Between 2015 and 2016, at the beginnings of German-language Tax Free Today (Staatenlos.ch), the American Limited Liability Company (LLC) was a very popular form of business.
Newcomers to the perpetual tourist‘s world chose to incorporate their LLCs because of their simplicity in addition to their low foundation and maintenance costs.
However, at some point this type of companies began to have a great disadvantage. Because of the FATCA regulations, it was (and, partly, still is) extremely dificult to open company bank accounts for the LLCs outside the US.
It was also impossible for it to open company accounts within the US because of its nature as a “diregarded entity” with non-resident status.
This led to the situation that many people registered their LLC but then charged customers through private bank accounts in the direct name of the entrepreneurs.
It was necessary to find another solution for those with higher volumes of business because most of the banks only allow the commercial use of private accounts to a certain limit.
LLCs would no longer be effective in those cases since without a company account they could no longer be used.
In 2017, there was a lot of confusion because of the new rules for filing forms (Form 5472) and therefore the number of start-ups decreased significantly in the US.
This was not only due to this new form, which can be filled in 5 minutes, but also to the emergence of other options such as the LP in Canada, its northern neighbor.
Canadian LPs are still a very good alternative to LLCs in the US, especially if you have certain concerns about the country.
However, several factors have driven us to focus again on the US as a place to register companies in general and on Florida in particular. We are going to tell you about it in this article.
Why companies in the US are interesting again
The main reason why the United States is so popular again to register your business there is because we have managed to solve the unfortunate problem of opening bank accounts for LLCs.
Depending on the business sector, we can help you accounts in different banks in the Miami area, so that you can personally open a company account with just one visit.
We now even have the option to open a business account remotely at Citibank. You just need to be registered manager in your LLC and show a passport copy and a maximum 60 day old utility bill. The complete application process is digital with scanned documents. No need to ever fly into the US. We offer this account also for non-clients (who do not have formed their LLC or Corp over us). Just write at email@example.com
Overall, the company must have at least two weeks of existence and have an EIN number (Employer Identification Number), a number that we also help you to get.
Thanks to Transferwise Borderless and other fintech options that are increasingly rising up in the United States, it is possible to open an account entirely remotely.
You can open an account in any state as long as the LLC owner’s name appears in the registry of the US. Of course, you will need to provide a consumer bill.
The other big problems are the reporting obligations with the FBAR and the form 5472.
We can confirm that FBAR and Form 5472 are no longer a problem after an extensive consultation with local tax advisers*.
*[This is the opinion of an U.S. tax advisor. (Vincenzo from Online Taxman). In the U.S. CPAs are responsible for their erroneous statements.]
In the past it was not possible to obtain clear information, so we were cautious in these cases, advising you to fill in the forms.
The FBAR was a form in which all foreign (from outside the US) wealth greater than USD 10,000 was declared in the United States. However, it was necessary to declare the wealth of the LLC, not the wealth of the owner of the company.
On the other hand, in most cases the Form 5472 is not a problem for the most LLC owners.
You have to fill out this form if the LLC engage business with its own companies or with related persons. Moreover, there is no reason to claim it because of the tax exemption as disregarded entity.
We can inform you if whether you have to fill out the form or not and, if necessary, we can also take care of the whole process.
It was said for a long time that LLCs from the United States should avoid having income in the US, otherwise it would be obligatory to pay taxes there.
But this is only partly true. In fact, you can have customers or sell there without problems if you are not a US resident or national there and so long as there is a “link”.
The LLC will not have a “nexus” in the United States and will be considered a disregarded entity, an entity that does not pay taxes, if it does not have a business substrate, that is, if it does not have a director, employees and/or an office there.
Those who regularly visit the United States are recommended to apply for a B1/B2 long-stay business visa. This is valid for 10 years and gives the right to several entries and exits from the country, but for this it is required to personally go to the American consulate in the country of origin.
This can then be combined with the “Global Entry-Program”, which can avoid us the immigration controls that waste our time and nerves.
Entering this program depends on your nationality and country of residence, but you can apply, for example, in the case of Panama.
After a pre-clearance issued by the US National Police, you will be subject to a brief interrogation by US officials, after which an electronic card is issued to electronically pass through airports.
The United States as a long-term solution
So after analyzing the case in detail, we have seen that all the previous disadvantages (impossibility of opening bank accounts, FBAR, Form 5472 and income in the US) have been solved.
A US LLC may represent a long-term alternative, taking into account the regulatory ambition of the OECD and the EU.
In this way, in more and more jurisdictions, both offshore (British overseas territories) and onshore (Cyprus and other EU countries), the so-called substance criteria have been introduced.
According to these criteria it is obligatory to have a commercial establishment and to hire local workers in order to recognise your company in those jurisdictions.
The United States, whose LLCs are also used by millions of Americans, will not join this game There, it will still be possible to create shell companies and even to register them anonymously.
While most company formation agencies around the world already ask you to submit passports, consumer bills, bank references and curriculum to allow you to incorporate a company, for US LLCs you hardly need to submit any documents.
It is also easy to hide the identity of the owners of the company in the Commercial Register. No one in the USA is talking about a transparency register for economic beneficiaries, which will be introduced in all EU countries by 2021 at the latest.
The US banks are also little affected by the international anti-money laundering and information exchange regulations.
The United States has its own legislation (FATCA) that forces banks to provide all information about their customers to the State.
However, the US does not exchange any information on business accounts with other countries although it has entered into the CRS. Nowadays, more and more countries are part of the automatic information exchange agreement and the United States represents a long-term alternative to keeping anyone out of your accounts.
The simplicity is another great advantage of the American company accounts. In the United States, banks rarely ask questions about your transactions, while in Europe you have to justify big transfers (in that case we are already talking about a few thousand euros). Large amounts of money can still be moved there without difficulty.
Americans prefer cheques, which reinforces this situation. It is something quite unusual in Europe. The online-banking is not bad in the United States.
Fintech alternatives, such as a business account at Transferwise Borderless, make it possible for a North American LLC to even have a European IBAN and account numbers from other countries around the world, making it easy for your customers to pay from anywhere in the world.
The most popular payment service providers, such as Paypal and Stripe, not only operate fluently, but offer US companies an additional competitive advantage through the lowest commissions worldwide (for example 2.9% instead of 3.6% in Germany).
However, an American LLC can register on almost any platform, whether it is Amazon FBA, affiliate marketing or many other business scenarios.
American LLC bills have no problem being recognized and deducted by their payees.
We must not forget other forms of corporations in the United States even if we talk a lot about LLCs. US-Corporations that pay taxes can also be managed optimizing the tax system.
In short, LLCs have many long-term advantages and very few disadvantages.
That is why we are offering a full service with company incorporation accompanied by business address, business account, tax ID number application, support in filling out forms and much more.
You can get more specific information about how LLCs and Corporations work at the end of this article.
American LLCs in detail
Despite everything, the United States has a reputation for being a country with a high tax burden; it is not seen as a tax haven.
The reality is that if an LLC is incorporated in the US as a non-resident, it is 100% owned by the founder (single member LLC) and there is no business establishment in the US, that company in the US will be tax-free (at least by the US side).
LLCs are tax transparent, that is, we have a pass through taxation. This means that no corporation tax is paid at the place of origin and the tax liability, is transferred from the company to the directors.
The tax liability of the administrator depends only on his place of residence.
Thus, if the owner of the company is a tax resident in Mexico, Argentina or Spain, he would be subject to the tax liability in one of these three countries, for example.
The partner will be exempt from paying taxes if he is no longer registered in his country of origin, but is, for example, a perpetual tourist, or if he lives in a country of territorial taxation such as Panama or Paraguay, that is, in countries where worldwide income is not taxed, but taxes are paid only on the income obtained in the place of residence.
A foreign resident LLC is considered a disregarded tax free entity and does not have to file a US tax return.
In addition, there is no VAT in the United States, but only regional sales taxes on physical goods sent to or from certain states. This does not affect the case of customers from outside the US or of services within the country.
Of course, another advantage is that you do not need to submit the accounting, with all that it involves:
- You do not have to keep receipts
- No need to present invoices and/or receipts from restaurants and others
- No need to constantly communicate with the tax advisor
- A simple profit and loss account is sufficient
You only need a simple account of exits and entries, and if you want, you can easily control the accounting of the company so that at the end of the year there are no profits, since it is not obligatory to file the income tax return.
In practice it is enough to have account statements and screenshots of income taken from PayPal, Digistore, or similar.
Without a doubt, one of the great advantages of LLCs is that no inspector will be interested in your accounts (because, as we said, whatever comes out you will not have to pay taxes if you do not live in the US).
Anyway, whoever has a US Corporation or for whatever reason wants to do the accounting, can use the services of an accountant (Certified Public Accountant “CPA”), who will charge for this service about $300-800 (if you need it we can contact you).
One of the advantages in the US is that the hired accountant takes responsibility for any mistake or problem in accounting (this is different in other countries).
There, many costs can be deducted very easily. Costs are usually deducted through so-called “expenses” which are set in the form of global amounts.
For example, a business trip uses a flat rate of $400/day. You just have to prove that you have made this trip, you do not need to keep all receipts apart.
As we said, the need for tax deduction only affects C Corporations or LLCs with US tax liability.
In practice, C Corporation are not interesting for typical constant travelers, unless you want to issue shares.
Other advantages of US companies
Having a company in the US has advantages in terms of reputation, as it gives the idea to customers and partners that it is a modern and successful company.
The change in the partner structure is not a problem and can be done immediately through the Operating Agreement or through the issue of shares or stock options, as in the case of a C-Corporation.
Having a well-structured Operating Agreement can make the LLC an interesting way to protect your assets.
Even though we often condemn America’s insolence in setting its interests around the world, we can take advantage of being the owner of a business in this country.
At the international level, its law can be imposed through American courts or through the use of an Arbitration Court, which usually reaches a binding and enforceable decision within a few months.
The U.S. position in the world and the long executive arm of its “rule of law” often leads the opposing party who has committed a breach of contract to recede and aim to reach an agreement or conciliation. The State of Delaware with its Court of Chancery should be mentioned here.
On the contrary, if we don’t have American clients, we shouldn’t be afraid of being sued. The LLC in the US is the ideal protection against international injunctions and claims. Having a US LLC can even protect you in many cases from expropriation if, for example, you own real estate.
It is important to mention the simplicity with which companies can be formed and dissolved in the United States. It is a process that can be done fully online without signature or identity verification.
It is not necessary to personally go to the notary public or to present a copy of the passport or any other document. No share capital is required and the company can be dissolved relatively easily and economically. In most cases, this only requires the filing of a dissolution form to the competent Secretary of State.
The expenses for the closure of the company normally equal the annual fees in the different States (for example, only $100 in Wyoming) and can be sent in cash along with the form.
Alternatively, the company may be forced to leave for failure to pay annual fees (Administrative Dissolution). This do not have disadvantages, only the fact that when a company is re-incorporated in the same State, all annual fees in arrears must be paid.
Banking in US
In order to use US accounts with all the advantages you need a US mobile to receive the TAN keys and for the bank to call us in case of need.
Mobile phone contract with T-Mobile USA or Google Fi are interesting options.
Google Fi offers a US phone number and 4G global Internet in more than 150 countries. 15 GB for only $80 a month. You can then continue to use the Internet more slowly or pay $10 per GB. Local service is excellent, as it can often jump between different local networks. With a routing incorporated trough a US-VPN you can even surf in China completely free of censorship, for example.
If you need help getting the number, we will be pleased to assist you. Note that the service must support roaming service, as you will generally use it from outside the US.
To open a U.S. bank account, the company’s manager has to appear in person.
To open an account in a traditional bank of the country you must present yourself giving a good image, because it is up to each branch to open the account or not.
The necessary documents are generally the passport, a second identification document (for example, bank card or driving license) and an extract from the company’s entry in the Commercial Registry, the Articles, as well as the Operating Agreement.
Normally in the US you are not asked for a consumer bill, not even for company accounts.
We have been successfully helping our clients to open bank accounts since the end of 2018 and we can arrange a meeting with well-prepared banks and branches. Our intermediation to open company accounts by selecting the right bank and with full instructions costs €1,000.
If you do not want to go through this process personally or if you want to have the account previously opened, there is the possibility to open a company account in part remotely through the Tax Free Today office team and our local accountant.
To do this, it is necessary to include an authorized person in the Articles and then exclude that person again after the account has been opened.
It is necessary to register a nominee manager in the business register.
This nominee is concerned with opening an account in the name of the company. After opening the account he removes from his manager position and transfers the access to the account to the client.
The client must go with the nominee manager to the bank branch to sign and appear as an authorized signature on his next visit to the United States. Afterwards, the nominee manager is deleted from the bank records as a person with an authorized signature.
At the moment we can offer this service from €1,500.
In most situations, it is preferable to go directly to the bank to open the account. If at first you cannot, you can start working with your LLC through a Transferwise Borderless account, for example.
You can do the management of your bank account online or through Apps, and you will receive Visa debit cards.
In traditional banks, accounts are usually in US dollars. At fintech you can generally have accounts in other currencies such as euros or pounds.
To open the accounts it is necessary to provide a postal address, because debit or credit cards will be sent there. The Tax Free Today office team offers different options for getting an address.
Access to credit through a US company
The frequent lack of access to low-cost credit is one of the major disadvantages of being a tax-free entrepreneur.
If you are not registered as a resident anywhere, no bank will want to give you credit. And if you register with a new home it will take a long time to get loans from local banks. Moreover, interest rates are very high in most countries with low tax burdens.
Fortunately, foreigners can also improve their credit worthiness in the US if they obtain an ITIN number and follow a procedure ranging from applying for an insured credit card to obtaining and repaying a consumer credit.
If you are interested, we can show you a procedure to follow that will help you to improve your reputation and get credits at a very good price.
If your company’s turnover is good and fiscally optimal, it will be used to improve its reputation, which may be necessary for possible investments or to obtain credit cards with attractive conditions.
If you are interested, we can help you to get an ITIN (Individual Taxpayer Identification Number). By the way, having this number does not make you a taxpayer.
Register your LLC in the US through Tax Free Today
Our Tax Free Today office in Medellin, with a branch in Miami, offers the complete processing of the incorporation of an LLC in the United States with intermediation to open business accounts and more.
The professional fees are about €2,200. To this shall be added running costs, such as costs for management and office structures in the US.
In the process of registering an LLC as Disregarded Entity there are no differences between States, except for the fees to be paid for the paperwork.
Depending on the case, it may be interesting to take into account the laws on the protection of assets and the options regarding the anonymity of the company.
It is generally advisable to register the LLC in a transparent manner, disclosing the actual beneficiaries, as this makes it much easier to open an account.
In our case, we register US LLCs exclusively in Florida, which is where we have local representation.
You will wonder, why Florida?
Florida does not have the bad reputation of Wyoming or Delaware, it is an easily accessible place and also an attractive destination in which to spend a few days. Florida is on its way between Europe and Latin America.
We can only guarantee the opening of company accounts for Florida LLC’s registered by us personally.
At the beginning, we can also register LLCs in other States, but we would have to study each case to see if we could also help you open the company account.
Each case has its own cost.
Let’s also talk about the LLCs in New Mexico because this State offers the greatest anonymity for LLCs.
While in most states the owner of LLCs is made public within 2 or 3 years, in New Mexico anonymity is guaranteed in the long-term, while in Florida the anonymity can only be achieved through trustees (a service that we can also offer as explained below).
This makes New Mexico LLCs the best option to protect you from sanctions for infractions of any kind.
If you only want to protect yourself by interposing a company of this type, you will not need to open a bank account, and therefore we can offer the registration of this company under more advantageous conditions, starting from €600.
In terms of the address of your US company you can choose from different options ranging from a post office box to your own office with employees.
Using a simple post office box makes it impossible or difficult to open accounts (whether bank or fintech), so we do not recommend it.
We work only with the following options:
Option 1: Virtual office
The virtual office is the cheapest option, which includes a real address. Here the mail is received, scanned and, if necessary, it is physically forwarded.
Option 2: Shared office
In this case you also have a real address, but unlike what happens with the virtual office, there you do work. It includes mail forwarding service, and you can also use a meeting room or keep employees working for customers on certain orders. Many fewer companies are registered in this type of address than in a virtual office.
Option 3: Own office with real commercial activity
A real own office in which you have at least one job available for you at all times. US companies with an operating business establishment are excluded from the tax exemption (in other words, they pay taxes). That is why this option is not the most recommended.
The best option is to set up the office abroad if you want to take advantage of having a US LLC and have a team of workers at the same time, but you should choose the country very well so as not to end up having to pay taxes here.
For example, good options could be: Philippines, Georgia, Colombia or other country with a cheap workforce.
Having a real office will mean a substantial improvement in the image of the company and, in addition, it will allow you to do more work in a very economic way. In these countries you can often get workers who speak English from €400 per month. Part-time work is cheaper.
Set up in a similar way, the Tax Free Today office in Medellín can help in the organization.
Here is a short list of our prices (which you will have to confirm in each case):
- Formation expenses of the US LLC €2,180 (lump-sum payment)
- Annual fees according to the office package €1,400 (annual payment)
- Trustee service €950 (annual payment)
- Local business account €1,000 (lump-sum payment)
- Business account with partially remote opening €1,500 (lump-sum payment)
- Increase in reputation for credit improvement €200-€400 (monthly payments)
As for our trustee services, we choose as trustees only persons who are not already registered as owners or administrators of other companies, so we avoid mere trustees.
Instead of using the services of a trustee, you can decide on a Swiss or Austrian association as owner, thus avoiding personal involvement in the company.
We can help you with the registration of your LLC with an association as an owner. In this case the price is €3,100 and the monthly fees for the all-inclusive service amount to €250 per month.
Using an association in this way can help you to avoid exit tax, to manage a company despite having personally declared yourself insolvent, to conduct a business activity despite contractual prohibitions or incompatibilities, or just to better protect your wealth.
The requirements as to the business substrate of association and company will depend on your place of residence.
This model has a special attraction because the US LLC is considered a mercantile society at the association level so that profits do not go directly to the association and do not have to be taxed. However, on the part of the United States, the pass through taxation is still in force.
Thanks to this difference, profits are tax-free in the United States, but they do not go directly into the association either. That is, you can freely access the money in the way of salary or credit or simply spend it with your company credit card.
In this case the association would only exist as a “holding” and has no other economic activity. However, there are many more options for this model.
Finally, it should be noted that there are hundreds of cheap company formation agencies for the United States and that they may be useful on a case-by-case basis, especially for people who earn little and may not yet need a good company account.
No doubt they will not offer additional services apart from the incorporation, administration and some postal address packages, and especially they do not include a business account.
They will also not be able to help you with questions regarding Form 5472, US income tax and so on.
So, if you’re looking for a long-term option, surely the Florida LLC registration service we offer is a good investment even if it is more expensive.
Any real entrepreneur should be able to afford an investment of €3,000 in exchange for, on the one hand, getting rid of paying taxes completely and, on the other hand, having a secure and flexible company account.
If you would like to set up an LLC in Florida (or other states) with our help, write to us at firstname.lastname@example.org. The registration will be ready in 4 working days after receipt of payment.
In case you are not sure about which is the best option for you and your business, you can obviously ask for a consultation first.