I am currently a resident alien in Virginia. I have been in the US since November 2011 (never left) and I have a J-1 visa, which expires on February 2014. I am going to leave US and go back to my home country (Turkey) before the end of this year. I also don't have any US-income as I am sponsored by my home country, however, I do have an SSN.
We are planning to form a US based LLC with a friend, who is a Turkish citizen but resides in Russia. This is a software company, and our income will be through Apple App Store sales, and maybe some individual app sales through PayPal.
Both of us will be members of the LLC, on a 50% basis. I understand that by default, LLC is a pass-through entity with respect to taxes, and each member pay taxes on their share of the profits on their personal income tax returns. That wouldn't be a problem if both of us were in the US. However, the situation is complicated. I also have limited information about ITIN, EIN, etc. I also would like to state that we will definitely hire a third-party registered agent.
What would be the best scenario for forming the LLC in our case? I have the following questions:
Scenario One: Form the company in VirginiaIt is unclear to me if it is beneficial to start the company while I am in the US, or if it is better to start it when I get back. I also would like to know about registered agents, because they have different and much more expensive plans for forming LLCs from outside the US. What difference does it make? If I start the company right now, would we need to switch to another registered agent or another plan?
Scenario Two: Form the company in Delaware
- As I am currently a resident in Virginia, should we form the company in Virginia?
- Since I have SSN, I think I will be able to obtain EIN for the LLC and also open a business bank account. Would my partner needs to do anything, i.e. apply for an ITIN?
- How would we pay taxes? As I've stated before, I will be back in my home country by the end of this year and will no longer be a resident in the US. Will I be able to pay income taxes from my share while I am outside the US? Would my SSN expire? Will I need to get an ITIN? What about my partner, how will he pay taxes?
- Can we renew the LLC in Virginia and continue our business after I leave? Do we need to follow any other procedures?
- I hear that Delaware has several advantages, especially for companies whose members are outside the US. However, since I am currently in Virginia, can we start the business in Delaware? Would it be a better choice?
- Same questions about taxes, EIN, SSN, ITIN apply here, as well.
- Also same questions about what should we do after I go back.
I am sorry if my post is confusing, but I am really confused on what to do. I would appreciate any help. Thank you.
I am currently a resident alien in Virginia. I have been in the USYou are not "resident alien". You're on J1 visa, and as such you're not considered resident for any purpose (neither immigration nor taxes).
since November 2011 (never left) and I have a J-1 visa
I do have an SSNIrrelevant piece of information. Having SSN doesn't give you any rights whatsoever. Its just a number.
I understand that by default, LLC is a pass-through entity withThat is correct.
respect to taxes, and each member pay taxes on their share of the
profits on their personal income tax returns.
That wouldn't be a problem if both of us were in the US.How does it matter where you are? Tax-wise you're non-residents, both of you.
As I am currently a resident in Virginia, should we form the companySince you're not planning to stay in the US - it doesn't matter where you are now. Open it in the most convenient (=cheapest and least troublesome) state.
Since I have SSN, I think I will be able to obtain EIN for the LLC andYou don't need SSN to get EIN. Any TIN will do. But in your case, since you have SSN, that is your TIN.
also open a business bank account.
Would my partner needs to do anything, i.e. apply for an ITIN?Yes. Your partner will need ITIN, you won't since you have SSN which is a TIN. You both will have to file US tax returns.
You'll also have to file a partnership tax return (form 1065) for the LLC itself
Can we renew the LLC in Virginia and continue our business after IYou can renew. Check the State laws about other procedures.
leave? Do we need to follow any other procedures?
I hear that Delaware has several advantages, especially for companiesNot really relevant to you, these are advantages for companies looking for investors/public companies.
whose members are outside the US.
Other questions are location agnostic, DE or VA, the answers are the same.
Corporation formation is just one of the hurdles you'll have to overcome (and I think littleadv covered that pretty well already). You might have banking issues as well. You'll need a bank account in the state of Virginia/DE if that's where you form your LLC and it's very likely that you'll need to be present to open it. The fact that your an out-of-country citizen could be an issue for a business account. It's worth looking into sooner rather than later.
There is also the issue of paying foreign-owned entities through paypal and the apple store. Look deeply into their rules and regulations - specifically about internationally owned businesses. There is the potential of them permanently withholding payment if you are in violation of one of their rules.