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Thread: Why not ?

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    Question Why not ?

    I wonder, if this is just a BLACK OUT of my thoughts... a SYSTEM ERROR, or a MODEL that is totally fine and shouldn't run into any tax issues.




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    I wonder why so many small business entrepreneurs are so worried about paying taxes on their private income.
    I wonder, why you don't want to keep all your money within the company, pay everything from the money of your company, live and benefit from the wealth of the company and DO NOT pay any profit to yourself.

    I REPEAT... what if you DO NOT PAY any profit to yourself ? Not through employment, and not through dividends. Not one single Dollar that is going to be transferred to your private bank account. NOT ONE SINGLE DOLLAR that is going to be payed into your private pocket.

    Let me try to explain MY MODEL in more detail.

    EXAMPLE / FACTS:
    - you own a company as a shareholder (sole 100% is yours)
    - the company (C/Corp Structure Inc.) is based in a country that has 0% taxes on corporation taxes
    - the company itself renders no service in the US and has zero links to the US
    - the company DOES NOT PAY the shareholder any dividends
    - the company DOES NOT PAY the owner any paystubs (not employed)

    NOW... let's take a minute and think about that setup. Nothing special, just a regular 100% LEGAL setup of a company structure, that creates profit outside the US.

    Your Questions:
    - how can you pay for all your private expenses if you don't have any income ?
    - how can you cover all your private costs of living if you don't get any dividends payed ?

    My answer/idea and thoughts and facts:
    - The company is incorporated outside the US
    - all service is rendered outside the US
    - all profit is made outside the US
    - a tax report is not even necessary and not mandatory since it's based in a country that has zero % on corporate pofits

    The OWNER of the company can invest in estates he likes. He can buy what ever he want's to buy in the name of the Corporation.
    In fact, he could blow all the money on a big party without reporting to any government or tax departments explaining losses or profits.

    The Corporation can buy Real Estate in the name of the company.
    The Company can also wire money for rent through online banking, can cut checks and can even have a debit or credit card to buy what ever the corporation want's to buy.

    NOW.... knowing that fact... and yes, there is ABSOLUTELY NO LAW in the world, that doesn't allow a company to own what ever the company want's to own... WHY NOT KEEPING ALL THE WEALTH WITHIN THE COMPANY ?

    If I am living in a house that is owned by the company.... so be it.
    If the company pays rent for an apartment I would live in... what's the problem ?
    The company takes care for your car payments, or even posses a car. The company can also pay for Food.. well, literally for everything.

    I know.. at this point.. I got immediately confronted with the argument that the IRS could see the rent payments, food payments, gas payments, or what ever payments the corporation is executing... as part of an INCOME - or hidden income.

    But again... why should the IRS even be interested in that, if you don't even have to report to the IRS ?
    Remember, the Corporation that pays or owns property in the US is a foreign Corporation.
    And again.. that corporation can do with it's money whatever the company decides to do.
    It could even invest all it's money into stocks.. losing all of it.. or making even more profit...
    But the profit the corporation makes.. stays untouched since the all corporation profit has zero % business income tax.

    Sooo.. let's keep in mind... it's a fact, that Corporation does NOT EVEN EXIST for the IRS because it's outside the US.
    That corporation only spends money inside the US, helps to drive the economy buy buying goods in the US.

    And again... NO profit is accumulated within the US.
    Sooo... now.. let's leave it by that for now.

    I wanted to hear everybody's opinion on that !

    • What do you think about it ?
    • Do you think this idea/thought is not correct ?
    • Do you see any concerns/issues ?
    • Any answers to WHY NOT doing it like that ?



    Again.. I can die as a poor man... I don't need any wealth in my private account.. as long as I own the company - it doesn't really matter.
    And as far as I understand.. Warren Buffet and/or Bill Gates handle it the same.

    Your wealth is measured by the wealth of your ownership of corporations !

    I am really curios about your thoughts, opinions, hints, tips and recommendations.

    Thank you very much !

    ps: I am not a US Citizen... I am member of the European Union with a Permanent Residency in the US
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    root Array Harold Mansfield's Avatar
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    All I can say is smarter, wealthier, older and more educated people than you, with teams of lawyers... for decades have tried to come up with a way to beat the system. Some do exactly what you are saying, dollar salaries the rest in options, bonuses and so on. But there's the simple truth..if you try and game the IRS, which is actually gaming the American people since taxes are what provides for the common defense and promotes the general welfare...you will lose.

    If you do business inside the United States you will pay taxes. How you structure your corporation, salaries and so on is up to you. There are many options and ways to do it. But you will pay taxes or either get fined more than you would have owed in the first place..or in extreme circumstances where the intent to deceive is so deliberate, you will go to jail.

    Bottom line, you're not saying anything new.
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    I don't think anyone enjoys paying taxes. Some people view them as a necessary evil, while others see them as a socialist method for stripping wealth from the rich and giving most of it to party supporters (let's be honest with ourselves and agree that most doesn't make it to those who could truly benefit from it).

    What you're proposing will most likely land you in jail for tax evasion in just about any country. If the owner of a C-corp works in the company, he must take a reasonable salary, must report that income, must pay taxes on it, etc.

    I don't see anything wrong with minimizing taxes owed, just don't cross the line and start avoiding taxes. It's a much nicer lifestyle when you can walk around without having to worry if the taxman is following you around.
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    First of all, you can't pay your personal expenses from a corporate entity without losing all the corporate privileges. The corporate entity exists for the corporation's sake, not your personal sake.

    Second, if you repatriate ANY of the money back into this country, you will get taxed on the money that gets moved into this country. That includes repatriating it to pay your expenses.

    Somewhere along the line, if you live in this country, you'll get taxed on money you receive, you cannot avoid it, don't bother scheming up ways to do it, smarter people than you spend a lot of time on this and sometimes they're successful, but usually they're not as successful as they thought they would be. Do you really want to spend years in tax court facing off with the IRS?
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    All the items that the company buy for you would be counted as income. The corporation would also be required to report that income on a 1099, or you would be required to self report it. Really your suggestion it's much different than being self employee. For those without a standard paycheck the government relies heavily on honest self reporting.
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    @Harold:
    It makes sense what you are saying, if you do business within the US. I hope my post was absolutely clear, in which I pointed out that there is ABSOLUTELY NO BUSINESS DONE WITHIN THE US.

    @Fulcrum:
    Hmm.. well.. I am also not sure if my post was clear enough. You have to understand. I am not a US Citizen. I have officially absolutely nothing to do with the US. I just live and work here as an employee, for a complete different company. Yes, I am European. But also.. as mentioned before. If I would start a Corporation in Europe, and if I am not running it, I just own it... there is no law in the world that would say it's illegal to be owner of that company. And that foreign company doesn't make any business inside the US, it would NOT need to pay any taxes in the US.

    I can't see your point mentioning even the word jail. Again.. being the owner doesn't automatically mean you work in the company. I can own a company but don't have to work for it. Plus, what has a foreign company to do with the IRS in the US ? I guess it's important to understand the entire situation. And yes, I live and work in the US as an employee. And I pay my taxes for that position. But again.. my full time Employment has nothing to do with the ownership of a foreign company. And I don't receive any money from that foreign company. No paycheck, no dividends, not one single dollar is going to be transferred ever to my personal account in the US or outside the US.


    @Freelancier:
    if you repatriate ANY of the money back into this country, you will get taxed on the money that gets moved into this country...
    The foreign company does NOT repatriate money back to the US. The money was never earned in the US and has nothing to do with the US. So why do you think money will be repatriate to the US ?

    For example.. I lived over 30 years in Europe.. 10 years ago.. I started living in the US. And I bought in cash a home for $200k. That money was already taxed and earned outside the US. I also didn't repatriate that money to the US, because it was never subject of income in the US. And yes.. I was never taxed on it in the US - why should I have been taxed on it when it was already taxed in the foreign country, and I just simple wired money to a US Bank Account to buy the house in cash. It was beneficial for the US economy, a private Person got the money payed for his house. If I follow your comment.. you said that I would need to pay taxes on that money, because that money I earned outside of the US through employment (was already taxed) and was on my savings account.. would need to be taxed because it was moved to the US... sorry.. as you can see. This can't be correct.

    if you live in this country, you'll get taxed on money you receive...
    I agree. If the money that you receive is a payment for your service you have been rendering inside the US. Or your work as an employee, like an official income, money that was generated through services, work, sales, business within the US. YES. But again.. that's not the case. Except of course, my full time job inside the US. Yes, of course... that's just taxed with my personal income. Which is absolutely correct. Because that is money I receive through employment in the US.


    @nealrm:
    A foreign corporation is required to report an income on a 1099 form to the IRS of the US ? How can that be ? If I am not even receiving an income from the foreign company ? Not employed, no Dividends, no payments at all to my pocket. The foreign company doesn't do any business in the US. Doesn't generate sales, profits in the US. The foreign company has simple ABSOLUTELY NOTHING TO DO with the US. The only thing is, that I am owner of that foreign company - and I live currently in the US. But again.. I don't receive any income for the foreign company, nor any dividends, etc.

    By the way.. please keep in mind.. even if the company would be in the US, and you would only own that company, but not work for your own company... as long as the company doesn't pay out money through employment, through dividends, or anything like that.. how can you pay taxes on something that you never receive ?

    As long as the money stays within the corporation... how will you be taxed on personal income ? You didn't receive anything... so how should that work ?


    Appreciate all your comments.... I just hope I was able to layout the situation correct. It feels like, I was not clear enough.
    Thank you so much for your thoughts and input - thumbs up !
    Last edited by remozseo; 09-19-2016 at 08:16 PM.

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    What you wrote was totally clear. But if you LIVE in the USA and want to repatriate your cash into the USA to pay your bills... you will get taxed on that repatriation one way or another.
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    Quote Originally Posted by Freelancier View Post
    What you wrote was totally clear. But if you LIVE in the USA and want to repatriate your cash into the USA to pay your bills... you will get taxed on that repatriation one way or another.
    Yep,. It's pretty simple.

    If no business is done in the US, you're not selling anything in the US, and you don't live in the US then why are you mentioning the IRS?
    Also, you don't have to be a citizen to be responsible for taxes. There are all kinds of levels of residents and one is a work visa. Work visas pay taxes.

    If you don't live here your visa is temporary. There is no situation where you live legally in the United States, have mysterious income from outside the United States, and pay no taxes. Unless you're a full time student at a university on a student visa, or a diplomat living in an embassy or on embassy property.

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    @Freelancier:
    I still can't see that. I refer again to the example, when I bought a house in the US .. 10 years ago. The money was earned outside the US, taxed outside the US. I simple bought a property in the US. So why should that money be taxed again from the IRS ? Just doesn't make any sense.

    @Harold:
    True. You don't have to be citizen of the US in order to qualify for paying taxes. In fact, you could live in the US as an illegal immigrant - but you still have to pay taxes to the IRS. The IRS doesn't really care about citizenship, permanent residency or even temporary residency, and the IRS doesn't care about your VISA status. I totally agree on that.

    There is no situation where you live legally in the United States, have income from outside the United States, and pay no taxes. None.
    Correct. But again... I mentioned it earlier.. I DO NOT HAVE ANY INCOME from outside the US. Because the foreign company I own, doesn't pay me a single dollar. lol;

    Again.. my personal situation would be super simple. I work and live in the US as an employee from a company, that I don't own. It's just a company that hires me as a full time employee. Doesn't matter if it's Target, Best Buy or McDonalds. I am just employed, and pay my annual taxes from the income I receive within the US. That's it. But yes.. I currently live and work in the US as an employee.

    But at the same time.. I can build up wealth by OWNING a FOREIGN COMPANY. And again.. that foreign company is not paying me at all. No income, no employment, no dividends.
    Maybe.. it will pay me something in 20 or 30 years... for retirement... a small amount.. but that's it.

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    If I am living in a house that is owned by the company.... so be it.
    If the company pays rent for an apartment I would live in... what's the problem ?
    The company takes care for your car payments, or even posses a car. The company can also pay for Food.. well, literally for everything.
    The payments for the apartment, car and food would be income to you that you could expense if you can justify it as a legitimate business expense. If you lived in the apartment then it would not be 100% deductible rather only the part that was exclusively used for business. The same with the car. Any part of the car used for personal use would be taxable.

    I am guessing that there are business taxes wherever the business is located and those would need to be paid.
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