The sole member of an LLC in California is looking to transfer his member status to a foreign national. Can this be done, and if so what are the tax ramifications for the foreign national as he does not currently file a US tax return?
The transfer is legally permissable. The "tax status" cannot be deermined without additional information. The foreign country, the nature of the business, the legal stauts of the business (e.g. partneship, single member LLC, or corp.) will all affect the tax consequnces of the sale or transfer. Also sales tax may be a relevant issued depending on what assets of the business are sold to the buyer.
Hope this helps!
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Licensed in the United States Tax Court
Main: 323-292-4116 ❘ Cell: 562-505-1004
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is email@example.com.
I agree with Attorney Smith's excellent answer.
Ownership is the easy part.
Every business needs a good tax adviser. In the international context, that adviser must have domestic as well as international tax expertise.
This information does not constitute legal advice and does not establish an attorney-client relationship.
International Law Attorney
The transfer is admissible. If the LLC is treated for tax purposes as a partnership you need to talk to an international tax attorney to see which is the best tax regime applicable to the foreign member. Good luck.
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The buyer will not ordinarily have any tax ramifications in such a transfer.
Mr. Smith gives a good indication of the tax considerations on a go-forward basis. There are also potential immigration issues, corporate governance issues, and depending on the business a number of other legal-related issues where an ongoing relationship with a CPA and an attorney would benefit the non-resident alien transferee.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
The transfer will not be an issue As to foreign national, in addition to what has already been addressed, there should be a serious estate planning analysis undertaken as part of the tax review.
The foreign party will have effectively connected income from the LLC that operates a business so he will be paying US taxes going forward on the profits generated from the LLC unless a more sophisticated and tiered offshore holding company is put in from of the NRA....not an Avvo question to be sure as some real time and attention will be necessary for the buyer....but no problems for seller.
My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a licensed attorney in your State should be obtained.
More facts are needed. You want to sell the business that is an LLC to a foreign national. In a business buy sell agreement every transfer that includes assets will be taxed. Thus you need to identify assets and conditions for transfer. is this LLC an investment that ultimately the foreign national will try to obtain an investor's visa ? If yes there are many other things you need to arrange and seek responsible consultation prior of sending or receiving and Intent letter or a buy sell agreement.
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