The taxes that apply to a foreign resident operating a business in the US can vary greatly depending on the specific circumstances of the business and the individual's tax residency status. Some common taxes that may apply include:
Federal Income Tax
Disregarded Entity: By default, a SMLLC is treated as a disregarded entity for tax purposes if it is owned by an individual or a corporation, meaning the LLC's income and expenses are reported on the owner's tax return.
Effectively Connected Income: The foreign owner is subject to U.S. federal income tax on income that is effectively connected with a U.S. trade or business.
State Income Tax
State Taxes: The SMLLC may be subject to state income taxes, which vary by state. Some states also impose annual LLC fees or franchise taxes.
Employment Taxes
Tax Treaties
The application of tax treaties can significantly affect the tax obligations of foreign owners. Treaties can reduce or eliminate federal withholding taxes on certain types of income, such as dividends, interest, and royalties.
It's important to consult with a qualified tax professional to determine the specific taxes that apply to your situation. doola offers CPA consultations to help foreign residents understand and navigate the complex US tax system.
Disclaimer: This information is for general purposes only and should not be considered tax advice.