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Converting an LLC to an S Corp

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Many small business owners form limited liability companies (LLCs) rather than corporations because an LLC is flexible and has minimal state reporting requirements.  Many US entrepreneurs set up an LLC in the beginning, because it is relatively easy and relatively cheap.  Generally, this is a good approach for the start as LLCs offer liability protection and other advantages.  Here's more on LLCs - http://www.mooresrowland.tax/2018/12/the-pros-and-cons-of-llcs.html

Why Switch?

Reasons include -

As your income from your LLC increases, so does the self-employment tax. The ability to contribute to retirement accounts does not change. This is where converting the LLC to S Corp has advantages.Offering shares in your company to outside investors.Enjoying the foreign earned income exclusion while working abroad
Let's talk about #1.  From a tax perspective, it makes sense to convert an LLC into an S Corp, when the self-employment tax exceeds the tax burden faced by the S Corp.  Some state…

Foreign Businesses - Permanent Establishment in the USA

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A permanent establishment (PE) is a fixed place of business which generally gives rise to income or value-added tax liability in a particular jurisdiction. The term is defined in many income tax treaties and in most European Union Value Added Tax systems. The tax systems in some civil-law countries impose income taxes and value-added taxes only where an enterprise maintains a PE in the country concerned. Definitions of PEs under tax law or tax treaties may contain specific inclusions or exclusions.

I first wrote about Permanent Establishment here - http://www.mooresrowland.tax/2015/06/e-commerce-and-taxation.html
Recent conversations mean that I need to return to the topic.

The contrasting of Permanent Establishment versus Nexus Standard is a very important subject of US International Tax to understand because, it will not only determine if a corporation is subject US Federal and/or State tax, but also how to manage expansion of a foreign corporation to the United States.

The United St…