[All4Tax]

I have a friend who lives in China and never been in the US. He formed an LLC with another person (also Chinese nationality) through a registered agent last year for his Amazon online sales. The business profit was around 100K last year. My questions: 1) Is the LLC required to file 1065 LLC tax? If so, how should they proceed, since they don't have a SSN. Should they apply for a ITIN first? 2) Do they need to file and pay individual tax using 1040NR? Is there any exemption for the individual tax, or they need to pay about the same tax as US citizen? Thanks.

[AtlantaTaxExpert]

The LLC is a BUSINESS entity, not a TAX entity. For tax purposes, they are a partnership, and, for sure, a partnership return is required at the federal level and probably in the state where the LLC is registered. The state may also have special LLC reporting requirements.

As for the personal return, an argument could be made that NO federal income taxes are due because neither partner lives or works in the United States, but registering the business INSIDE the U.S. gives it a base here, which the IRS will argue makes it (and the partners) subject to U.S. taxes.

The partners would file Form 1040NR with a Schedule E for the federal return, which means they must pay income taxes, but NOT self-employment taxes. They would also have to submit Form W-7 to get an ITIN, and THAT process can be really complicated, especially if the applicant is NOT located in the United States.

Your friend needs specialized tax help which I CAN provide. If her is interested, have him email me at the email address in my profile.