California LLC Tax Help?

Need help with delaware LLc taxes, answers from people experienced with DELAWARE llc tax laws?

• I filed a single member llc in delaware that will do business exclusively abroad.  The llc is a passthrough entity so there is no federal tax to be paid by the LLc but instead will be filed on the individuals personal tax return.  However, what happens to profit that are earned abroad? are they taxed by income tax in the U.S? and are money made abroad put in U.S banks taxed?

• Answer:

  Because the LLC is a disregarded entity any profits are taxed based on the individual owner's tax status.  US citizens and residents are taxed on worldwide income, so all the business profits are reported on schedule C and are taxable in the US. It does not matter where you choose to deposit the money. Two things to consider are: If any foreign taxes were paid, the owner may qualify for a foreign tax credit. If the individual owner qualifies for a foreign earned income tax exclusion, some or all of the foreign earnings may be excluded from US taxable income. If the owner is a non-US resident, then they need to consider if the profits are "effectively connected business income" or if the foreign earnings are non-US income.  They also need to consider their country of domicile to determine if there is a tax treaty between their resident country and the US.  If a tax treaty exists it will typically allow taxpayers to avoid "double taxation" and for some specific countries may even offer some tax benefits. My advise would be you contact a tax professional who can assist you with filing the returns.  Dealing with tax reporting for foreign income is not something I recommend as a DIY project.  Also just because the LLC does not have to file a federal return, it may still have to file a state return and pay franchise tax.