Tax Returns for Limited Liability Companies, Partnerships, and S-Corporations in Colombia
Our team specializes in servicing U.S. taxpayers doing business in Colombia with multi-member LLCs (MMLLC) or S-corporations.
Multi Member LLCs and S-corps are often discussed together, but it’s essential to understand what they mean. First, an Limited Liability Company (LLC) whether either single member or multi member is a type of business entity, while on the other hand, an S-corporation is a tax classification that tells the IRS that the business is to be taxed like a partnership. To gain an S-corporation status, the company needs to be classified as a C corporation or an LLC.
Our team of licensed professionals have flexibility in the way we are able to serve MMLLC or S-Corp clients. Since the entities are separate from the taxpayer that owns them, USATax.co can work with expat business owners either in a full service model for business and individual tax returns, or work together with the support of our clients’ supporting CPA firm.
Reporting Requirements
A considerable benefit of a MMLLC and S-corporation is that both types are pass-through entities. As a result, the owners or members receive a share of profits that they report on their individual income tax. This is different from C-corporations, subject to corporate income tax, among other corporate taxes. However, there are still more complexities to filing compared with sole proprietorships or Single Member LLCs.
Multi Member LLC Tax Filing | Expats in Colombia
There are similar ownership abilities between a multi-member LLC and a single-member LLC. Each member of the multi-member LLC will complete an individual income tax for 1040, but in addition, they will each complete the following:
The members will also need to file tax paperwork for the business as well:
Another option is that a multi-member LLC can choose to be treated as a C or S corporation for tax purposes. In that case, the multi-member LLC would complete a Schedule K1 for both federal and state. But, again, a licensed and experienced tax professional will advise if it’s more beneficial for the multi-member LLC to be taxed as an S-corporation.
S-Corporation Tax Returns | U.S. Shareholders in Colombia
An S-corporation, or known in California as a QSub, is a corporation that can elect to be treated as a pass-through entity for tax purposes. This status must be requested from the IRS, and the entity is subject to strict requirements related to its shareholders, class of stock, and locale of incorporation.
A benefit of qualifying the S-corp as a pass-through entity is that it can make filing your taxes more efficient and help save money on corporate taxes. In this case, the following forms would be filed:
- Form 1120S: This form reports the profits and losses
- Tax form specific to your home state
Choosing Colombia
Now more than ever, earning in U.S. dollars and living in Colombian Pesos gives U.S. business owners a high quality of life and a low cost of living in cities like Bogota, Medellin, or Cali. If you are an owner of a Multi-Member Limited Liability Company (MMLLC) or S-Corporation that is residing in Colombia, either for business or personal reasons, USATax.co can be your strategic partner for all your unique expat and business tax requirements.
Colombia as an Offshore Business Destination
Colombia is an emerging market that is growing in interest to United States business owners for more than just lifestyle reasons. The close proximity to the U.S., access to a lower cost and higher quality outsourced workforce, as well as the country’s capitalist friendly policies are a few of the reasons why more and more U.S. business owners are seeing Colombia as a strategic market to expand their business in South America.
Starting an SAS in Colombia can be an opportunity to serve both the Colombian or U.S. market. Many U.S. expats are opening an SAS in the flourishing coffee industry, working with textiles, infrastructure, or other agricultural industries. While other U.S. expats are looking at serving the U.S. market through a “contrato de mandato” or similar partnership agreement with a local SAS in order to outsource labor and accomplish a shared business goal.
U.S. Reporting for Partners, Members, and Shareholders
If you are a member of a multi-member LLC or S-corporation and living abroad, you still need to meet your federal and state filing obligation.
Our team at USATax.co includes experienced tax professionals that will be able to determine the most beneficial tax avenue for you and your business all while keeping the unique needs and requirements of expats in mind. Schedule a consultation today in order to become a client for this year’s tax season.