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- Corporate Structuring
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We can help you structure your investments to legally avoid the US Estate Taxes that apply to all shares held by non-Americans.
We can help you avoid common mistakes made by foreigners structuring their US Real Estate holding companies.
We can help you tax optimize your US investment vehicle.
We have helped 7 and 8 figure Online Sellers from all over the world navigate US tax compliance. Aside from tax treaty analysis, we help you structure with both indirect taxes (sales and use taxes) and direct taxes (income and corporate taxes) in mind.
Incorporating in the US is easy. Getting US work visas can be tricky. Expanding to the US in a way that leverages applicable international treaties and complies with international and domestic tax and migration rules is not easy.
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Many would have us believe that forming an LLC is as easy as logging onto the Delaware website and a few hundred dollars later it’s done.
Unsurprisingly, any professional with tax and legal experience would agree that it’s not that simple. If the intent is to use the LLC for some serious business purposes, you would probably need
– Professional advice and
– To spend thousands (rather than hundreds of dollars).
If you do not have a tax or legal background, here’s an introduction to US LLCs. It provides proper context and if your business is important to you it’s worth the 10 minutes of reading.
Now that you have that foundation, let’s talk about some other considerations:
- If the intent is to have the LLC form part of an international structure, the arrangement of the entities does matter as in the famous Arden case where a UK based investor invested into a US LLC:
- If you’re US exposed, remember self employment tax liability
- If you’re US exposed then perhaps an S Corp is superior to an LLC
- Maybe you’re a non US person investing in US assets? Consider using offshore companies as part of the corporate structure.
- Maybe you want to be an online seller? Then be aware of the potential implications, both in terms of personal liability and “sales and use” taxes
But let’s focus on a point raised in the first link above where I touched on asset protection?
If protection of the assets within the LLC is important to you read on. If not, you can stop here.
Choosing to use the LLC over (for example) a C Corporation may be prudent but raises the question of where to form the LLC. There are several factors to consider in deciding where to establish the entity.
Picking the right LLC jurisdiction may be as important as the decision to use an LLC.
In 2010, the Florida Supreme Court issued a ruling that eviscerated the effectiveness of the Florida single-member LLC for asset protection purposes. States such as Nevada, Alaska, and Wyoming provide express statutory language respecting the protection of single-member LLCs. Wyoming became a particular favorite because of its low cost and the fact that LLC members and managers were not required to be publicly disclosed. A recent decision by the Supreme Court of Wyoming, however, should give planners cause for concern. In the 2014 case of Greenhunter Energy, Inc. v. Western Ecosystems Technology, Inc. The Wyoming Supreme Court upheld a ruling that permitted the creditor of a corporation’s wholly owned subsidiary to “pierce the corporate veil” of the subsidiary, making the parent company responsible for the debts of its subsidiary.
Veil piercing is an extraordinary legal remedy typically reserved for those cases involving fraudulent conduct. The remedy is rarely permitted unless a limited liability entity is found to be mere” alter ego” of its owner such that it would be inequitable not to make the owner responsible for the subsidiary’s debts. In the Greenhunter, the Wyoming Supreme Court acknowledged that the two companies (parent and subsidiary) maintained separate bank accounts and business records. The court, however, took the unprecedented step of considering consolidated tax returns as a factor favoring the alter ego relationship and permitted the plaintiff to pierce the subsidiary (to reach the parent’s assets).
The Wyoming Supreme Court’s decision to confound tax treatment with legal liability is unprecedented and runs counter to proper application of LLC protections. This is a dangerous and surprising prospect from a state otherwise offering one of the most protective LLC statutes in the country. The ruling forces us to consider dropping Wyoming as an option for LLC formation.
Other factors should be considered as well.
- If stability is a concern, Delaware is a traditional choice and Nevada offers a sound alternative due to its reliance on Delaware’s long-standing body of favourable corporate law.
- If privacy is a concern, Delaware and Alaska are options.
- If the entity is to be owned by a single member and charging order protection is a concern, Nevada and Alaska offer sound legal framework.
- If maximum asset protection is desired, the best options are often offshore.
- And, finally, one should always consider the types of assets to be owned by the LLC. It makes a little sense, for instance, to use a Delaware LLC to house Florida real estate for assets protection. The practical reality is that any litigation involving the property is likely to occur in Florida, where a Florida court could be expected to apply Florida Law.
Entity selection is a fluid process.
The Supreme Court of a favored state can quickly throw the state’s law into tailspin.
Professional planning requires constant study…
Feel free to book a paid consult with one of our tax professionals now