If you plan to form an LLC in the United States, you can reap many benefits. In this article, you will learn how to incorporate a US company as a South African, open business bank accounts, apply for credit cards, and have an exclusive US mailing address, as well as open business account specifically for crypto trading on major US crypto exchanges.
What’s LLC? What does LLC stand for? How is LLC different from other types of companies?
LLC stands for limited liability company. This type of company is very popular because it offers several advantages compared to sole proprietorships or partnerships. LLCs offer protection from personal liability. They also allow owners to pass on their ownership rights to future generations.
US LLC owned by foreign individual, in this case a South African, is considered a disregarded entity and if he or she does not hold a green card, does not have a established office and does not have a dependent employee working for him or her in the U.S., then he or she is not legally required to pay income tax. However, the situations of foreign investors can differ. Sooner or later, you as a South African business owner may need consultation with LLC taxation for non us residents in your entrepreneurship journey.
Why incorporate as an LLC?
Many foreign investors choose to incorporate their business as either a corporation or a limited liability company because they find that one suits them better than the other. Limited liability Company (LLCs) offer both a tax advantage for their income and limited liability protection for their owners. One advantage of forming an foreign owned US LLC over a corporation is that the requirements for formation and maintenance are less stringent than for a corporation. It also offers the advantage of flexibility in managing ownership. An LLC for non us residents can be managed by either the members or the manager, depending on who’s managing the business. The owners of an LLC can structure their business to delegate management responsibility to one or more individuals to run the day-to-day operations of the business. Other requirements of a corporation, such as mandatory annual board meetings, are less stringent in an LLC.
The Single Member LLC
A limited liability company ( a pass-through entity for federal income tax purposes. This doesn’t mean that the LLC isn’t taxed at all. Instead, the taxes owed by the members are passed through to them.
If you don’t live in the United States, but live in South Africa, that doesn’t impose taxes on income earned outside the country, you won’t have to pay income tax.
To determine the appropriate tax rate for foreign investors, we must first examine how the U.S. Internal Revenue Service (IRS) taxes foreign owned us LLC.
For a business to avoid U.S. federal income tax, it must meet three requirements.
- It must be 100 percent owned by South Africans, who live outside the United States.
- It must’ve no U.S. presence or economic substance.
- The income mustn’t be effectively connected.
Tax-free US LLC income for South African
One of the lesser known facts about the United States is that it’s been one of the largest tax havens in the world for decades for foreign investors. An foreign owned US LLC under the law may be able to avoid taxation if it has its principal place of business outside the United States. Certain rules must be followed when forming an LLC for tax purposes.
South Africans are only subject to U.S. tax if they’re “engaged in a trade or business in the United States” (ETOB). If your business is an ETOB, the income won’t be taxed in the U.S. even if it earns income in the U.S.
However, you’re engaged in a trade or business in the United States (ETOB) if
(1) you’ve at least one dependent agent in the United States who works almost exclusively for you.
but (2) that dependent agent not only performs an administrative function but substantially assists your business in the United States.
or (3) you conduct “substantial, continuous, and regular” business in the United States.
Tax treaties also play a role. Dependent employees may be exempt from taxation under certain circumstances. If you live in a country that’s a relevant tax treaty with the United States, you may not have to pay U.S. taxes.
If you want to learn more about income from U.S. sources versus income from foreign sources and seek more clarity on this topic, you might be interested in Starfleet’s in-depth post on forming a tax-exempt LLC in the United States.
Opening Business Bank Account and Applying for Credit Cards
After you choose a name for your LLC and entered into an agreement with your registered agent, you can open business account and also apply for credit cards and a U.S. mailing address. Not to mention, you can easily verify your crypto account with major US crypto exchanges and start transferring and trading there without having to pay taxes. But let’s be honest, some US banks can easily reject your application and you might run into problems when applying for credit cards.
But worry not, Startfleet brings a termandous value to South African and foreign owned US LLC. They have a 100% success rate with opening business bank account and can send you your credit cards in fastest possible way. If you wish to expand your knowledge more and seek other services such as tax consultation contact their experts and you will hear from them in no time.