Loading...
Answers
MenuHow can a U.S. startup LLC legally employ someone abroad & what are the consequences of that?
I'm starting an LLC here in the U.S. (Texas state) and I want to recruit a couple of engineers who live abroad. They are not planning to migrate to the US, they'll work from home in their respective countries. How do I go about doing that? What's the tax implications? How does payroll work? Etc?
Answers
When I do this I use Elance.com or another similar marketplace. They handle all the logistics and payments through escrow. I've been doing this for years if you want to have a call about it. I have workers all over the world doing different pieces of my businesses and it's quite effective.
Hi..
If you want to hire people abroad , you have freelancer.com , guru.com , upwork.com , and elance.com . These are the famous ones mainly used by developers and graphic designers ..
If you want something bigger , without a middle man , then you need to have the over seas candidate sign a W-8 form , for your taxes to keep in record . It just shows that this person is not a U.S. Person and he is not liable to US tax payments or deductions .
The above mentioned platforms take care of the tax deductions If people are either in USA or outside.
I've managed multinational distributed teams before. I can help if you need more info.
Good Luck!
If you're going to hire overseas engineers to perform work for your U.S. based company, you should be mindful of federal and state laws, as well as the laws of the foreign country where your engineers live and work. First, determine whether you want these individuals to be employees of your company, or merely serve as subcontractors hired to complete specific tasks. Generally, the subcontract relationship is easier from a compliance, reporting and tax perspective. When hiring a non-U.S. contractor, the contractor completes an IRS withholding certificate in order to verify the individual or company is not a U.S. tax resident. Foreign individuals sign a Form W-8BEN, a foreign corporation would complete W-8BEN-E, while a foreign partnership would complete a Form W-8IMY. So long as the foreign contractor is performing the work outside of the U.S., there should not be any U.S. tax withholding issues. It can become complicated if, on occasion, you have the developers travel to the U.S. to perform work. The nonemployee compensation could be considered U.S. source earnings and subject to federal and state taxes in the U.S.
Related Questions
-
In a startup with a globally-spread remote team, does it still make sense to incorporate in U.S./Delaware vs. somewhere overseas?
Delaware C-Corp I usually Delaware is the best choice for any startup looking for fundraising with a US focus. However, if you are a remote and global team, an overseas or foreign corporation or US tax purposes might make sense. You'd have to talk to an advisor who can dive into your situation, but it would be more difficult for the US owner come tax time, as he'd likely have to file form 5471 to the IRS for any controlled foreign corporation, and form 90-22.1 for any foreign bank accounts. There are a lot of other concerns I didn't hear you raise that entrepreneurs usually have and ask me about, namely banking and merchant accounts/ payment processors. In terms of accepting online payments, any US corporation or LLC is far and away the best option for a company. It's difficult to suggest without knowing more about the company but you might explore Delaware, Wyoming, Hong Kong and other offshore jurisdictions for your legal entity. Each tend to have positives and negatives and there is no one size fits all solution. I do write about issues of incorporation quite regularly on my website FlagTheory.com - so you can read those articles for free, or we can schedule a call - Clarity.fm/incorporation when you have specific questions. Thank you and hope this was helpful!Edmund JohnEJ
-
Do companies in the U.S. have to charge a sales tax on digital products, e.g. Info products?
There are a lot of moving parts to this question. First, you need to determine in which states you have "nexus" and then determine do those states require you to charge sales tax, as each state has different rules. As an example, MA requires salesforce.com to charge sales tax to MA customers but does not require newyorktimes.com to charge sales tax. The difference is that users can manipulate data on salesforce.com vs. neworktimes.com is read only. This example can only be applied to MA, Arizona, Illinois, New York, Texas, Pennsylvania and Washington State (as of now). There are also "click-through" and "affiliate" nexus rules that need to be considered. Be careful, as state and local taxation has become a very hot due diligence issue in M&A transactions. So, if you plan to sell your business in the next few years, you want to get this right. Also, the Officers and Directors are personally responsible for uncollected Sales tax. You are best to get an expert to review your sales tax compliance, as it is a very specialized area and changing constantly. I am not an expert, but know of some firms that offer this service at a very reasonable rate. Feel free to call me. Thank you, Joe Faris Accountalent Management Corp. 45 Prospect Street Cambridge, MA 02139 Tel (978) 621-0759 Fax (978) 278-1517 Website: www.accountalent.com LinkedIn: www.linkedin.com/in/farisjoe/ Twitter: @accountalentJoe Faris, CPAJF
-
What are the tax consequences for founders if the seed round investors take common stock instead of preferred?
There shouldn't be any tax consequences for the founders if you've made 83b elections--the election meant you paid tax already on the full value of the stock at the time of the election (presumably zero) even though it was subject to future forfeiture. If you sell newly-issued stock there should be no tax impact. If you sell your own common stock, you'd pay tax on the gain, but I doubt that is what you mean here. Of course, you should not take the free advice dispensed on Clarity and consult your own tax preparer--this is not tax advice.Ben SavageBS
-
I'm a Canadian selling ecommerce products on Amazon (US only). Need info on cross border tax clarification & if it's time to incorporate (in US or CA)
Regarding US taxation of internet sales. Since you are a foreign entity or person (in regard to the US), and there is an income tax treaty between Canada and the US, you will not be liable for US federal income tax on internet sales unless you have a “permanent establishment” in the US with which the internet sales income is effectively connected. So as long as you do not have a warehouse, physical store, sales office, etc... in the US you don't have to file US returns or remit tax to the US. Amazon should be charging to the customer and withholding any sales tax due to a state in which your products are sold. If you sell through other merchants or directly you may have to deal with this yourself. Regarding incorporation Incorporation is almost always a good idea from a liability standpoint as it prevents a judgement for damages from taking all your property and limits the collection to what is owned by the business, With the facts you have given I would suggest incorporating in Canada unless you have a business reason to establish a physical presence in the US. This will eliminate US taxes and related compliance costs. Once you establish a US presence you will need to begin filing returns in the US even if you are running a net operating loss. If there is no benefit to having a physical presence in the US then the related compliance costs and tax would be an unnecessary expense. Feel free to setup a phone call if you would like to chat for a bit regarding the matter. ThanksD. Mathew BlackburnDM
-
I'm a business in Canada (QC) that mostly does business with USA based clients over the web. What taxes do I need to apply?
I will answer this is the simplest form I can. Basically in every country to conduct business in you will need to pay taxes in that country. If you have an office, employees or your revenue comes from that country you have to pay taxes. These taxes will include State, Federal and Sales Tax. Moreover, this at the beginning will make you think you are paying double tax since this income also has to be paid with your local government, but it isn't so bad. This could be a great opportunity to build a tax strategy where you can take advantage of multi country taxation which can lower your overall tax bracket. There are several steps you have to do to conduct business in the US, such as incorporating first as a foreign corporation in the state you chose (Preferably one with no state tax) then filing your taxes. Your tax preparer in Canada will have to take this in consideration since there are forms he has to fill out to cancel either you Canadian Income Tax or your US tax preparer to fill out the return not to pay taxes here but in Canada... whichever tax you have to pay depending on the international treaties they have.CARLOS QUINTANACQ
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.
