how about Tax in case of a foreign member in LLC?

In order to avoid single-member LLC,
to get dual protection, & tax benefit as partnership
I’d like to put a foreign member in my LLC when I form it.
She will financially invest later once I make a good profit.

My CPA says, putting a foreign member in LLC is not a good idea
from this point of view of TAX.

If I put a foreign member into my LLC, what happened when tax report?
The process is complicated?

Thank you so much for your help in advance!! :biggrin

I’m assuming that the foreign partner does not live in the US, is not multi-national or have a US SSN, etc.

Foreign partner needs to obtain a TIN for use on a US tax return.

Partnership must file forms 8804 and 8805 and IS REQUIRED to withhold 30% of foreign partner’s income (not “distributions” or “cash” but Sch K income) and send to IRS. Penalty for failure to withhold is the tax plus 10% penalty, enforced against the partnership.

foreign partner must file a US tax return.

plus about a half a dozen other things that can pop up to keep it interesting.

Thank mcwagner for your help.

It sounds like very complicated & no benefit to have a foreign member in my LLC.

My goal is to avoid Single-member LLC, to be safe doing real estate investment.

An expert of LLC says on his book,

=>”You can [forming a corporation], with yourself as [the sole shareholder],
& making the corporation your partner in the LLC.

If you live in a state where forming a corporation is a costly endeavor,
you can always form your corporation in a less expensive, tax-free state,
such as Nevada. You’ll pay about $175 per year in registration fees;
however, your LLC will get the benefit of partnership taxation.

Nevada is a great state for forming a partner corporation
because of the privacy it offers: Nevada doesn’t require you to disclose
who the shareholders are of a corporation.
This privacy is beneficial if you don’t want anyone to know that the partner
in your LLC is actually, well, you.”<=

In case of this situation, how about the tax matter.
Is this much better than having a foreign member in my LLC?

no entity will ever shield you from your personal actions.

if you are personally negotiating the deals

personally managing the properties

personally performing the maintenance

personally hiring the contractors

you will be personally liable

for anything unfortunate that happens. no entity or combination of entities will protect you from your personal actions.

being the sole owner of the corporation, which is the managing member of the llc of which you personally are the 99% member, only complicates your banking, bookkeeping and tax returns with no additional protection from liabilities BECAUSE YOU ARE STILL PERSONALLY INVOLVED IN ACTIONS THAT CREATE LIABILITY.

In my opinion most of the gurus should be prosecuted for continuing to preach this crap. /soapbox

don’t even get me started on the privacy myth.