owners for expenses they pay on behalf of the business, and the corporation can pay owners for services they provide to the corporation, both of which are tax deductions for the business.
The only other option for the shareholders to take funds from the business is if the corporation pays them dividends. Dividends are not a tax deduction and are generally taxable income to shareholders as the individuals. As a shareholder, your personal income is subject to the income tax rules in your country of residence.
Q. What is the best way to reduce the taxable income of my LLC or Corporation?
Most businesses have both revenues and expenses. The IRS keeps a list of eligible business expenses, and it is safe to say that expenses that can are obviously related to maintaining and running the business (e.g. hosting, advertising, salaries of employees, etc.) are considered deductible expenses. Other expenses might be partially deductible, and it is best to have your CPA handle the question which of your expenses are deductible and to what degree.
To minimize your tax obligation you would want to report as many eligible expenses as possible, however you should be able to prove these expenses were real, so keeping receipts and/or bank and credit card statements is a must.
Q. Ok, let’s talk about wages. Can I pay myself a salary as a corporate officer, this way avoiding double taxation?
If you are non-resident alien you probably don’t have work permit, which means you cannot
receive a salary as a resident alien or U.S. citizen would. Sorry.
You could however provide services, such as management services, to the U.S. company, and receive payment in form of consulting fees. You will then be required to report this income in accordance with your country tax rules.
Q. What if we spend all or most of the income of the U.S. company on services provided by our other company, registered in our country?
You could do that, provided you can prove services were indeed provided and properly documented. You also want to make sure these services are provided outside of the U.S., in order not to be considered U.S. sourced, and as such subject to 30% withholding requirement (more about it below).
Q. What if we retain all the corporate profits in the U.S., pay the corporate income tax, and not distribute it to shareholders? Can we just reinvest this money into the business?
Yes, you can.