USA Paying partner abroad his share of royalties

[guillopuyol]

Hello,

I am a resident in Texas and my brother lives in South America. We have been working together online publishing books. The royalties for the books come to my Texas-based LLC. My question is: When time comes to pay my brother his share of the royalties, what will we need to do to keep everything legal?

Is he subject to US taxes if he is not a US resident or citizen?

Can you point me in the right direction so I can educate myself better in this matter?

Thanks in advance,

Guillermo

 

[kirby]

Are you an llc taxed as a c or as an s?

 

[guillopuyol]

Are you an llc taxed as a c or as an s?

It is taxed as an S, but I just want to be clear that the company is just under my name, my brother does not figure on anything legally at this point.

 

[kirby]

If it is under your name only and it is taxed as an s then all the income flows into your own tax return and you pay all the tax. So whenever you pay your brother it us going to be as a gift because you are the sole owner. Correct me if i am missing any other fact on this.

 

[Michael Myers]

Oversea payments

Hi,

I would call the tax office to discuss your situation - maybe call a few times to see if you get the same answer or at least review their website. I would be concerned that your brother would be taxed no matter how you described the payment - generally tax law looks at regular payments as indicative of an income stream - may not be seen as a repetitive gift. Depending on the countries involved there are double tax agreements between most developed capitalist countries - your should look at the royalty agreements within the particular double tax treaty.

Hope this helps.

 

[MichaelM123]

Technically he is subject to federal and state taxes but in texas no state taxes so no on the state. On the federal you technically are supposed to pay him his royalties minus withholding and he is going to have to file a us federal tax return to possibly get some of the withholding back. Maybe he should own shares in the llc or have a debit card on an llc bank account set up only to hold his royalties.