Results 1 to 4 of 4
  1. #1
    Join Date
    May 2020
    Posts
    2

    Default LLC for Startup Owned by Non-U.S. Citizens and U.S. Citizens. --

    My question involves business law in the state of: California
    I am creating an online startup with a student from china who is not a U.S. citizen. I am a California resident, which means I should register the LLC in California; however, if my business partner registers the LLC, could he register it in Wyoming since he is not a U.S. citizen? We need to know because if our company is foreign owned and we register under Wyoming, we would have to pay much less taxes than if it was registered in California. We need to be an LLC in order to publish our app.

  2. #2
    Join Date
    Jul 2018
    Posts
    2,213

    Default Re: LLC for Startup Owned by Non-U.S. Citizens and U.S. Citizens. --

    Quote Quoting Josh Clymer
    View Post
    I am creating an online startup with a student from china who is not a U.S. citizen. I am a California resident, which means I should register the LLC in California; however, if my business partner registers the LLC, could he register it in Wyoming since he is not a U.S. citizen?
    Organizing the LLC in California probably makes most sense since you live in California and since the LLC presumably will not be conducting business operations in Wyoming (or any other state). However, you (i.e., the two of you jointly) could organize the LLC in any state, and I'm at a loss to understand why you think it makes any difference whether you or your "partner" does it.


    Quote Quoting Josh Clymer
    View Post
    We need to know because if our company is foreign owned and we register under Wyoming, we would have to pay much less taxes than if it was registered in California.
    And, since most or all of your U.S. business operations will be conducted in California, the LLC will likely have to register and pay taxes in California (in addition to those in Wyoming).

    I suggest you seek out a consultation from a local business attorney so you don't make a very costly mistake. At a minimum here's an article that discusses a hypothetical that is very much like what you're proposing.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,831

    Default Re: LLC for Startup Owned by Non-U.S. Citizens and U.S. Citizens. --

    Quote Quoting Josh Clymer
    View Post
    My question involves business law in the state of: California
    We need to know because if our company is foreign owned and we register under Wyoming, we would have to pay much less taxes than if it was registered in California.
    Not so. You will not save any tax if the only difference in the business is that the LLC is organized in Wyoming rather than California. By the way, the fact that you live in California would not prevent YOU from organizing the LLC in any other state if you wanted to do so. You don't need a non citizen to do that.

    But the reality is that for most businesses it does not make any sense to organize the business entity in a state other than a state in which the business operates. If all the work is going to be done by the two of you in California then California would be the place to organize the LLC. If you organized the LLC in Wyoming but still conduct the business from California you will be required to register that Wyoming LLC as a foreign LLC in California. (Foreign in this context meaning any LLC organized outside of California.) You'd still have to pay California income tax on the earnings of the partnership either way, and would also owe the California franchise tax either way. States long ago made sure that you could not escape state tax simply by virtue of the state in which the entity is organized. The primary factors for state business taxation in the United States turns on where the business operates, has employees, and owns property, regardless of the state in which the business is organized.

    So if you organize it in Wyoming but conduct your business in California (or some other state) you'll end up paying to register the company twice once in the state you organize the company and then again in each state where the business actually operates. Thus, in most circumstances, registering in Wyoming, Colorado, Nevada, or Delaware when you do not conduct business in those states simply is added duplication for no benefit.

    By the way, forming a partnership with a foreign person may result in additional administrative tax burdens for you. If your Chinese partner is not a resident alien for tax purposes then the partnership must withheld tax for the foreign person's share of the income under Internal Revenue Code section 1446. As the U.S. partner it would fall to you to ensure that the partnership meets that obligation. Failure to do that may result in YOU being personally liable for the tax that was supposed to be withheld but wasn't. Your Chinese partners is a resident alien for tax purposes if he meets one of the following: (1) he is a permanent resident of the U.S. (i.e he has what is often called a "green card") or (2) he meets the substantial presence test. More details on residency for tax purposes is found in IRS Publication 519. More information about partnership withholding under IRC 1446 can be found in IRS Publication 515 starting on page 44. The withholding rules for partnership income are rather detailed and complex and I encourage you to seek out the help of a tax attorney or other tax professional familiar with 1446 withholding to ensure you get it right. Getting it wrong can be very costly.

  4. #4
    Join Date
    May 2020
    Posts
    2

    Default Re: LLC for Startup Owned by Non-U.S. Citizens and U.S. Citizens. --

    Thank you so much for your thorough and helpful answer. Really. Thank you.

    1. Sponsored Links
       

Similar Threads

  1. Guardianship: Can U.S. Citizens Name Canadian Citizens to Be Guardians in Will
    By bxd20 in forum Disability and Elder Law
    Replies: 8
    Last Post: 02-04-2011, 04:32 AM
  2. Unlawful Presence and Overstay: Violence To Us Citizens
    By caroline0515 in forum Immigration Issues
    Replies: 1
    Last Post: 04-06-2008, 07:05 AM
  3. Divorce: Is Divorce Possible For Non US Citizens
    By beautifulmind in forum Divorce, Annulment and Separation
    Replies: 1
    Last Post: 03-25-2008, 06:41 AM
  4. Prenuptial Agreements: Prenup For Non U.S. Citizens
    By joingtown in forum Marriage, Cohabitation and Civil Unions
    Replies: 1
    Last Post: 01-02-2008, 02:07 PM
  5. Marriage: Marriage Of Two Non-Citizens
    By LittleOne in forum Visas for Business, Tourism and Family
    Replies: 1
    Last Post: 12-11-2007, 12:28 PM
 
 
Sponsored Links

Legal Help, Information and Resources