I’ve searched high and low for an answer but I’m stumped about what to do. I’m an American living in Bulgaria. I’ll be in BG for one more year And then moving to SE asia. I have a consulting company that works with companies in the US and Europe. As an American I file taxes US taxes every year. I assume a sole proprietorship is the best business option. My question is: do I need to legally establish my business if I use my social security number to file business taxes? I think I need a Fictitious Business Name (FBN) since my business name doesn’t include my name? Is this correct? I used to live in California and use a CA address when necessary. I get conflicting advice from US tax experts. One says to register the FBN in CA. One says not to. What does your collective wisdom say? Is there anything else I need to do to legally do business? Thanks in advance!
I am not a tax attorney, this is just based on my personal experience. International business is very complicated, a tax attorney can save you a lot of money in the long run if you have a serious business
Here are some professionals that will help a lot more than random internet entreprenuers.
Firstly, you will want to change your state residency from California for personal tax reasons, they are a sticky state and do not honor the Foreign earned income exclusion, this can cause an audit down the road where I have seen people get bills from california in the tens of thousands of dollars. Changing Residency Before You Move to Mexico to Avoid Taxes
Next, the easiest route forward is to just set up an LLC in a state of your choice, many choose Nevada, Wyoming, or Delaware for their lenient tax laws. I have read S corporations can be more favorable for certain situations, they are a pain to manage though so I did not go this route as my company was small at the time. You can use a registered agent for your business address, and then a mailing service like this https://my.virtualpostmail.com/. Getting a business bank account is hard with an address like this online online, I personally went in person to a more local bank though and they did not mind. My favourite online banks though, are AZLO or Mercury. This business structure will only have you paying 15% in self employment taxes. There are also some restrictions regarding the scale back rule, where only 30% of your income maybe exluded in the FEIE if you provide most of the services of the company, more info here How to Structure your Non-US Business or Profession – US Tax Services
The next level up would be to set up an international business in a tax haven like Belize, Panama, Hong Kong, etc., then having that corporation own a US LLC in a state mentioned above to have access to the US banking system. This way you are an employee of the foreign corporation and no longer self employed, aka you pay 0% taxes on your first 100k in income. I’ve set up one of these structure before and it cost be around $1500 usd, but saved around 15k in taxes so well worth it. Note it is NOT designed for small single member businesses, but rather corporations that can function without you providing the main service. Here is an article I wrote on the subject
The final corporate structure you can do is own a US C corporation, that owns a foreign entity that pays you. This tax strategy only works if you are making like 300k+ a year, as the foreign earned income only excludes your first 100k of income, after that you are taxed at the full income rate by the US government. C corporations are able to retain earnings for later years when income might be lower and you can pay owners dividends that are taxed more favorably. I have not seen much about this structure online, but our tax attorney told us about it once we grow a bit more.
Labuan, Malaysia. And look into Albania, Macedonia for the future. I have an old friend in Hungary, and some good Romanian engineers I respect have re-located to Hungary, a couple of hours from Budapest. Good healthy food, low prices there.