Forming a US LLC and paying taxes while outside the US


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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 Virginia

  • 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?
Scenario Two: Form the company in Delaware

  • 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.

It 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?

I am sorry if my post is confusing, but I am really confused on what to do. I would appreciate any help. Thank you.

LLC Foreign Business USA

asked Apr 17 '13 at 07:39
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Tolgamorf
103 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll
  • "What difference does it make?" - those outside of the US are less likely to want to do it themselves. There's no reason not to, but those outside the US will be easier to be convinced otherwise. – Littleadv 7 years ago

2 Answers


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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

You are not "resident alien". You're on J1 visa, and as such you're not considered resident for any purpose (neither immigration nor taxes).

I do have an SSN

Irrelevant 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 with
respect to taxes, and each member pay taxes on their share of the
profits on their personal income tax returns.

That is correct.

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.

Your questions:

As I am currently a resident in Virginia, should we form the company
in Virginia?

Since 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 and
also open a business bank account.

You don't need SSN to get EIN. Any TIN will do. But in your case, since you have SSN, that is your TIN.

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 I
leave? Do we need to follow any other procedures?

You can renew. Check the State laws about other procedures.

I hear that Delaware has several advantages, especially for companies
whose members are outside the US.

Not really relevant to you, these are advantages for companies looking for investors/public companies.

Other questions are location agnostic, DE or VA, the answers are the same.

answered Apr 17 '13 at 08:10
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Littleadv
5,090 points
  • Thank you for the clarification. It is good to know that advantages of Delaware does not apply to us. I only mentioned the SSN to state that I would be able to obtain EIN number for the business. – Tolgamorf 7 years ago
  • What about other official documents that we might need, i.e. apostille certificate? Is there a place that I can get some information on those? Also, could you suggest me a registered agent company that we can trust, if you happen to know? Thanks, again. – Tolgamorf 7 years ago
  • @tolgamorf you don't need SSN to obtain EIN, and you don't need EIN unless you plan to have employees. – Littleadv 7 years ago
  • Good to know, thank you. – Tolgamorf 7 years ago
  • @tolgamorf for apostille certificates contact your consulate (what do you need those for?). For US-documents - you get the apostilles from the relevant State Secretary of State. – Littleadv 7 years ago
  • It's just that I thought it might be good to have a certification of our company for our home country. I am not sure if we need such a document, though. Just in case. – Tolgamorf 7 years ago
  • @tolgamorf then you get it from the State of incorporation. Check if you really need it, apostilles are troublesome to get from afar. – Littleadv 7 years ago
  • All right, thank you so much. – Tolgamorf 7 years ago
  • @tolgamorf actually I might have been wrong re EIN. Since you're forming a MMLLC, you'll have to file a tax return for the LLC (form 1065), so you *will* need EIN for that. – Littleadv 7 years ago
  • Well, I thought MMLLC's can be pass-through entities. Does this mean that we will need to pay taxes for the company and also individual taxes? Or that form is just a formality? – Tolgamorf 7 years ago
  • @tolgamorf its a "report-only" form. "just a formality" is one way to put it... – Littleadv 7 years ago
  • Great information, thanks! – Tolgamorf 7 years ago
  • I forgot to mention it in my question, but the reason for me bringing up Delaware instead of Virginia is the state taxes. I wonder if we will need to pay state taxes in our personal tax filing? For the first year I think I will have to pay it since I will be present in Virginia until the end of the year, but what about after I go back? And also what about my partner's situation? – Tolgamorf 7 years ago
  • @tolgamorf you'll have to check residency and sourcing rules in these states – Littleadv 7 years ago

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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.

answered Apr 18 '13 at 16:48
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Turtle Powered
129 points
  • thank you for the information. I've contacted the online support of Bank of America. They told me that there is a possibility that they would need my partner to be present during opening a business account. But I was also told to discuss it with a branch, where they may suggest a solution. – Tolgamorf 7 years ago

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