We are a partnership based in a South Asian country and none of the partners are U.S citizens or residents. We sell business software in the United States from our website. If we register our company (LLC) in the State of Delaware or Wyoming, while we are physically present outside the US, will we be subject to US taxes?

ANSWER

The BIDaWIZ Team's Answer:

You will certainly have to pay a franchise tax and file a form 1065 for the partnership. Please note that a partnership is a pass-through entity in which the income and expenses are allocated to the partners via a K-1 form. The individuals would then need to file individual tax returns via form 1040-NR since the income is sourced within the US. The source of the income is critical in determining a foreign owner's LLC taxation. The actual tax is assessed on the taxable income or profit, not the revenue. For instance, if the entity generates $100,000 in revenue and $95,000 in expenses, the taxable income would be $5,000 or less. This would be allocated to the partners. The amount of taxes will depend on the income generated. Please note that sales tax requirements vary by state. Typically, you must collect sales tax in states in which you have a physical presence or tax nexus (i.e. Delaware).