Setting up a Dellaware corporation to do my trading

Discussion in 'Professional Trading' started by Daal, Apr 20, 2007.

  1. This has got to be a new low for ET.

    Some ass clown in a Third World Hell Hole claims he is not a "criminal"...
    But pulls a dozen regulatory "facts" out of his ass...
    For the sole purpose of EVADING TAXATION.

    And then someone who should clearly have better things to do...
    Actually attempts to "educate".

    Comic gold.
    #11     Apr 21, 2007
  2. I think this may actually be a semi-workable idea (and legal) and it's not so much a tax evasion scheme as a tax minimizing scheme. But it's probably not worth it unless you're making a very high income from trading.

    At most, it only accomplishes for you getting around the limitation you say Brazil has on offsetting losses/gains on foreign derived investment income. Basically, by obscuring from Brazil how you're really earning the money. You're still gonna be paying all kinds of taxes on that income (US and Brazil) and have a buttload of hassle and cost getting it all set up and maintaining the arrangement. Also, better make sure this is even legal in Brazil. And even though what you're talking about can be done legally in the US, you're gonna be audit bait for sure. Better figure in some costs for getting someone to defend you on that.

    To do this, as a non-resident alien you'd have to form either an LLC or a C Corp (or an LLC that has your C Corp as a partner). You probably want an offshore LLC (how long are those going to last? who knows). You'd end up paying someone thousands of dollars most likely to set this up for you and to be your agent in the state where you choose to set it up since you don't actually intend to be here. That's a requirement. By the way, now you have to track how much time if any you spend in the US vs. outside. Also, now you're subject to complicated US rules on how to handle your trading losses and gains. Let's hope you're not also employed in Brazil cause that's a whole other can of worms.

    OK, so assuming it's still worth it to you, the next problem you have is determining whether your income is derived from the US or not. I'm not 100% sure but I'll bet that you find it is if you're trading US equities or derivatives on US exchanges. Don't know about currency. This is important because it determines whether or not you will be taxed on the income you earn here - just being a non-resident doesn't automatically get you out of US federal income tax by the way.

    Let's assume the worst case that the income is considered to be US derived income. Then if you go the C Corp route, you will be paying corporate taxes and you will owe US taxes on your salary you pay yourself and any remainder that you might owe to Brazil after deducting what you paid in the US.

    If you go the LLC route, then again you are likely going to end up paying US income tax and then also whatever else you may owe Brazil after offsetting the US income tax.

    Should you be lucky enough that someone can figure a way your income is not considered US derived (I doubt it), then you don't pay the US federal income tax (except corporate taxes if you go with a C corp). But you obviously still owe Brazil income tax on the full amount now.

    Now, if it's true what another poster said about the feds wanting to limit this kind of thing and cracking down on the states that make this easy (Nevada, Delaware and Oregon to my knowledge), then you will have gone to a lot of expense and bother for something that may not last long.

    However you really do need a GOOD accountant and lawyer as mentioned above because there's all kinds of obscure laws and gotchas such as when the controlling member of a corporation is a non-resident alien and hires himself. Stay away from the cheapie internet sites that offer to form a business entity for you and find someone you know is reputable.

    So what have you accomplished? You've found a way that you can offset losses/gains legally (at least in the US - don't have a clue about Brazil), but you'd really have to think about whether the cost and hassle of doing this is worth what you will save in Brazilian taxes. I doubt it would be.

    Good luck figuring out the costs/benefits of this one! You'll be paying thousands US$ a year to a lawyer, accountant and agent to keep this all running. And by the way, I only half know what I'm talking about because I'm not a professional in this field so don't rely on my interpretation for anything more than another viewpoint on your post.

    Another thought is to trade Brazilian markets or look into currencies to see if they're handled differently in your county. Or -here's a crazy idea - pay what you owe Brazil and bug your politicians to spend your money wisely.

    #12     Apr 21, 2007
  3. Daal


    you guys are more clueless than me. LOL. The public company I said was an example. SEC has nothing to do with this. Nothing.

    I dont know if you guys know this or not but non resident aliens can own US companies(except S corps). And that's even without a visa.

    And the company can open bank accounts, brokerage accounts. And it can be a C corp and keep retaining earnings so I dont have to pay taxes in my country(but do has to pay US federal income taxes, but no state taxes in nevada). 15% income up to $50,000 and some deductions, thats fine with me. When I need some money I'll pay a dividend pay taxes in the US and MAYBE some tax in brazil, dividend income is taxfree here.
    I dont even need to hire myself.
    You guys think uncle sam is turning down tax money and your wrong. I could be a fifty pound homeless nerd in bangladesh eating rice with my bare hands and they aint turning down a penny. I did my homework. I just want to have all the information
    #13     Apr 21, 2007
    #14     Apr 22, 2007
  5. Daal


  6. Daal


    Tax avoidance is the legal utilization of the tax regime to one's own advantage, in order to reduce the amount of tax that is payable by means that are within the law. Examples of tax avoidance involve using tax deductions, changing one's tax status through incorporation
    #16     Apr 22, 2007
  7. virgin


    I suggest you contact , one of the biggest and most reputable offshore providers in the business.
    You can have 0 tax liability if you work with nominee shareholders.
    #17     Apr 22, 2007
  8. Hi Daal

    Please excuse the rude answers from other ET members. They should encourage and facilitate foreign investment into their own country.

    First LLCs: For tax avoidance, incorporation in the US does not work well. The LLC is useful for asset protection, meaning that if you engage in a business that goes broke, then you do not lose your personal assets (limited liability). For taxes: LLCs have passthrough taxation, meaning that the LLC is not liable for taxes, its owners are. So you still have to pay taxes on your company in Brazil. LLCs work if you live in a zero tax country like the Bahamas (or Uruguay) but not in Brazil. Of course, you can "forget" reporting your LLC to your government but that's illegal in most countries with worldwide taxation.

    So, what are your options? non-US citizens have many many options. It's much easier for non-US persons not to pay taxes from trading.

    Option 1. Get legal residence in Uruguay. There is no tax to foreign income there. You can also do your trading through a "relative" living in Uruguay.

    Option 2. Establish a panamian foundation. Or a Liechtenstein foundation. Do your trading through a company owned by the foundation. The foundation must be incorporated through nominees, but you have to make sure you and only you have signatory powers on bank accounts otherwise say bye-bye to your money.

    Why foundations? First, in most countries you only pay taxes on companies or assets you own. The beauty of foundations is that technically you don't own it. But you still control its assets as your own. You can get a salary through a foundation.
    Why Panama? No tax treaty with most countries.

    In the US you pay tax on companies you own and/or CONTROL.
    So thank again you are non-US. The foundation trick does not work for US citizens. In the US you have to report every offshore structure and bank account over 10K you own and/or control. Not in most countries.

    AFAIK, the netherlands antilles have both foundations and limited companies. Soros' Quantum Fund is a limited company. He's able to compound his profits tax free (as long as profits are not distributed), and getting a salary at the same time, but as a US citizen he must report the company to the IRS.

    If this sounds like mumbo-jumbo to you, visit your local KPMG or Deloitte, they can assist you better.

    Good luck and happy trading.
    #18     Apr 22, 2007
  9. danoXP


    Granted, your C Corp will be able to retain earnings after paying the Federal Corporate Income tax on those earnings (your looking at 15% here?), but I don't believe a dividend distribution from the C Corp would be "qualified" in the US - meaning, it might be taxed at the normal income tax rate (35% marginal versus 15% dividend) in the US. A dividend to a foreign shareholder is interesting idea.

    However, it may be possible to borrow the money in the form of a loan ... or eventually, sell your C Corp (instead of distributing moneys) ...

    I guess these options start to make sense, when the administrative overhead fees become a very small percentage of the total income or asset level. (millions $$).
    #19     Apr 22, 2007
  10. A foreigner might set up a Delaware LLC for trading. Since trading profit is not an income, but a capital gain. When you file your LLC tax, specify the amount in the capital gain section (check the K-1 form). Allocate the gain to the partners of the LLC. Do NOT pay yourself any salary because a LLC with employees make thing more complicated!

    Now each partner has to file his/her own tax. Since you are a foreigner, you don't have to pay any US tax. You might need to report your capital gain in your own country though. In some countries, you don't have to pay any capital gains.

    The LLC has to keep a copy of W8Ben in order not to withhold the tax for the foreign partners.
    #20     Apr 22, 2007