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As a non-US tax resident, should you run your US business through an LLC or C-Corp?
LLC or C-Corp
If you use a C-Corp blocker, should your trading entity sit within an LLC or C-Corp? This is the questions Alfonso Nuñez of Andersen in San Francisco will discuss with you in this episode.
Here is what we learned but please listen in since Al Nunez explains this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
LLC or C-Corp
You start with the end. If your ultimate goal is a capital gain upon exit and you don’t worry about profit distributions in the meantime, then you might as well place the trading entity within a C-Corp. When you sell your shares, any capital gain will be tax exempt in the US and possibly also in Australia, at least while you hold the profits within your Australian holding company.
But if profit distribution is your goal, then you face double taxation since the US doesn’t have an imputation system. So your C-Corp trading entity pays tax and then your C-Corp blocker pays tax again on the net amount it received. Far from ideal.
So start-ups in Silicon Valley are more likely to use a C-Corp + C-Corp structure. But if you are a more traditional busienss looking at long-term expansion and not a quick exit, then C-Corp + C-Corp probably won’t work for you and you need to look at just one C-Corp and/or an LLC.
Consolidation
If your C-Corp blocker holds at least 80% of the C-Corp trading entity, you can probably caonsolidate and avoid double taxation in the US. But if you hold less than 80% in the trading C-Corp, then consolidation is off the table and you face double taxation.
Theese are just some quick notes. Please listen in since Al Nunez goes into a lot more details and shares many more insights than we listed here.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 12 October 2021
Tax Talks spoke to Alfonso Nuñez - Managing Director at Andersen - for more details.
