It is hard to imagine that you can save on corporate taxes anywhere in the world. But, you will be amazed to know it is possible to save corporate taxes. Interestingly, you can do so in the USA. In this article, let’s understand how to save corporate taxes and the process to start an LLC Company in the USA.
Understanding Tax Options for an LLC in the USA
C-Corp Taxation
Having USA Company Registration as C-Corp allows LLC to be treated as a separate taxable entity. Thus, you pay a fixed federal tax rate for your company.
Pass-Through Taxation
By default, LLCs are pass-through entities. So, if you don’t register it as C-Corp you can avail the benefits of pass through taxation so the income passes to the owners and is taxed at their individual tax rates.
Double Tax Agreement (DTA)
Some countries have tax treaties with the U.S. to prevent double taxation. As a foreign owner, you can use these treaties to avoid paying taxes in both countries.
How to avoid US Corporate Taxes?
If your business income is classified as “Effectively Connected Income” (ECI) or if you are “Engaged in Trade or Business” (ETB-US), you will owe taxes in the USA. However, the goal is to structure your operations to avoid these classifications and stay corporate tax free.
Be eligible for Non-ETB-US Status
If you are able to maintain non-ETB-US status for US LLC, you will be able to avoid U.S. taxes. Following criterions must be satisfied to be eligible for Non-ETB-US:
- Foreign Residency: All LLC owners must live outside the U.S.
- No U.S. Presence: Don’t manage your business from within the U.S.
- No U.S. Employees: Avoid hiring permanent employees in the U.S.
- No Key Operations in the U.S.: Keep major business activities outside U.S. borders.
What businesses can be done while maintaining Non-ETB-US Status?
There can be several business opportunities to do as Non-ETB-US, for example:
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Dropshipping
You can operate an e-commerce store where suppliers handle inventory and shipping from outside the U.S.
Read Also: How to Register a Company in the USA for Dropshipping
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Service Provider
You can offer remote services across the globe with credibility of US LLC, For example, consulting, marketing, or design,
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SaaS
One of the most beneficial businesses to do while saving corporate taxes is to provide cloud-based softwares hosted on servers located outside the U.S.
Read Also: How to Start Business In SaaS Industry
How to save US State Corporate Taxes?
You can also save US State Level Corporate taxes through having Company Registration in USA in following two states:
Wyoming
- No state corporate tax.
- Minimal reporting requirements.
Delaware
- No corporate tax on export income.
- Only 8.7% tax rate applies only if you’re doing business within Delaware.
Other Important Tips to stay tax free in USA
- Don’t Hire in the U.S.: Hiring employees in the U.S. creates a taxable presence. Therefore, you must hire talent from a global pool except the USA.
- Avoid U.S. Inventory: It is important to store inventory outside the U.S. to avoid creating ECI.
- No U.S. Office: You must not have a physical office in the USA.
- Host Servers Outside the U.S.: If you run a digital business, you must keep your servers outside of the states.
- Travel Visa Only: If you need to visit the U.S. do it on a travel visa and not on a business visa.
Conclusion
In conclusion, setting up an LLC in the U.S. with zero tax is possible if you know the rules and plan strategically. Don’t miss the opportunities, consult a tax professional from our team right now to ensure everything is set up correctly.
Moreover, If you want any other guidance relating to opening an LLC Company in the USA or filing taxes, or Company Registration in USA, please feel free to talk to our business advisors at 8881-069-069 .
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