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Concerning Income Taxes.... LLC in the USA or Sociedad Anonima in COSTA RICA?

  • Hi, I am starting a new business that will operate in Costa Rica with no employees or overhead (internet business). My first plan was to operate under a U.S. LLC because of ease of business registration and banking issues. Registering a Sociedad Anonima (CR version of the LLC) in Costa Rica takes a while (2 months) in comparison to an LLC which can take as little as week. In addition I will seek payments to be made through online merchant accounts for credit card transactions. Paypal for instance, will be the primary payment gateway until I get a track record and can then "upgrade" to a private credit card merchant account. My clients will be global (Vacation Property Owners) and I presume that sending payments online to a company registered in the States (although working out of Costa Rica), and through a traceable payment method such as paypal would add an intangible amount of credibility to my business...this is essential considering my business is primarily over the net and in a different country than most of my clients. My question is... Does it make more sense to run the business as an U.S. LLC operating abroad? Afterwhich, come tax season I would pay taxes (Gains/Losses) on my income through Schedule C like most other Sole Prop. LLCs. I would also deduct Foreign Earned Income and Housing Exclusions and at that point be able to deduct operating expenses just like in the states. or... Does it make more sense to wait the time needed to register in Costa Rica under a Sociedad Anonima and take advantage of the lax business income taxes, lax capital gains taxes, and also once again claim the Foreign Earned Income Exclusion to the IRS in order to offset what taxes I pay the Costa Rican government? In addition, I would also have the ease of business transfer to a foreigner in case I ever wanted to sell in Costa Rica due to lax rules regarding the transfer of shares of a Sociedad Anonima. Should I consider operating under an LLC in the states AND registering a Sociedad Anonima in Costa Rica (for the same company) in order to take advantage of both scenarios? Has anyone here had this issue come up? Thanks!

  • Answer:

    My suggestion is to form a Costa Rica SA in Costa Rica. If you plan to do banking in Costa Rica or own/lease any asset it's advisable to have a few SA. Regarding the tax issue you should consult with a tax expert in the United States Lic Giovanna Barrantes [email protected]

Giovanna Barrantes at Yahoo! Answers Visit the source

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Assuming that you are a US citizen or resident, it does not make a dime's worth of difference tax-wise either way on your federal return. You are taxed on your world-wide income and that won't change regardless of how you structure the legal entities. If you are a foreign national operating outside of the US, don't mess with creating any US legal entity. That will effectively connect your income with the US and make it taxable in the US. For the most part, setting up an LLC in the US is a waste of money. It does not provide the expected liability protection in a single member LLC or a small partnership LLC. A first-year law student could pierce the liability veil in must jurisdictions. You are stuck with additional state filing requirements that a Sole Proprietor does not need to mess with. You can even be stuck with paying higher state taxes and fees depending upon where you live and where you set up the LLC. I can't speak for the SA in Costa Rica. Consult with a local attorney there.

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