• Tax implications after incorporating a solo LLC in US

Hi, I am software developer and I develop apps for the iPhone. Currently, I file my taxes under Section 44ADA as my income is less than 50 lakhs. 

However, the business is growing and I want to register a company in the US. I am looking to incorporate an LLC as a solo member in Delaware, and I'll continue to sell software/digital products. My plan is to draw salary also from the US LLC. Here are my questions:

1. From what I've read, the LLC need not pay taxes in the US (one person LLC being a disregarded entity). Also, I being a non resident alien for US need not file taxes in US (as income is from sales of digital products) but I do have to file an annual form. Is this correct?

2. I'll get a US bank account where I'll receive all the revenue from the sale of the softwares. I assume that I will be able to adjust expenses from the revenue to arrive at profits. On the profits arising from the LLC, do I need to pay taxes in India even before remitting them to my personal bank account? 

3. Is one person LLC allowed to give salary to the beneficiary owner? For the salary which I will draw, can I continue to file it under section 44ADA?

4. Do I need to apply for GST in case i register my LLC or draw salary from the US LLC? My annual revenue exceeds 20 lakhs.

Thank you!
Asked 25 days ago in Income Tax

1. The US exempts the non-resident from filing taxes if there is no US presence or economic substance.


2. You need to pay taxes in India as your global income is taxable.


3. Generally you are considered as owner and salary is not allowed. It would be considered as dividend. 


4. Since it would not be salary, GST would not be required. 


For detailed consultation, please opt for telephonic consultation. 

Prerna Peshori
CA, Pune
172 Answers
8 Consultations

5.0 on 5.0

1. LLC with a single member if does not elect to be corporation or partnership, is treated as a disregarded entity (i.e. sole proprietorship) and net earning would be clubbed in the member tax return (i.e. Form 1040-NR). Assuming your residential status to be non-resident alien in USA, you would be liable to pay tax on LLC net earning in USA by filing tax return Form 1040-NR


2.Assuming your residential status in India would be ROR. In such case you would be liable to pay tax in India on global income. You can claim benefit of FTC (foreign tax credit) on federal taxes paid in USA on LLC income proportionate to income tax liability in India on such double taxed income while filing tax return in India


3. No. Section 44ADA is not applicable on salary income


4. Yes



For detailed discussion you may opt for phone consultation


Vivek Kumar Arora
CA, Delhi
4708 Answers
967 Consultations

5.0 on 5.0

As per my understanding the answers are as below 


- You need to either select to pay taxes and file returns for LLC, or can select to work it as pass through entity in such cases need to file tax liability in personal capacity for the profits of the LLC and also need to file annual return


- No need to pay any tax on profits lying in the US Bank Account unless its brought to India in the form of dividend if you select to pay tax at LLC level, If you decide to pay tax at personal level income will be taxed in india as business income from foreign entity and you need to offer it for tax subject to benefit of double taxation avoidance agreement relief


- Yes its allowed subject to personal taxation on that amount in USA and filing return of income for the same


- No if you are taking it as salary from US based LLC than GST is not applicable, it will only apply if you take this amount as business income or professional fees

Vishrut Rajesh Shah
CA, Ahmedabad
909 Answers
37 Consultations

5.0 on 5.0

What is the purpose of forming a LLC in USA is it just tax or any other purpose?


Yes you have to file return there and declare that you are non-resident LLC or you can form an Inc and pay tax in USA only.


You need to pay tax as per the financial year.


No it won't be considered as salary if you opt for pass through entity and not C corp.


Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4216 Answers
94 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA