I am currently an owner of a US based single member LLC in Delaware which is in the startup stage. I am a US citizen, for what it matters.
Physically, I am living in Poland, which is part of the EU. My LLC requires many small web and graphic design services (template building, icon design, etc). Naturally, I would prefer to work with local (to me) contractors in Poland. They are physically close, and less expensive.
What do I need to do in order to be able to properly account for these services? I will most likely be paying cash, in local currency (PLN) as SWIFT transfers for such relatively small amounts of money will be expensive.
I can have them sign a contract, if necessary for documentation. However, if not needed, I would prefer to avoid any unnecessary paperwork.
Do I need to keep a petty cash account in PLN? Or do I expense it out of a USD petty cash account at the day's avg. forex rate?
They will not provide me with W-9's as they are not US persons. Do I need to issue 1099-MISC's to them? If not, do I need to report to the IRS these payments for services in some other way?
Any other considerations?
Can you pay for them yourself, then book it to the business as out of pocket expenses?
For the exchange rates, just batch them up and at month end, or quarter end, reimburse yourself at the prevailing rate.
What you mostly do is open yourself up for prosecvution by the polish government.
Because you run an unlicensed business in poland. Point. You make all decisions in poland and obviously havea busienss presence there, yet your delaraare llc has no reigstration in poland for running an office there. WIth you being the owner / only worker and living in poland you can also not claim that you are not making the decisions. Your LLC has to pay income tax in poland at least for all business it does in poland. and as all adminsitration is doen in poland (through you) you can not claim to just get the benefits, ESPECIALLY when you also hire local other companies and meeth them there etc.
Theey can invoice you ,and you give them oney - but you are legalyl liable for paying polish VAT. The "goods" do not exit poland and your hole "I am a delaware us company" will be seen as tax evasion because eu law is quite strict on foreign jursdical setups that ONLY are a postal address. The lLC is void, you are personally liable with your own moeny for all business you conduct in poland and you run an unregistrered business.
This is goign to explode in your face the moment you et a tax check at one of your suppliers and they start to investigate, which theys may do the moment you want a vat free invocie for being a none european entity. You LIVIGN in poland (most of the year at leaast) means you are fuly taxable for income tax in poland.
I strongly advice you to seek legal advice in poland. I foudn the polish tax offices to be quite ok as long as you have decent income and do not try to btray them openly - but you are two steps across the line with the delarware thing taht just cries "tax evasion" - at least for the polish government.
Note as discplaimer: I am a german national living in poland and running a 6 people company in poland. We work with zero polish customers and do business only international incvluding some "red flag" business for taxes. We are also midly profitable i european standard,s which means very porfitably bsy polish standards and thus get regular tax reviews.