All Topics / Overseas Deals / LLC and Tax Query

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  • Profile photo of James2118James2118
    Member
    @james2118
    Join Date: 2010
    Post Count: 27

    Is anyone able to help me with a query I have. I am just trying to work out the structure and have a couple things I am not sure about, I have looked around the internet but sometimes that just provides too much information and you end up losing track of where you started.

    I and a couple friends have decided to invest in some US property, we are going to put our money together in an LLC, I realise there are probably other ways it can be done, but this seems to suit our needs best.

    1) Is it best to have the LLC set up in the US or home in Australia. There is potential that my group of friends would want to invest in other things other than US Property hence why we thought about setting it up over here. But we are not sure how easy it would be to get property in the US. Also as we plan to use it as rental income, assuming the rent would be addressed to the LLC, maybe it would be best if it was based in the US.

    2) Once we get the LLC set up, I assume a next step would be to set up some bank accounts, an AUS one and a US one, that are linked in the LLC's name so we could transfer funds between them relatively easily. I am trying to find out currently which bank I can find that can do this sort of service with the minimum amount of fees and charges, Citibank seemed alright so far, I believe HSBC is a possibility too. If anyone else has a recommendation or some extra information that would be great.

    3) Finally, paying tax, if the LLC was set up in Australia, would we have to pay Tax in USA? If the LLC was based in USA I can understand paying the tax, but am not sure how it would work if it was based in Australia. Also, if the LLC was based in USA, do we pay tax over there by filling in a tax return on behalf of the LLC in the USA, and then an individual tax return in Aus, with the added income, using the foreign tax offset so you do not get taxed twice.

    If anyone had some information out there, that would be really appreciated. Thanks

    James

    Profile photo of white_goodmanwhite_goodman
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    @white_goodman
    Join Date: 2010
    Post Count: 67

    bump to this thread, id also be interested on everything james asks here…

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    A LLC is a type of American company structure so you would have to set it up in America.

    You would need to comply with american corporations law re the transferring of money – remember a company is a separate legal entity so you can't just take its money as if it was your own. As long as you are doing it properly you would not want to transfer too often as the fees will eat up a lot of it. Try to keep any profits there and then send them home once per year or keep reinvesting.

    You also need to consider the initial sum used to start it off – do you lend it to the company, gift it or will it be share capital. You need to be aware of american company law, tax law, bankruptcy/insolvency laws as well as australian.

    A LLC is an american entity so the company would be paying tax there. The ATO may also want to know about this and may tax you again here, depending on how it is set up, but you may get a tax credit for some or all of the tax paid over there. I imagine you would need company tax returns in america as well as individual tax returns and then individual tax returns here too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of James2118James2118
    Member
    @james2118
    Join Date: 2010
    Post Count: 27

    Thanks alot Terryw,

    That is how I thought it would work, just wanted confirmation.

    I am hoping to get to America around May next year, and will try and talk to a tax consultant and/or solictor person to hopefully help me set something up, however I think I would rather it set up before I go over there so everything is ready

    Profile photo of shannon fshannon f
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    @shannon-f
    Join Date: 2010
    Post Count: 5

    Hi james,

    could you let us know how you went,  and what  the structure/process was for the LLC setup, ITIN number, EIN, Bank acc, Etc…. We are going to the US in April for a holiday and to look at SFHs in Atlanta to buy without borrowing.

    We would like to be setup everything here first except for maybe trustworthy property managers, Realtors, and a handyman to do minor rehabs and organise other trades over there.

    Thanks Shannon

    Profile photo of James2118James2118
    Member
    @james2118
    Join Date: 2010
    Post Count: 27

    Thank you for all your advice so far,

    Just a quick question, I understand you set up the LLC in America and then pay company tax with that. But when do you pay the Tax as an individual in Australia, is it only when you bring the money back into this country, and if that is the case, theoretically do you not have to pay it at all if you leave it over there?

    It just seems to me that you leave the money with the company and since it is a separate entity to the individual then I am not sure if the individual would get taxed even if the company is in the individuals name. At least not until the money from the company is transferred to the individuals bank account, then the ATO might start asking questions as to where them oney came from.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    The laws around international tax are complex, and I haven't looked into them in any detail.

    My understanding is that the ATO wants to tax you on your worldwide income, so they ask and want to know your world wide income. Using a company to hold your assets overseas may mean this is still required to be reported – I think there is a question about this on the ATO tax return.

    Whether you have to pay tax or not, and where will depend on the situation. There is a double taxation agreement between USA and Australia so you shouldn't be taxed twice. And what tax you pay will also depend on what the income is, if any – eg is it a dividend from the company, wages, partnership income etc. All these may be taxed at different rates.

    Also, leaving the money overseas shouldn't affect whether you pay tax on it here or not.

    Do a search on the ATO site and you will find something.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of jeff2investUSAjeff2investUSA
    Member
    @jeff2investusa
    Join Date: 2010
    Post Count: 54
    James2118 wrote:
    Is anyone able to help me with a query I have. I am just trying to work out the structure and have a couple things I am not sure about, I have looked around the internet but sometimes that just provides too much information and you end up losing track of where you started.

    I and a couple friends have decided to invest in some US property, we are going to put our money together in an LLC, I realise there are probably other ways it can be done, but this seems to suit our needs best.

    1) Is it best to have the LLC set up in the US or home in Australia. There is potential that my group of friends would want to invest in other things other than US Property hence why we thought about setting it up over here. But we are not sure how easy it would be to get property in the US. Also as we plan to use it as rental income, assuming the rent would be addressed to the LLC, maybe it would be best if it was based in the US.

    2) Once we get the LLC set up, I assume a next step would be to set up some bank accounts, an AUS one and a US one, that are linked in the LLC's name so we could transfer funds between them relatively easily. I am trying to find out currently which bank I can find that can do this sort of service with the minimum amount of fees and charges, Citibank seemed alright so far, I believe HSBC is a possibility too. If anyone else has a recommendation or some extra information that would be great.

    3) Finally, paying tax, if the LLC was set up in Australia, would we have to pay Tax in USA? If the LLC was based in USA I can understand paying the tax, but am not sure how it would work if it was based in Australia. Also, if the LLC was based in USA, do we pay tax over there by filling in a tax return on behalf of the LLC in the USA, and then an individual tax return in Aus, with the added income, using the foreign tax offset so you do not get taxed twice.

    If anyone had some information out there, that would be really appreciated. Thanks

    James

    Hi James,

    Your best advise should be with an accountant that has knowledge on US tax laws, company structures that suit your investment needs.

    I am investing in the USA and would be willing to give you 2 accountants that you would find helpful.

    My email adress is [email protected]

    Jeff

    Profile photo of grossrealisationgrossrealisation
    Member
    @grossrealisation
    Join Date: 2005
    Post Count: 1,031

    hi james
    you have asked a question lots of investor are thinking
    first this is a free to air board and don’t ask this type of question unless you are will to accept every man and his dog giving you his view
    and lot have no idea so work on that premise first
    now an llc can’t be set up here
    llc stand for limited liability corp
    limited as in it its worthless
    same as our pty ltd 2 dollar companies
    also you need to set the llc up in the state you want to buy in
    yes you will hear no you can have one that crosses state lines but the cost are high so just go with set it up where you want to buy
    now to the lastpoint
    i have no idea to answer your question
    your question needs to be answered by an accountant that does both here and the USA
    and do I know one
    now that answer is yes

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