Frequently Asked Questions
US Taxes and Foreign Owned LLCs
What is a Dependent Agent?
Let’s explain the “dependent agent” requirement with two examples.
Example 1: US owned software company with all “operations” done in India – no physical employees in the USA and no local representative
An Indian company decides to enter the US market.
From India they find clients who need programming/design work,
The software company is It is based in India and has no US office or sales agents. All sales are done over the phone or online.
The owner of the Indian company decides to open a US LLC.
All work will still be performed in India and the owners a non-US citizens/residents, who are not taxed in the US.
Therefor the LLC income is not taxed in the US as there are no offices or dependent agents in the US.
Example 2: Foreign “Fulfillment by Amazon” service provider
A Chinese company decides that the US market represents a good opportunity for its products.
Because of payment and currency exchange issues, the owners of the Chinese company decide to establish a LLC in the US.
The LLC buys goods from its Chinese sister company and sells products to the US market using Amazon’s “Fulfillment by Amazon” service.
All marketing and procurement are managed online by the non-US citizen, who lives in China. Products are ordered and shipped to Amazon’s warehouses, where Amazon employees package the products and ship to customers in the US.
In this case, Amazon is not a dependent agent but an independent agent that has its own business with millions of other clients. Amazon is not uniquely working for this foreign entrepreneur.
Even though Amazon is not a dependent agent, the Amazon seller may still engage in a US trade or business. If the seller doesn’t manufacture the product, then the actual transaction, the transfer of ownership, takes place in the US. This means the seller may have to pay US income tax.
Again, the tax code and courts have been vague if this qualifies as ETOB. To mitigate the risk, setting up a C corporation would be a safer approach.