI may have occurred) or if you have earned a large amount of income from any country other than the USA (you can get detailed information about the amount from Stripe). Speak to a CPA when you receive the form.
Each country has different taxation laws. When transferring income from your US company to your country (according to the laws of your country), you may be required to report this income to your revenue authority and pay an income tax in return. It is recommended that you obtain information from local advisors in your country regarding whether or not you should report this income depending on the amount of income. There are also tax agreements signed between countries, please consult your advisor about your rights in this context.
92 Comments . New Comment
Hello, is PUSH required to make a declaration? There is currently no active income in my company. What path should be followed?
If there is no active income, no declaration is required and no return is required.
Hello. On July 23, 2024, when should an LLC formed in Florida submit its annual report and tax return?
You can inquire with your document number from the FL state portal here: https://services.sunbiz.org/Filings/AnnualReport/FilingStart
Hello, I am currently doing dropshipping on Amazon Canada. We opened an llc in Usa for Amazon dropshipping. Since our earnings are in Canadian (CAD) currency, when we withdraw the money to our Payoneer account, it is withdrawn in USD. Do we need to declare our income in cad currency during tax declaration for our company in the USA and is the tax currency to be paid cad? usd ? How will it be done via? If USD is to be made, will it be determined in proportion to the CAD earnings?
Hello,
it will probably be USD, but it would be beneficial to get support from a consultant to clarify the issue.
Hello friends,
I recently formed an LLC company in Usa and received my EIN number. Then I opened a Mercury account. However, when I tried to register on some platforms to receive payments, such as PayPal and Stripe, they asked me for an ITIN (Individual Taxpayer Identification Number). In the videos and resources I watched, I saw that ITIN is not required for such platforms, in fact, most people complete their transactions with EIN. But right now these platforms do not allow me to continue without ITIN. What do you think I should do in this situation? How can I solve it without ITIN?
Also, how can I ensure that my Mercury account receives payments worldwide, not just from the US? If anyone has experience in this matter, I look forward to their help.
Thanks!
You probably selected the US citizenship section when opening a Stripe account. You can select TR and enter your Turkish ID number. If you do not want to push it this way, check the steps again when opening an account.
By the way, you made this comment under the tax topic, the topic is about stripe, so you are in the wrong topic. Read the Steipe topic, it explains step by step how to open an account.
Hello Mr. Nazmi,
On March 25, 2024, I formed a single-partner LLC in the state of Wyoming. I received my BOI in April and opened my bank account with Mercury. I started making my first product this month, in August. I didn't have any activity until then. Have I ever had to file any taxes? If no, will I file my first return in December 2024 or April 2025?
Have a nice day,
batur
Hello,
You must declare your activities in 2024 by the end of March 2025. It is not the current tax season, it would be better to declare it by the end of March or April 15, after the new year.
Hello, can anyone help me?
I set up a company and will open a Mercury account, but there is a situation like this: I am doing advertising, and after we chose our company as advertising in the Mercury account, we ended up imitating it. Mercury wants this from us at the end. What is this? What is it?
(Please share any other professional online profile
links, articles, or announcements that could help
verify your company or owner(s).
Please help anyone with information
Did they ask for this in the first account opening steps or later?
When I open a new account, it says what organization it is and I select the advertising sign for them.
Ask me additional questions at the end.
Please share any other professional online profile
links, articles, or announcements that could help
verify your company or owner(s).
he wants this
Can you send a screenshot?
Let's say we exceeded the sales limit in a few states and we need to pay tax. We will apply to each state separately and pay the taxes separately. Another one is that you said income tax. What will we pay income tax for? Will we pay an income tax on the entire income of the business or will we pay income tax on the profit from sales made to that state?
Sales tax and federal tax are two different things. Sales taxes collected in the state where the border is exceeded are refunded and must be refunded separately to each state.
Federal income tax is declared as net income after deducting expenses from total U.S. source income.
Thank you for your answer. Well, for example, the federal income tax is 0 in Wymoing. In this case, does it mean that we will not pay an income tax? If our company is formed in Wymoing, is there any declaration for this? Another question that comes to my mind is: If we did not exceed the state sales limits, but still had sales in the USA, do we need to make a declaration and pay any tax?
Federal income tax does not work by state; income is declared regardless of which state the company is formed. Wyoming state tax is 0, federal income tax is zero, there is no such thing as zero for US companies. It is clear that no tax is paid to the state, federal tax is declared to the state.
If you do not exceed the limits, you will probably not be taxed, but in this case, only an activity report called Form 5472 is declared, this is a form without paying taxes.
Only a fee of 62 USD is paid to the state every year. You can do this online and there is no need to pay any other tax to the state.
Hello, thank you very much for your informative answers and guidance.
I opened the company in February 2204 with what we learned from this site. wyoming too. I registered it on amazon. Do I need to pay different taxes other than the Wyoming annual tax? If so, could you please let me know which ones for me to research? thank you
You're welcome, we would be happy if it were to happen.
In Wyoming, there is an annual fee of 62 USD every year. You can pay it with your credit card on the state website before the company anniversary. You do not need to make any other payments to the state, and do not forget to renew your registered agent.
If you open a bank account by entering your company ID number or open accounts for different transactions and do business, you may also need to file a federal tax return. It would be beneficial to have these federal tax returns prepared by a licensed consultant in the USA, at the beginning of the new year for your activities during the year. If you make your declarations on time, you can continue your trade in a healthy way.
Hello, I read your explanations until the end, thank you. At this point, I had an important question; me and my 2 partners will form a mobile application company as an LLC in Usa. The startup will initially operate in Türkiye, but we will localize the app to many parts of the world, including Usa, when it comes to the store. In other words, users from most parts of the world will be able to download and make in-app purchases. We are Turkish citizens and after forming the company in Usa as a foreign founder, I do not think there will be an ECI situation between us and the USA for a long time. At this point, the issue that I care most about is how a mobile application company that is formed as an LLC in the USA and provides digital services will be taxed by the state and federal governments. In what cases will we be exempt from taxes, or what kind of incentives & tax deductions does Usa have for the software world? At what rates will we or will we pay corporate or income tax? I will be waiting for your answer, I wish you good work.
Hello,
You may have to pay federal income tax annually. Since you are an online company and do not have any physical store or office in the US state where the company is formed, you will be exempt from state taxes. As we mentioned, you only declare federal income to the state.
We do not have information about support and incentives. If you want, you can get help from a consultant or professional.
Hello. The topic may have been discussed before. If so, please excuse me.
I established my LLC company through you and I am ready to start online sales with Shopify. Regarding issuing invoices after sales; As far as I understand, I cannot issue an invoice based on an order placed in Shopify. However, I can create a draft order and issue an invoice. I saw a statement in the forums that there is no need to issue an invoice unless the customer requests it.
My question is: As an LLC company established in America, am I not obliged to issue an invoice for sales activities unless the customer requests it?
Does the checkout slip serve the same purpose as an invoice?
If an invoice is not mandatory, can I formalize the income with a checkout slip in the tax declaration?
Thank you in advance.
It is not mandatory, but it may be useful to create one.
Hello, we want to form an llc in Usa. Our aim is not to sell products or anything. We need Mercury debit cards. I am doing a social media business. I need an llc to open a Mercury account. My aim is to obtain credit cards. I need them for my business. Once this Mercury account is opened, we will deposit money from our own budget for our online business. To spend, in short, we will deposit money to the bank account from the country we live in and make payments to places such as advertising, google, facebook, but we are stuck in the taxation business, do I have to pay tax for this or how much will it be if I pay tax? Can you please help me with this?
Hello,
we recommend that you consult a financial advisor on the issue. It is not right to give tax advice this way because there can be too many variables.
Where can I get information about financial advisor?
Hello,
You can get consultancy at https://www.tamaccounting.com/tr
Hello,
I have an LLc company in Wyoming.
We established it online, we have a virtual office, we have no employees and no commute.
Recently, I received a notification from Shopify: "You need to collect sales taxes, you must register with the state to collect sales taxes."
We made sales of 40 thousand dollars in 3 months, including in different states. We also submit our declaration in April.
In this case, do we need to get tax license?
Do we need to collect taxes from sales here?
thanks
Hello,
in this case, you need to open a tax registration in the states where you exceeded the limits and you need to return the sales taxes collected from your customers in these states back to these states. You can work with a consultant for these transactions, you may have difficulty in dealing with them yourself.
Hello, I live in Turkey. I formed an LLC company in New Mexico in 2023. I did not earn any income. Do I still need to file a tax return? What happens if I don't? Thank you.
Hello, the tax return filing deadline ended on April 15. For your information, the previous year's declaration is given up to 15 times each year.
How many dollars will I have to pay as a penalty for being late?
Unfortunately, there is no clear information about penalties for every company. Unfortunately, the IRS sometimes conducts audits. If it is understood that a declaration was not made at that time, a penalty may be imposed on your company address in the USA, but as we stated, there is no such thing as a penalty for every company that does not make a declaration. This situation may only arise in possible audits.
Hello, I have an LLC single member company in New Mexico and I do not know which declarations I need to fill out every year. I am new. I will start selling in 1-2 months. I have sent the BOI report. Is there any other declaration that I need to send? Or is it enough to file a tax income declaration only once a year? What is it? Do I need to fill out a time declaration at the end of the year?
Hello,
if you established your company in 2024, keep the income and expenses for this year in an Excel table and keep digital copies of your expense invoices. You need to declare this year's activities in April 2025, there is no need for anything this year, BOI is sufficient anyway, BOI is also a one-time application.
There is no annual maintenance, report or payment in New Mexico, you just have to pay the annual service fee of Northwest agent.
I understand, thank you, so there is nothing extra I need to do for the company other than annual tax declaration.
Apart from the annual declaration, there is a registered representative fee offered by Northwest Agnet, which you have to renew every year. When the time comes, they will send you information via e-mail and they will create your online invoice and you can pay with your card. Other than that, no further action is required.
thanks
Hello, can you please answer me, I am in a difficult situation. No one gives proper information. I do not live in the USA, I have an LLC company in Wyoming. I do not have an itin number, only my ein number. My income was $31.60 deposited into Wise LLC account. The company formation fee is around 156 dollars. There is nothing else. I filled out the 1140 and 5472 forms and faxed them to the IRS. One of the five companies did it. Is there a need for a 1040 declaration or anything else? Please help and answer
Hello, this type of declaration is made by qualified consultants and the forms contain a lot of information. For this reason, unfortunately, no one can give you a clear answer on how to fill out these forms. Statements vary from company to company and are not in a clear pattern.
Since you have already made your declaration at this stage, it would be beneficial to check the accuracy of it with the person you receive service from. Unfortunately, you cannot find information on how to make declarations on our platform.
I have my own one-person LLC company in Wyoming, but it was an llc we used jointly. I gave up foreign trade due to the death of my friend. Even a bank account wasn't opened. Do I still need to fill out 1040NR or another declaration form?
Hello, 1040 nr cannot be filled for partnership companies. Instead, you must submit a 1065 partnership declaration.
There is no official partnership, but does it matter?
What is written next to your name on your e-in certificate?
SOLE MBR: SINGLE MEMBER, WITHOUT PARTNER, MEANS 1040 NR must be filled
MBR: MEANS JOINT PARTNERSHIP 1065 must be filled in
Hello, I have an LLC company in the USA and I haven't even opened a bank account yet, but I have a business in the USA with a turnover of 3000 dollars. Will anything happen if I don't submit a tax return?
If you have income, it will be beneficial for you to file a declaration.
Hello. I had previously formed a single-member LLC in Wyoming. I sell advertising services from my social media accounts via Fiverr. I have not received anything like this 1099K form yet. I will fill out and send the tax declaration forms for the LLC, but I am not sure if I should fill out the 1040nr. Most of my customers on that platform are from the USA, but I did not receive the so-called 1099k form. I think my income in 2023 is around 9k dollars. Do you think I should create eci and fill out 1040nr? Kind regards.
Hello,
The reason why you may not receive a possible 1099 K may be due to your low turnover. It is useful to fill out at least Form 5472
Can we integrate Kra… cpa software into our website for dropshippers?
Your question is not fully understood. If you write in more detail, we can give you correct information.
Hello, I want to ask something urgently. I applied to get an EIN number. Exactly 25 days have passed in July last month, but I have not received any information from the place where I received the fax. This made me happy, I wrote everything correctly, I called all the irs numbers, they cannot be reached, what should I do, whereas everyone can get 14 in 10 days? It takes a day, I would be glad if you could help me
Hello,
They do not respond to every application by fax, sometimes they do, do not believe everything you hear, the EIN certificate does not arrive in 10 days, but the fax does not come to every application.
Sometimes it can cause problems in fax systems. It is useful to send backups, but 25 days is normal in some states for it to arrive as a document.
Hello, I have read many of your articles, thank you for the information. After I reach the states and transactions written when I formed an LLc company in Wyoming, I think I will pay taxes for every product I sell, Amazon collects this directly from each sale. After Amazon pays the tax on all the products I sell (I will ask them about the Amazon part), will I ever pay taxes to the state where the Company is formed for the money collected in my company (excluding the $30-40 filing each year) And is there any tax other than the product tax for each state that exceeds the limit? will I give? Also, I think even though the product tax is paid automatically, we should definitely keep the income and expenses ourselves from the first installation?
No, you will not pay any taxes to the state except the annual state fee. Keep your year-end income and expenses in Excel (if you do not have accounting software) and forward the records to the consultant in the USA. According to these accounting records, only federal general tax declarations are made. Not to the state..
Hello, Bil LLC company was established at the beginning of 2023. When should it send its first tax declaration? No sales have been made yet.
Good luck.
Hello,
There is a problem in filling out Form 5472 until April 2024, so that there will be zero income.
If you do not have an accountant, you can contact us via the link below.
https://www.tammentor.com/?ref=90fc42
Thank you, you provide very fast and high quality service.
Hello,
We formed a multimember LLC in Usa and started selling our products on the e-commerce platform there, but my sales just started to occur. When I applied to get an ITIN number, they asked for my tax return document, but I could not send it because I did not have it. I think I need to pay tax in order to get my tax return document, but I don't know how and where to do it. Do you have any information about this subject?
Hello,
Since you did not apply through an IRS-approved agent (it appears as an individual application), they ask you for a tax return.
If you know how to prepare a tax return, you can prepare and submit your declaration in the correct class and in the correct tax season, but it is recommended that the tax return preparation be done by a licensed CPA, otherwise incorrect declarations will cause penalties or failure of the transaction. These types of procedures will be healthier if they are supervised by a professional.
Hello, is the US phone number you provided to us when establishing a company a virtual phone number or a physical SIM card?
After establishing a company, do I have to register with ICO if we want to make eticaert on our own website?
I think ico registration is required for GDPR.
Hello,
We do not provide any virtual phone number when forming an llc because there is no US area code telephone requirement when forming an llc. If you also need a phone number, you can get a sip phone number from skype business, Zadarma or talku, or if you have an e-sim supported phone, you can get an e-sim.
There is no ico registration requirement. If you are going to do e-commerce from your own site, you just need to open an EIN, bank account and stripe virtual POS account for your company.
Hello,
I am in the process of establishing a company with Stripe. They asked me for some information about what the company would do. I explained it and said, I'm not sure if it's an INC or LLC, can you give me information? However, before I could get any information, they applied as INC without responding to me because I marked INC from the beginning. Now the DE state has suspended the installation because there was a problem in verifying the address, it is waiting for verification from me. I don't think it makes sense to establish an INC for a company that I will grow on my own, from scratch, and from which I will want to withdraw as much money as I earn every month. What would be your advice? Thank you very much for your articles and past explanations on the page.
Hello,
Our website contains 100+ articles and guides on forming an LLC company and opening a stripe and bank account in an economical and efficient way. Despite this, it is difficult to understand why you unnecessarily spend a lot of money on Stripe and form an llc.
If you have started the installation, it would be better to get support directly from them on Stripe-related issues from now on.
Good luck.
Let me tell you why, I saw this site for the first time today. But are you sure right now, your INC company is trying to open… Thank you anyway.
Inc. company is preferred for much larger organizations, it will be quite a lot for the work you will do. Inc is a type of company that requires double tax filing (both the company and the owner), filing of meeting minutes every year, and many similar maintenance expenses. Of course, there will also be annual expenses that Stripe charges just for the company.
LLCs are more logical and economical in every way.
Unfortunately, closing companies formed with Stripe Atlas is many times more expensive than our alternative systems.
If you have placed an order and the installation phase has started, unfortunately there is not much you can do.
Good luck in your new job.
This was the answer I expected from them... But they directed me directly to the lawyer and he said that switching to an LLC after the company is opened costs more than 500 dollars. Also, the price changes depending on how many shares there are in INC. The part I don't know at all. But since I did not verify the address, the installation has not been completed yet. I hope they help, I'm waiting for an answer. If anyone encounters such a setback, I hope they will see and benefit from this answer. I will follow this site from now on. Thank you.
Hello,
I established an LLC company with a partner in October 2022, and due to a problem, I canceled the partnership and turned the company into a single-person LLC. Then I closed the company. I did not make any income, expenses or transactions. Will I file taxes?
Hello,
Have you canceled your EIN number?
What do you mean by cancelled? Is it canceled with the company or is an extra action required?
No, your company is just closing down, and since your spouse is active in the IRS, a cancellation petition must be written.
Otherwise, a declaration must be made every year.
So how can I cancel my eIN number? And if I cancel will I avoid paying taxes for this year?
Yes.
There are cancellation procedures here, fill out the form and mail it to the irs. In addition to the form, attach your spouse's document and company closing documents (if any) and send them all. That's all.
https://www.irs.gov/businesses/small-businesses-self-employed/canceling-an-ein-closing-your-account
If I do this, I won't have to pay taxes for this year and there won't be any penalties etc., right? I didn't misunderstand. Also, where should I mail it?
You will not pay taxes, you do not have a transaction, and if you cancel it, there will be no penalty etc.
Cancellation instructions are available here.
https://www.irs.gov/businesses/small-businesses-self-employed/canceling-an-ein-closing-your-account
Thank you so much, you really helped a lot 🙏
Hello, I formed a single owner LLC in September 2022. I live in Turkey, I am not a US citizen. I had already been trading on various platforms for a long time in the US, but as of October 2022, my earnings officially started to return through my LLC company. So, as 2022 comes to a close, I have officially earned income through my LLC company for about 2.5 months. We founded the company in Delaware. I also receive payments via Stripe. However, one of the channels I sell to sent me a 1099-K form, and I was surprised because I did not live in the US and I was not a citizen. I told them that I am a Turkish citizen and live in Turkey and they told me that the 1099-K form is only valid for US citizens. Then they asked me to fill out the WBEN-8 form and the problem was solved. But I buy goods within the US, trade within the US, and sell almost everywhere in Usa. I'm confused about what kind of tax process I'll be subject to. What path should I follow? Can I get information specifically about federal taxes?
Hello,
Since your income is from within the US, you probably reached a certain level of turnover and received a 1099k. 1099k is sent not only to US citizens but also to foreign-owned companies doing business registered in the US.
From now on, W8 will be of no use to you because stripe has already sent information to the IRS at the same time as the 1099k.
You can get accounting services, including IT, from our consultancy business partner without wasting your time. If you are interested, you can make an appointment here and get information about the process and price: https://turkotaxacc-1.hubspotpagebuilder.com/startupsole
In November 2022, my new single-owner LLC company was formed in Wyoming. There was no transaction or money flow. In this case, which numbered forms do I need to fill out for taxation? I did not receive a 1099.
Hello,
If you did not receive a 1099-K, you must fill out form 5472. You can get form 5472 service, including itin, from our consultancy business partner. If you are interested, you can make an appointment here and get information about the process and price: https://turkotaxacc-1.hubspotpagebuilder.com/startupsole
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Thank you. So is there a need for 1120?
You're welcome The consultants file the necessary document together with 5472 as Proforma 1120, they are in control of the process.
https://www.northwestregisteredagent.com/maintain-a-business/state-tax-rates
Hello, as far as I understand, there is no obligation to file an income tax unless the sales limits are exceeded or an active connection is not formed. In the link I mentioned, there are either none or personal tax rates. The question I want to ask is; When we declare income in the state of New Mexico when an active bond is formed or sales exceed the limits, is income tax calculated according to the rates specified in the link? In the state of Wyoming, the personal tax rate is stated as none, so won't we pay income tax when eci occurs?
Separately, I would like to ask you a question that I would like to get your opinion on?
In general, I want to establish a company to quickly enter the market with e-commerce and software projects at the first stage. So this can be a dtc e-commerce project or a micro saas project. If the project grows and investors are included, it can be continued with a new company. But in general, in which state does it make sense to establish a company for projects that I can bring to a 0-10k monthly income level and sell?
I'm thinking of New Mexico, this personal tax rate issue is on my mind, so I wanted to ask.
Thanks
Hello,
Unless a 1099-K tax return form is received from Stripe or similar platforms (which can be any platform that registers with an EIN) (meaning no ECI has occurred), single-member LLC owners only file income and expense returns by filing form 5472 at the end of the year. If you have not received a 1099-K, you are not required to pay or file federal income taxes.
LLC companies are not taxed on a state basis anyway; they only declare and pay federal income tax when necessary. This is the case in Wyoming, Delaware, New Mexico, etc. is independent of the state. LLCs already have federal taxes transferred to the owner, and the LLC owner pays or declares the federal tax. In summary, the state part is not very important at this stage, if you plan to form an LLC for a SAAS project, states that do not have annual maintenance or have low costs are preferred. Trying to attract entrepreneurs, New Mexico is preferred because it has no annual expenses.
This subject has been written and commented many times, but it was necessary to summarize it again;
You can have a single-member LLC in any state. You have a SAAS project and you generate income from the USA. When you exceed the limits in any state, ECI occurs and 1099k comes, at this stage a federal tax declaration is required. Whether your company is in Wyoming or Delaware, which has no personal income tax, you pay the tax to the U.S. Internal Revenue Service, not the state.
Example 2: Let's say you have a company in any of the states with the highest personal income taxes. Your customers always come from states where there is no tax, that is your source of income. Let's assume you have so many customers that ECI occurs. In this case, since you do not live in this state with a high personal income tax, you will not pay tax there again. You pay your taxes to the US Internal Revenue Service when ECI occurs.
Another explanation is this:
Having an llc in a state with no personal income tax does not prevent ECI formation when your customers are from the USA and you make a lot of sales. In other words, the state where the company is formed (if there is no representative, office, store, building, payroll worker affiliated with your LLC there) has nothing to do with ECI formation. ECI occurs when the limits are exceeded, and sometimes the limits can be exceeded even in a single state. Sometimes the total sales to 20 states may eventually be exceeded.
Coming to your last question, if you plan to receive investment, register your company in Delaware because funding platforms generally look very favorably on Delaware companies. But if you are going to do e-commerce classically, choose a state that does not have annual maintenance, for example NM.
Personal tax does not apply to LLCs formed as foreigners, unless you personally live in that state and do business there (ECI arising from sales and limits is not related to this). There is federal tax, which is calculated according to annual turnover, business type, income class, income amount, and the region where the income comes from. After all your expenses are deducted, a sane accountant will make you pay a good tax rate at the end of the year.
I hope it was useful.
Sir, all e-commerce sellers (amazon, etsy, etc.) cover ECI, so can we say that all e-commerce sellers have to pay the tax in Usa, not in Turkey?
For 1099k shipments, you already have to pay in the USA at that stage.
The 1099 received from Amazon confirms this, yes, but where can I access the tax rates?
Please consult your accountant. If you received a 1099k, the advisor will inform you about this.
Hello sir, I have an LLC company in the USA DELAWARE state, which is about to complete 1 year. I am not working in any job in TR. I only transfer my income to my LLC through Amazon. I only withdraw a small amount of money to Turkey on the 15th of each month, which I give to myself as a salary.
The monthly turnover within the company is over $100,000. I make a profit of around 10% on this and it continues to grow. My question is, do I have to pay income tax on this money during the US tax period (April/May)? My second question is, after paying this income tax, will this money be taxed again when I withdraw money from my company to my personal dollar account?
Best regards,
Hello, yes, you must file a federal tax return for the income you earned from your LLC company in 2022 by April 2023.
Assuming that you are using a pre-accounting program such as Quickbooks, you can only authorize the accountant to make a statement from this application. If there is no software, classifying so many transaction records will cause you great costs on the accounting side.
After paying your taxes there, you can still benefit from the ongoing asset peace when transferring your money to Türkiye. Again, consult your accountant about the issue. Can you use the advantage of a tax agreement between two countries? This is also an important issue, but in any case, the ongoing peace of existence is quite advantageous.
Thank you sir, thank you for your efforts, it was once again a very informative article.
I have a request, but this depends entirely on your personal wishes; As you know, among those dealing with e-commerce businesses, the number of people who have formed or want to form an llc in the UK is quite high. If possible, it would be great if you could share an article about forming an llc in the UK, fees, required information, registered agents and taxation.
Thanks in advance.
Thanks for your comment.
Unfortunately, we are not very familiar with the UK's tax system and the legislation regarding company formment, but if we can research the subject and get accurate information from net sources, we will of course share such posts.
It is stated on the government website that there is zero tax up to a certain limit in the UK, but we hear from our followers that even companies that do not make any turnover after registering watts receive tax payment letters at the end of the year.
Each country has certain laws and regulations. No country allows trade within itself to be tax-free and to use its resources to run a free-for-all, so to speak. Certain laws and statutes limit these.
In the USA, even if there is no turnover, it is necessary to fill out at least the 5472 form every year and transfer the information to the IRS. Depending on the source of income, it may be necessary to declare income and expenses with form 1040 and pay taxes every year. This varies for each company, in the USA...
It doesn't make sense to start a business with hearsay information.
It is necessary to research thoroughly before attempting. If we do a certain research and get accurate information, we will definitely share an article.