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March 19, 2019 - Phil Hodgen

Minimultinationals Chapter 02: It’s All Taxable to You

Introduction

All of the profits generated by a minimultinational enterprise will be exposed in real time to the U.S. tax system. Chapter 2 explains why.

We will talk about how the U.S. taxes those profits in future installments of this book. Different business structures have different tax results.1

Recap

What’s a minimultinational?

Let’s recap. A minimultinational is a small business that:

• Has U.S. owners; and
• Generates its profits outside the United States.

“Small” is relative. A minimultinational might have sales in the hundreds of millions or the hundreds of thousands.2

Who this is for?

This series is for owners of minimultinationals.... continue reading

February 1, 2019 - Phil Hodgen

Minimultinationals Chapter 01: Overview of the Series

American minimultinationals are small (for various definitions of “small”) business enterprises subjected to the U.S. tax system.

There are many ways that a minimultinational becomes exposed to the U.S. tax system. Doing business in the United States is an obvious way. If you have an office or employees in the United States, some portion of your business profits will be taxed.

I focus here on businesses that operate mostly or entirely outside the United States but are owned by U.S. citizens or residents. This factor alone–ownership by a U.S. person–means that the business profits will be exposed to U.S. income tax, even if the business never operates in the United States.... continue reading

January 18, 2019 - Phil Hodgen

American Minimultinationals: An Introduction

What’s an American Minimultinational?

What do I mean by American minimultinational?

Multinational

A multinational business operates in multiple countries, exposed to multiple tax-hungry governments. Apple. General Motors. Exxon.

A minimultinational is a multinational business, but smaller.

• Do you have 100 people in a cubicle farm working on your international tax stuff? You’re a multinational.
• Is that thought ludicrous bordering on insane? You’re a minimultinational.

American

An American minimultinational is one that is owned by a U.S. citizen or resident.

Merely by having a U.S. citizen or green card holder as an owner, a business that operates 100% outside the United States is a multinational business.... continue reading

July 20, 2018 - Phil Hodgen

Assign a Purchase Contract to an LLC and Why It Works

Nonresidents often show up and sign contracts to buy U.S. real estate in their own names. Then, before the sale is complete, they set up a holding structure. They transfer the purchase contract to the holding structure, and the purchase is complete.

Hey presto.

As I wrote a few weeks ago, transferring a purchase contract from a nonresident individual to a holding structure is a “disposition” of U.S. real estate. The result?

• Paperwork. Until proven otherwise, the nonresident individual must file a U.S. tax return to report the “disposition” of a “U.S. real property interest”, even though self-evidently there is no capital gain.

... continue reading

June 22, 2018 - Phil Hodgen

Form 8832, Community Property, and Foreign Business Entities

I received an email from Scott, a good friend who, well, does taxes in Mexico.

He had a question about an American couple in Mexico who are setting up a S de RL (Sociedad de Responsabilidad Limitada), which is similar to a U.S. LLC. One of the features of this type of entity is that it must have two owners. H and W. How convenient.

Mexico has community property laws for married couples, and Scott tells me that this S de RL is a community property asset of H and W.

Will this entity (S de RL) be treated as a corporation, partnership, or disregarded entity for U.S.... continue reading