I need answers to a few LLC related US tax questions. These are general questions that should help me discern the best way forward. The actual LLC has not been set up yet. We are in the early planning stages.
NOTE: Please only respond if you hold a relevant CPA/tax advisor or legal qualification.
This is the back story:
A US LLC has two members and is taxed as a partnership. One member is a US citizen, the other member is a UK citizen who does not reside in the US and never has resided there.
According to the management agreement of the LLC the US member is entitled to 1% of the profits of the LLC and the foreign member is entitled to 99% of the LLC profits.
The LLC has no income that is connected to a trade in the US: There are no US customers, no US suppliers, no US employees. There are no offices in the US other than a virtual office. No client services are rendered in the US. No sales or marketing activities are performed in or from the USA. The foreign LLC member does never travel to the US to conduct business there. When the two members meet they meet outside the USA. The US member of the LLC is essentially in charge of any admin work concerning the LLC, such as bookkeeping and record keeping.
The LLC has a US bank account with Chase.
Here are my questions:
1. Is it correct to assume that only the 1% of LLC profits the US member is entitled to are taxable in the US?
2. Is it correct to assume that the 99% of LLC profits the UK member is entitled to will not be taxed in the USA.
3. Is it correct to assume that the UK member of the LLC will not need to declare the income from the LLC on a US tax return.
I need the answers to these questions by email. I don't need a very long document. A short nut precise opinion will be enough.
Any references to the IRS tax code or previous rulings are greatly appreciated. If you have personally dealt with similar matters in the past I would be interested to hear from you.