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I am an Indian citizen living and working in the Indian software industry for many years. I am also a regular tax payer in India. Due to the overseas client growth in US, I am planning to setup a LLC in Delaware, US. I am also planning to setup a LLC Bank Account.

Am I liable to any tax in United States, when I am already paying my taxes in India? Will the LLC be liable to any kind of tax, since I am a non-resident US person? Will LLC require any kind of annual returns to be filed to US government?

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First, yes, your LLC has to file annual taxes to the US government. All US companies do, regardless of where their owners live. Second, you will also probably be liable to personally file a return in the US and unless the US has a tax treaty with India (which I don't believe it does) you may end up paying taxes on your same income to both countries. Finally, opening a US bank account as a foreign citizen can be very tricky.

You need to talk to a US accountant who is familiar with Indian & US laws.

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    Opening bank account as a foreign citizen is the easiest thing to do in US. Just enter into a bank, show theM your passport, and wave to the teller's face the money you want to deposit. They will open you bank account stright away. IRS does not have any issue with it either, cause if you are a non-US resident they'll withdraw a 27% taxes over the annual interest generated by your saving account. This is what makes US a great country in the world: IT'S SIMPLE, AND TRANSPARENT LIKE A CLEAN GLASS. – Marco Demaio Oct 16 '12 at 19:06
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An LLC does not pay taxes on profits. As regards tax a LLC is treated as a Partnership, but instead of partners they are called members. The LLC is a passthrough entity. As in Partnerships members can have a different percentage ownership to the share of profits. The LLC reports the share of the profits of the members. Then the members pay the tax as an individual. The profit of the LLC is deemed to have been transferred to the members regardless of any funds transferred. This is often the case as the LLC may need to retain the profits for use in the business. Late paying customers may mean there is less cash in the LLC than is available to distribute. The first answer is wrong, only a C corporation files a tax return. All other corporate structures are passthrough entities. The C corporation pays corporation tax and is not required to pass any funds to the shareholders. If the C corporation passes funds to the shareholders this is a dividend, and taxable to the shareholder, hence double taxation.

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    What are you talking about "Only a C corporation files a tax return"? Partnerships, S-Corps - they all have to file tax returns. In some states they even have to pay taxes, and even SMLLC may have to file returns and even pay taxes, depending on the State. – littleadv Oct 18 '14 at 21:04
  • This is completely wrong. LLCs, Scorps etc certainly have to file a return in almost all cases. – Fattie Nov 3 '16 at 21:59
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  1. There is no such thing as double taxation. If you pay tax in the US, you CAN claim tax credits from India tax authority. For example, if you pay 100 tax in USA and your tax liability in India is 200, then you will only pay 100 (200 India tax liability minus 100 tax credits on foreign tax paid in the USA). This is always true and not depending on any treaty.

  2. If there is a treaty, the tax rate in the United States is set on the treaty and you CAN claim that final tax rate based upon that treaty.

  3. If you operate an LLC, and the income is NOT derived from United States and you have no ties with the US and that LLC is register to a foreign person (not company but a real human) then you will not have to submit tax return in the US... I advice you to read this:

http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

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    The first part is of course not generally true. The USA cannot force every other country to honor such "tax credits". It is however a common clause in tax agreements. – MSalters Apr 18 '11 at 13:23
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    Both #1 and #3 are false. – littleadv Nov 6 '13 at 20:40

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