Hi all,
My friend overseas wants to start an export business in the US, but he can’t register the company himself. He’s asking if I can register it under my name, and he will share profits with me. I’m trying to figure out what I should keep in mind if I agree to this. Would I be responsible for the taxes? Will this business income be added to my personal income? I’m concerned about my tax bracket going up. Any advice?
Why can’t your friend register the business himself? Non-residents can and do own businesses in the US all the time.
If he’s offering to share profits, it would be best if you both own the business—maybe through a partnership or an LLC that’s treated as a partnership for tax purposes.
As for taxes, yes, if it’s in your name, you’d be responsible for paying the taxes, and the business income would likely count as your personal income.
@Sai
Thanks for the info. Are there any tax benefits if we both create an LLC versus just having it in my name?
Lennon said:
@Sai
Thanks for the info. Are there any tax benefits if we both create an LLC versus just having it in my name?
It makes more sense for running the business if both of you are owners and split the profits.
Even without an LLC, if you both own the business and split the profits, it’s considered a partnership. With an LLC, it would be based on your agreement, not just whose name is on the paperwork.
What you’re describing is already a partnership. A more complicated option would be for one person to own the business and subcontract to the other.
Lennon said:
@Sai
Thanks for the info. Are there any tax benefits if we both create an LLC versus just having it in my name?
What kind of export business are we talking about? Who’s putting in the money, and where’s the product coming from? You need to have a clear business plan before deciding how to handle things.
@Oli
He’s covering all the costs from start to finish. I’ll talk to him tomorrow to get more details, but I wanted to get some general advice about taxes and other things first.
Lennon said:
@Oli
He’s covering all the costs from start to finish. I’ll talk to him tomorrow to get more details, but I wanted to get some general advice about taxes and other things first.
Honestly, I’d be really careful here. You’re taking on a lot of risk, especially with him being in another country. Even if he’s a friend, things could go wrong quickly. Mixing business and friendship is risky enough, but adding in international complications makes this even riskier. I’d say don’t do it.
Are you sure this is your friend and not a scam? What you’re describing sounds a lot like a common setup for fraud.
Phoenix said:
Are you sure this is your friend and not a scam? What you’re describing sounds a lot like a common setup for fraud.
Yes, I’ve known him for years. It’s not a scam, but I’m still trying to figure out what the risks are, especially with taxes.
@Lennon
If you’re the one listed on the company’s documents, you could be held personally liable if something goes wrong with the taxes. And since you’re in the US, the IRS will come after you, not your friend overseas.
It might be better if you own the business yourself and share profits with him. That way, you have more control over the legal and tax issues.
Here are some things to think about:
Sure, you could make some money, but do you have enough experience to handle this? A lot of ‘help a friend’ situations go south, fast.
If the business is in your name, you’re legally responsible for everything. That means if your friend doesn’t pay taxes or makes a mistake, the penalties are on you. And you won’t know about these issues until years later when it’s too late. You’re putting a lot of trust in someone else.
Also, since he’s not in the US, you might run into legal issues, like money laundering rules. You should definitely look into that.
Overall, I’d recommend against letting him use your personal information. It’s a risky move, and plenty of stories here show how badly this can go.
@Morgan
I agree with this. If you’re taking on this much risk, make sure you get at least 33-50% ownership, and have signed contracts in place.
Also, since he’s in another country, you’ll need to be extra careful. Make sure there’s a US bank account that only you can access, and if there’s a foreign account, don’t touch it to avoid filing extra paperwork (FBARs). If things go wrong, you’ll want some protection in place.
@Morgan
The default for an LLC is a partnership, which means there’s non-resident withholding to worry about. That would be a debt for the partnership, and if not paid, it could be collected from either partner.
If you don’t want to be involved in owning the business, just be an employee and not listed as a partner. That way, you don’t take on unnecessary risk.
@Johnstone
That would apply if the friend was a partner, but it sounds like the plan is to have everything in OP’s name only. His friend wouldn’t be listed on any paperwork.
Maybe he’s just asking you to be the registered agent, not actually putting the business in your name? Usually, a company needs a registered agent in the state it’s formed in for legal reasons.
But the fact that he’s offering to share profits makes me think it’s more than that.
Honestly, this sounds sketchy. Why can’t your friend register the business himself? Why would he pay you to register it in your name if he can do it himself? It sounds too good to be true.
I’d walk away from this deal.
Here’s a worst-case scenario for you to think about:
It can be done legally if you set things up correctly.
This is a bad idea, even if he’s a close friend. Just don’t do it. He has other options.