Non-resident LLC in California

**owen** · Sep 23rd, 2011, 06:16 AM

I have a question regarding setting up a non-resident LLC in California.

I'm in online business (making web sites, web applications, web-hosting re-seller) and I have clients in Europe, where my company is based. The taxes in Europe are huge ... monthly wages are taxed at 50% , tax on yearly profit approx. 46% etc.)

My plan now is to divide the business - I would acquire a new clinet through my EU company and then outsource it to a US company (that I plan to incoporate now) or hook US company and client directly.

This way I can channel the money outside the EU company, where the taxes are enormous.

Why California? I do not wish to set up a LLC in Nevada, Delaware, Wyomning or any other tax heaven (Belize, Gibraltar etc.) since all of these states are already stigmatized at tax officials and also at some clients. It is completely different perception if I offer them services from a company based in California than to Cook Islands etc. Even a dumb secretary knows there are IT companies in Silicon Valley and raises eyebrows when a well known tax heaven is mentioned. Unforunatelly, but true in many cases.

So now- can anybody tell me - if I forgot something or have a better idea in general:

I incorporate a non-resident LLC in California (I'm a non-US citizen).
I don't have any business with any US resident company and never use this company for any US based business or have a US partner
I open a bank account outside EU
I pay $800 annual CA franchise tax

Thanks, Owen

**jbuckingham** · Sep 23rd, 2011, 10:31 AM

Frankly, it sounds like something you should get a legal opinion on. LLC in CA = $800 tax year for resident but may be different for non resident. It costs like $80 to file as well.

**GlobalWealth** · Oct 16th, 2011, 02:24 PM

Originally Posted by owen

Why California? I do not wish to set up a LLC in Nevada, Delaware, Wyomning

CA would be a poor choice. Way too many pitfalls. You could end up owing CA state tax on profits generated by the LLC, not to mention lack of privacy, terrible creditor friendly laws, and expensive annual renewals.

I know you said you aren't interested in NV, DE, or WY, but you are being a bit naive with your assessment. Most major publicly traded US companies are registered in DE. NV incorporates more LLC's each year than almost all other 49 states combined and WY is the first US state to offer LLC's.

Each of these would be a better choice than CA for a variety of reasons, not the least being taxation.

If structured properly, a US LLC can create a very tax efficient vehicle for a non-US citizen/resident. But it can also create a nightmare tax trap if done incorrectly.

One caveat, you could run into trouble opening an offshore bank account in the US company name. I would recommend a US bank account if just for minimal usage.

Let me know if you have further questions.

**process_junkie** · Jan 31st, 2012, 07:22 AM

What about incorporations? Does it make sense to register that kind of company? Since I'll be looking for VCs in California, does it make any difference if people register company in different state?
Sorry to OP in advance.