Unsure about tax issues or double taxation problems operating a single member WA LLC company from outside the US.

What country are you currently resident of? The U.S. has a fairly far-reaching network of income tax treaties, and if your country of residence has entered into one of these treaties with the U.S., then you will most likely be shielded from double taxation. Also, not every country imposes tax on its residents' foreign income (for example, Australia doesn't seek to tax many kinds of foreign income).

If you are the sole owner of a U.S. LLC, the existence of the LLC is ignored for U.S. tax purposes, and the income of the LLC flows through to your Federal individual tax return. This means that any U.S.-source income earned by the LLC is reported on your Federal individual income tax return, which would be your Form 1040 (NR), assuming that you're a U.S. non-resident alien for tax purposes. Then, if your country of residence also seeks to tax the income which the LLC has earned in the U.S., certain international tax rules come into play: basically, the U.S. gets first dibs at taxing the U.S.-source income. Then, if your country of residence has entered into a tax treaty with the U.S., that residence country would have to give you a dollar-for-dollar credit for any taxes imposed by the U.S. This foreign tax credit would offset your foreign taxes and eliminate the possibility of double taxation. (Note, however, that, if your country of residence has a higher individual tax rate than the U.S., you may still owe some residual tax to your residence country).

Finally, if you're resident of a country that has a tax treaty with the U.S. and you don't maintain any kind of physical presence in the U.S. (and, in general, a physical presence means an employee or office of some kind), then ignore most of the above paragraph because the U.S. will give up its right to "first dibs" at your U.S. source income. In this case, you would simply pay taxes to your country of residence and claim treaty benefits in the U.S.

Please note that all of the above is a very quick bird's eye overview of your cross-border tax issues. I strongly recommend that you consult with a U.S. attorney or CPA who has significant experience working with bilateral income tax treaties and other foreign tax issues.

Lindsay Rubel, J.D., LL.M. (Taxation)
www.leburtaxlaw.com