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.
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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.
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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.
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