

Ask HN: LLC with International Founder - stillmotion

I'm not entirely sure if this question has been answered before, but I've searched around for a while and cannot find anything on the subject.<p>I'm looking to form an LLC in the next couple of week for an up-and-coming product a friend of mind and I are working on. Problem is, I live in the US and he lives in the UK. Does the international aspect of my co-founder increase the complexity of government taxing? Has anyone had any experience with this scenario?<p>Any help would be greatly appreciated.
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jhancock
You should eventually speak to an expert. When? It depends on how quickly you
expect to yield net revenues and need to distribute profits.

If you expect to run in the red for a while and once you show some traction
may bring in investors, then I would follow my "rule of lazy paperwork":

1 - An outside investor will want you to restructure into an investment
compatible vehicle, not an LLC most likely. So treat you LLC as an operating
vehicle while you bootstrap. The less complex things are in the beginning, the
less complex it will be when you need to restructure.

2 - For any startup partner you can write a simple contract that says the
intellectual property ownership is shared by your persons and will be injected
into some new entity in the future. In the meantime, you create another one-
page contract that licenses this jointly owned IP to your operating LLC.

3 - You can't easily have both UK and U.S. rules. I suggest your partner
accept that he is enjoining a U.S. (really, your state) ruled set of contracts
and live with it.

4 - In the future, you can assign your IP into an offhore entity (e.g.
Caymans) and then redeploy those licensing contracts your LLC already has. At
this point you would also make the U.S. LLC a wholly owned entity of the
offshore entity and have all you and your partner's shareholdings in the
offshore entity.

The above gives you an operating LLC so you get some protection and can have
bank accounts, etc... Until you need to distribute any earnings, you can keep
it simple and with little paperwork.

As always, IANAL, this is simply how I might approach the problem.

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yokumtaku
You will need to engage someone to help file the LLCs taxes, so you should
engage this person now and start asking your question before you incorporate.

Among other things, consider the following:

1\. If this is the type of project that is intended to be VC-funded in the
future, you should start with a corporation, not an LLC. (Keep in mind that an
S corp can't have non-U.S. residents.)

2\. If the LLC is a flow through entity, the UK person may have income
"effectively connected to a U.S. trade or business," which may subject them to
U.S. income tax at the same graduated rates that U.S. persons pay.

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ahoyhere
It definitely increases the complexity of taxing. Sorry. I know how you feel -
I'm an American partnered with (& married to) an Austrian (and we both live in
Austria!).

However, I'm fairly sure that the UK and US - like every other major country
and the US - have an anti-double taxation treaty. Which probably means that
you personally will pay taxes only in the country which has the highest rate
(clearly your home country).

IF - and only if - you get good tax advice up front can you reduce your
American taxes by carefully structuring the way you take money out of the
company.

It's hard to find accountants who are experienced in this. My personal
suggestion would be to call Deloit or another big international consultancy.

EDIT: Sorry, I got who's UK/who's US backwards. Advice still stands tho. You
can definitely form an LLC with a foreigner, even using an online service,
it's just that taxes are a bitch. No way around that.

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timcederman
Wait, what? As a citizen I pay double taxes. I get a credit up to ~ $83k, and
after that I get double taxed.

