Hi All,
I just want to get everyone's opinion on where I should form my LLC. From my research so far, Nevada & Wyoming are recommended because the tax is low, but I'm thinking to buy investment properties in North Carolina, Geogia & possibly Florida so is it still a good idea to have an LLC formed in Nevada or Wyoming?
Also is everyone lodging a personal tax return or a LLC tax return during tax time? I guess it depends on the income? Am I right to say a personal tax return is better if the income is less than US$50K? From what I read, the tax rate for personal tax is based on where you live, e.g. New Yorkers pay higher taxes than someone who lives in Nevada. But how does the tax rate work for someone who lives overseas like in OZ?
Are there any traps that I should watch out in terms of LLCs & paying taxes?
Again any comments is appreciated.
Cheers,
SabHi Sab,
Your probably going to get a few opinions flowing on where & why but I'll start with my opinion. One of the features of incorporating or forming an LLC is that you do not necessarily have to form the company in the State where you do business (in your case this means buying property). When deciding on which State to incorporate in, there are basically 2 choices:
1. The state where you live or where you carry on business
2. Wyoming, Nevada or Delaware (thought I'd throw in another state people sometimes mention)For the majority, incorporating or forming an LLC in your home state or where you do business is usually the easiest and least expensive option. This is because virtually every state has laws that require you to "re-register" a Delaware, Wyoming or Nevada company in the state where it is actually doing business. For example, if you form a Nevada corporation but your physical business (buying properties) is located in Colorado, the state of Colorado will want you to "re-register" as what’s called a "foreign corporation" (a company that was not originally incorporated in Colorado). This is especially true if you intend to get a bank account and business license. In most cases, registering as a "foreign corporation" or LLC will subject you to all the same taxes and fees as an in-state company. So you will probably have not avoided any taxes or fees, plus there is the added expense of registering as a "foreign corporation" in your home state and any annual fees in both states.
Delaware is where most large corporations (Fortune 500, Nasdaq, etc.) are incorporated. The reason for this is that Delaware’s body of law is more business-oriented and they have a large and advanced business court system to handle complex legal litigation. It is the state of choice for both large corporations, foreign corporations and many fast-growing or high-potential companies.
Nevada has popularity for both large and small businesses. This is due to Nevada’s very pro-business climate, low-tax mentality and the lack of an information sharing agreement with the IRS (all other States share company information with the IRS). Also, shareholders in Nevada corporations are not public knowledge (though Officers/Directors and Members of LLC’s are).
Wyoming also has a very business-friendly climate and features some benefits compared to a Nevada entity including lower filing fees, lower annual fees, and more
As far as taxes….an LLC is a flow though entity meaning once all the income and expenses are taken into account the outcome or difference flows through to the members or shareholders which would need to lodge a tax return with the IRS.
Hope this assists.
Overseas investors are taxes the same way as us investors. You can prepay taxes before the funds leave the US and when you file your year end tax return, you claim your expenses and maybe eligible for a refund from the IRS depending on your tax bracket. The tax bracket is determined by the amount of income produced by the rentals.
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