Jason KnottInternational Tax Attorney and U.S. CPA

Practice focused on legal international tax strategies, asset protection and privacy, offshore banking and corporate structures. Strategies to navigate US FATCA and CRS reporting regimes.

Recent Answers

No. That service is likely a scam. The only way you could obtain an EIN that quickly is if the service company is using an SSN or ITIN of an individual working at their company. This is often referred to as a nominee application. The IRS strictly prohibits nominee applications for an EIN. Under normal circumstances a nonresident could apply for an EIN via fax and receive an EIN in 6 to 10 business days. Because of Covid, we are seeing a turnaround time of between 70 and 80 days.

In-kind donations of tangible products are generally tax-deductible. For example, if a business wants to donate used computer equipment to a charitable cause, the business can contribute the property to the charity and take a tax deduction equal to the FMV of the property at the time of donation. There are special rules, however, if the property has depreciated or appreciated in value from when the company purchased the product. Definitely consult with a tax advisor before donating property and recording the charitable contributions on the business tax return.

You should collect a signed Form W-9 at the time you have the vendor sign the subcontractor agreement. It's always a best practice to have the form included as part of the onboarding package for when you hire a vendor or bring a subcontractor on board with your team. At the latest, the Form W-9 should be provided before you remit payment to the vendor or contractor. If you don't receive the signed Form W-9, you are technically required to impose backup withholding upon the gross payment and remit the taxes to the IRS.

If you are the owner of the corporation you can transfer cash into the corporation in exchange for stock and its generally not a taxable event. The cash you contribute to the entity is recorded as either common stock or additional paid in capital which are all equity accounts. None of the cash should be recorded as income of the business. Alternatively you can fund the bank account and record the amounts as a shareholder loan on the company's balance sheet.

There are a lot of different platforms to try and raise capital. You can try and borrow money from a traditional bank, or if you are in the US, the small business administration (SBA) has many programs to loan funds to small businesses.

Other startups try to raise money by issuing debt or equity to investors. Crowdfunding has also become a popular method of raising funds. The crowdfunding platform generally entails people "gifting" you money to fund your company, so any proceeds are generally treated as taxable income.

If you are trying to raise capital through private financing, the residency of the owner of the LLC is generally not a factor. The larger US bank and financial institutions will have an issue with the LLC being a nonresident. It is easier to borrow funds if the LLC is taxed as a C corporation, or if you setup a traditional corporation rather than a single member LLC.

This depends upon the state. Each state has a different definition of what constitutes "transacting business within the state" Some states will not regard selling products to customers physically present within the state as transacting business - it would require more of a physical presence on the part of the company (office location, warehouse location, remote employees are living and working within the state, etc). Other states, however, have very low thresholds for what constitutes engaged in business within the state. Selling products to customers within the state and collecting sales taxes would be sufficent in those cases, which is likely why you are getting annual report notifications.

If the LLC is owned by a nonresident individual or foreign entity, the SS-4 application must be submitted via Fax or paper filed using US mail. Unfortunately, the online application only works if the responsible party for the entity has a valid SSN or ITIN.

If the LLC continues to be a disregarded entity, and you as the sole owner continue to be a nonresident alien for U.S. tax purposes, then you won't be able to get a U.S. tax residency certificate.

If you file an election for the LLC to be taxed as a C corporation, then the LLC will be a regarded entity for U.S. tax purposes, and will qualify as a U.S. tax resident. Once you file the election you can go ahead and complete Form 8802 to obtain the residency certificate, if needed.

There are several states in the U.S. that will allow you to form an LLC or corporation without having to disclose the beneficial owners of the entity. Wyoming, Delaware and Nevada are the most popular jurisdictions when it comes to privacy protections.

Wyoming, for example, has a public database that will show the LLC is formed and validly existing under Wyoming law, but the register doesn't publish your information as the owner. You don't even have to provide this information to Wyoming.

These protections shield your identify from the public and state, but not so much with the IRS and other tax authorities. If the LLC was a single member LLC, you would still need to disclose your ownership on a Schedule C attached to your Form 1040. So, the IRS knows you own it.

If you form a Wyoming Corporation, the corporation is required to file an annual Form 1120. On Schedule K and G of the Form 1120, you're required to disclose the beneficial owners of anyone that owns directly 20% or more of the company.

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