Multi member LLCs - LLC’s with 2 or more partners - why this fear of multi member LLCs?

f you have a multi member LLC, you have all the filing obligations, 1065, K1, K2, K3 and so on, but in addition - if your multi member LLC has a US trade or Business and hence effectively connected income, then you also have 37% withholding on any profits to individual partners and 21% withholding on profits to corporate partners - unless of course a treaty applies. So this is a real disadvantage if you trade from a country that has no treaty with the US - like Argentina, Brazil, Chile, Peru, Uruguay, Paraguay - in fact half of South America doesn’t seem to have a double tax agreement with the US, but that is a story for another day - so if you trade from one of those countries without a treaty, then the multi member LLC is a problem because of withholding tax on ECI. But if you are in Australia, the US-Australia treaty will protect you and no withholding tax applies.

The speaker in this episode is James Baker.

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