Do we have to pay US taxes on the investment he brings in to USA.
Yes, a foreign national can invest in a US LLC, unlike an S corp, where he would not be eligible to be a shareholder. Transfer of funds for investment in an LLC or a corp is not a taxable event, so you will not owe taxes on receipt of the funds.
DISCLAIMERâ€”This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California. (Bryant) Keith Martin sbbizlaw.com
I agree with the prior attorney. The only thing to add is to clearly document the foreign national's contribution to the LLC and determine what his percentage share of the LLC will be. Make sure your operating agreement and the membership certificates are all reworked accordingly.
Hope this helps. If you think this post was helpful, please check the thumbs up (helpful) tab below and/or designate my answer as best answer. Thanks.
Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is firstname.lastname@example.org . For further tax advice check out his website is www.sjfpc.com . and his blog is >
LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is email@example.com , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.
As others have said, a foreign national may invest in an LLC. He can also invest in a C corporation, but it appears you intend to use an LLC which often makes sense with foreign investors.
I defer to Stephen as to the definitive word on taxation. However, the federal and state governments tax income. If an investor purchases an interest in a company, there should be no income tax consequences to the investor until the investor sells his interest, since he has received no income.
The LLC will be taxed as a partnership once there are two or more members. Your share of profits or losses will be passed through to you to report on your Form 1040. The taxation of profits or losses to your foreign investor may be addressed by a tax treaty between the U.S. and his country. Here again, I defer to those with tax expertise.
It is always important to have a well crafted operating agreement for an LLC, and I think that is particularly important here. For example, depending on the circumstances, I would be inclined to require the parties to arbitrate any disputes and to arbitrate them in the Greater Philadelphia area. You do not want to litigate abroad, should there ever be a falling out with the investor.
Determining the governance of the LLC is likewise critical. With an LLC, each member has a voice and a vote on virtually all things, unless the operating agreement provides for a managing member or members.
I represent many small to mid-size businesses, some of which are subsidiaries of foreign companies and many of which have foreign investors. If I can answer more questions or be of service, please do not hesitate to contact me.
Admitted in PA, OH, MD, DC