Full question:
I am moving to the Philippines in December. I plan to start a corporation in the Philippines, for which I have a Filipino lawyer. The corporation will be a technical writing outsourcing company - I will hire writers there to do work for client companies in the USA. I will be back in the USA several times a year to facilitate this. The question is, do I need to also incorporate a business entity in the USA? Or can my Filipino corporation have clients here and offices and employees in the Philippines? Will it change my tax liability if I create a US corporation vs. don't create a US corporation?
- Category: Taxes
- Date:
- State: California
Answer:
Generally, a U.S. company can do business with a foreign entity without needing to be incorporated in the U.S. However, forming a U.S. corporation may affect your tax liability. If you create a U.S. corporation, you will likely be subject to U.S. taxation.
For federal tax purposes, some business entities are automatically classified as corporations. Others can choose how they are classified. A business entity with at least two members can be classified as either a corporation or a partnership. A single-member entity can be classified as a corporation or disregarded as separate from its owner.
Foreign tax credits allow U.S. taxpayers to avoid or reduce double taxation. You may choose to take a deduction for foreign taxes paid instead of claiming a credit. Generally, it's beneficial to take foreign income taxes as a tax credit.
We recommend consulting a tax professional to review your specific situation and documents.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.