legal, business-registrationI am trying to figure out a situation concerning my partner that is rather elaborate and complicated because of different countries involved. She is a US citizen, but currently living in the UK. She is registered as a consultant here, while she works at the university. But we are planning to move to Singapore for a year (for a job) and then come back to the US. We want to avoid setting up a company in each country that we live in, but she would like to keep doing consulting as a second job. I think we would prefer to just set up a US company, would this be legal? The details:
Could she be paid with divident or so while living abroad? Would that be legal (I am assuming she can’t be employed in both Singapore and the US at the same time).
How would that work exactly. Would you suggest a limited company and would the payment/non-resident be an issue?
It’s technically legal but somewhat risky. Call it a grey area, leaning towards white if it doesn’t look like she’s actively avoiding taxes - and borderline black if she is. Ask a local accountant in each case (including one in the State she’ll be registering her business in) and see these related questions and answers:
https://startups.stackexchange.com/questions/6221/what-major-things-to-consider-when-starting-a-company-overseas-without-being-phy/7873#7873
https://startups.stackexchange.com/questions/1592/tax-structuring-how-to-pay-no-corporate-tax/1665#1665
Two slight twists to be aware of as you read the above. One is she’s a US citizen, meaning she’ll need to declare her revenue to the IRS anyway - which reportedly is a mess.
The other is she’s moving around. Administrations are slow. If the sums are small enough to not register on anyone’s radar, the odds are good she’ll be out of the country before a taxman wonders what her revenue source is.
If a taxman ever asks before that, she can always play dumb if she’s been around for a short enough period: she intended to leave earlier and she had not realized it was such a big deal since she had been paying income tax et al like everybody else in the country. (This assumes, of course, that she actually does pay all applicable taxes in the country she’s residing in. If she’s actively expensing stuff on the company and not paying herself a salary so as to pay the minimum amount of income tax where she resides, it could degenerate into a cavity-search grade tax audit.)
But, again: ask a local accountant in each country for the gory details. I am not a tax advisor at the end of the day - they are.
PS: I’m skeptical that the NV advice from the other answer is sane, owing to the fact that it has “tax avoidance” written all over it and because she’ll end up needing to declare stuff in two States when she returns if she doesn’t live there. Better register it in Washington or wherever else she has good reasons to set up shop in my opinion.
I would suggest an LLC formed in NV specifically. In NV, you do not have to ever physically set foot in the state of NV (or even in on US soil for that matter) to form a legal corporation or LLC. You would, however, need to get what is called a “Registered Agent” which is someone physically in the state who holds a physical copy of your articles or organization and is available to receive any legal docs on your behalf during business (usually an individual that does this as a professional service for hire) and a NV mailing address (also very easy). Don’t bother paying a company to do your filing for you, NV makes it really easy they have it all online and step by step on the secretary of state’s site or you can go to their own “Business Formation Portal”. That site (silverflume, their business formation portal) will also have a list of pro registered agents etc.. Another bonus to NV is it’s one of the cheapest places (NV and WY) to form a corporation as far as Licensing and taxes (initial and annual) at only $100/yr., and NV also has it’s own very business-centered “business courts” (unique concept as far as I know only NV and DE have it) that are specifically dedicated to business law, and no matter where in the world, you transact, if your company was formed in NV you are protected by NV law (which covers your rear end really well).
As far as her being able to bill her UK employer in USD, as long as it’s set up properly (see above) and the correct taxes are being paid to the jurisdictions to which they’re due you should be fine…you wouldn’t be the first freelancer to travel and work abroad!
Speaking of Taxes, CA loves to charge as much as possible. As long as she physically does not set foot in the state of CA or have anyone who is physically in the state of CA process a single transaction for her during until she gets back to the states she should be find and not owe them a penny (get a NV mailing address, especially since you’re filing a NV LLC, no taxes) if she plans on residing in CA and conducting business in CA, she can keep her NV LLC for the legal protections but she would also have to register in CA as a “Foreign LLC,” as in one from a different state.
To clarify, although lower taxes happens to be an incidental benefit of a NV LLC, The main reasons I suggest NV for you are currently overseas, and Nevada Business laws as they are explained on the Nevada Secretary Of State website would be most accommodating for you, due to the low cost and ease of setting up a NV nexus, which would completely eliminate the IRS headache if you:
Set up a Nevada LLC
Set up a NV Nexus (a Registered agent and a mailing address/mail forwarding svc provider will do)
File for an EIN for your NV LLC (you can do that on the IRS website)
As far as payments, you can still route a merchant processor/TPP/Invoicing software, however you planned to bill your employer to you your US account.
NV charges $0 state business tax, so as long as the IRS gets their money based on the current tax schedule for a domestic LLC whatever percentage of your earnings that may be, there is no tax evasion involved in the US. I cannot, however, attest to what the laws in EU or Singapore are.
Regarding CA: If you don’t currently live work or physically do business in CA you don’t owe them anything, however when you do go to CA, make sure you file as a foreign LLC (meaning you’re registered in NV and also performing business activities in CA - and yes it’s the same tax amounts and registration fees so not evasion), but keep your LLC as a NV LLC - due to extra protections NV gives you that CA does not.
If you (especially if you are a single-member LLC) fail to dot one “i” or cross one “t,” or there is any suspicion that so much as a cellphone that you own had been used both for business purposes and for personal purposes at any point (comingling or lack of proper funds at startup, or any number of loopholes to pierce the corporate veil that work well in CA that don’t fly in NV business courts), your corporate veil is shredded - and your personal credit and assets are totally up for grabs to any creditor, or scam artist with a bogus lawsuit (not just your LLC’s). You also become potentially become criminally liable (depending on what type of work you do) if the “perfect storm” of events were to play out and there was an unfortunate accident or financial oversight as opposed to being protected.
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