How I got My Amazon Account Back

i didnt know you could get an llc so fast

thats cool

Hey thanks for the great advice
I live in CA ...I think I will try this out soon..I want my Amazon account back

Oh Mr Jan Roos once again you rock this world...

I know there will be many people here who will appreciate this

Great job Jan! Way to bounce back! So guess you will hanging around in Cali for a while after all

Single owner LLCs in the US have pass-through taxation. So the LLC doesn't pay taxes in its name but the owners of the LLC do pay the business taxeson their personal income tax form. This isn't a case of paying taxes only on the salary you're paid. You have to pay the taxes on LLC profits as well. Good to see an accountant on this one.

Interesting post. I'd want to consult a lawyer before doing something like this. But it might never be an issue for me, hopefully.

In Indiana, you can file for and receive your LLC online instantly.

It's becoming one of the most business-friendly states in the US by the way. Just passed a venture capital investment state tax credit to foster new business development.

Careful. The IRS requires US citizens to report all information, including account numbers, of foreign held bank accounts that reach a certain monetary amount (I believe $5000).

The reporting applies even if the account is in the name of a separate company - if you can sign checks on the account.

The penalties are extremely severe for not complying.

- P.S. - Don't assume the only taxes you'll pay are on your salary. You may want to look into this a little more.

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Thanks for this information Jan. I think a lot of affiliates are going to have to look into such ideas in the future. States and cities are the hardest hit by the financial meltdown and more and more will be trying to grab our money.

As to LLCs, it seems to me that Nevada and New Hampshire are very business oriented states that have quick setups. So far, Arizona is still quite business friendly and the winters are great! You could pick up a cheap condo here for peanuts and make it a business expense for spending your winters here! I saw a 2 bedroom condo the other day with granite countertops, maple cabinets and stainless steel appliances for only $39K! Even the golf membership would be a write-off as long as you played golf with a customer every now and then.

PhilG

This is a good way to be charged with tax evasion.

Do you have an actual presence in the foreign country?

No? That could be a large problem.

Have you reported your foreign owned corporations to the IRS?

No? That will be an enormous problem.

Have you reported your foreign bank accounts to the IRS?

No? That will be a considerable problem

Nexus is an important thing. Is somebody your employee in the foreign state? Is somebody there doing your work for you?

Are you paying yourself a salary?

If you hare, has your foreign business qualified to do business in your home state here in the US, i.e. California?

No? The Franchise Tax Board will want to speak with you about that, as will the Division of Corporations.

Can you do this legally? Yes?

Is it easy? No!!!

You are going to want well informed counsel in the nation you are setting up your foreign corporation in, and well informed American counsel from your home state.

Someone who specializes in business practice!

If a client approached me with the story you just told me I would be very worried about them.

I'm not licensed in California as an attorney, but I've been an attorney here in New York for seven years now, and I've looked into doing precisely what you've suggested with an LLC set up in Nevis and St. Kitts to operate my own business, and I've got to tell you, it would involve multiple entities including a New York based entity that is completely separate from the Nevis one to do it in a way that would have me less concerned about the tax man, than what I'm hearing right now, and even then, I would probably write the New York Dept. of Taxation and Finance, and the Internal Revenue Service for No-Action Letters before proceeding with the plan.

The USA is one of only two nations that taxes income worldwide on it citizens and legal residents. When Haliburton or some other major US corporation re-incorporates in say the Bahamas, there is a reason an Army of attorneys are involved in the process!

The difference between tax avoidance and tax evasion is a considerable jail term. Just ask Wesley Snipes.

Many of these issues remain true when talking about incorporating or setting up an LLC in another state as well.

Many companies, Microsoft as an example set up as a Delaware corporation, even though it is a company based in the State of Washington. For the privilege of Delaware's more favorable corporate governance laws, Microsoft gets to pay taxes in Delaware, AND Washington State, and they get to pay filing fees in both states, because they have to qualify to do business in Washington.

The real question for a California based affiliate the sets up as a Nevada corporation isn't where they are incorporated, it's where are there offices. That's where they are taxed, that's where they are doing business with Amazon.

Unless you are leaving California, this plan is not a very good plan.

When a company re-incorporates overseas, they generally put some staff on the ground, and they keep an entity or two here in the US. The foreign parent or subsidiary will be where a large part of the profits are "earned" The key questions involve nexus. The very issues that the whole Amazon affiliate debacle are about.

The way I think it can work legally, but again, this is a theory I haven't finished the research on myself is Corp A. is in Nevis say, where there IS NO TAX.

It is the "Parent Company." It's Board of Directors are American. They are paid a nominal salary from the parent company, and have an annual meeting, Outside the US, in say Nevis. Why not? It's a tropical paradise in the Caribbean, that seems like a good place for a vacation/shareholders/board meeting right?

The Board then appoints Corp b. or LLC B, whatever the case may be to act as the Manager of the "Parent Company" for a fee. Corp B. or LLC B. is an American based company, say, Nevada if you lived there for example, or California, or New York, or whatever fill in the blanks state you live in. The management fee pays the salaries for you as the primary shareholder of the Nevis Corp. and the principle employee of the American subsidiary, which is in fact the management company for the Nevis Corp.

This is possible because Nevis, as I understand it, allows a company to act as an officer, or board of directors or both, for a Nevis entity. This is an interesting concept that isn't usually the case in America, although I can see more business friendly states like Nevada, Wyoming, Delaware, or possible Texas, or New Hampshire adopting similar rules.

So you aren't employed by the offshore corporation.

You are employed by the American subsidiary, which in fact manages the foreign parent corporation.

Are you with me so far?

The American subsidiary pays all of the costs of the business, and takes tax deductions against the fees that the parent company pays to manage the enterprise, and your servers are purchased or leased in the name of the parent company. Your domain names are owned in the name of the parent company, your drop shippers if you have them are moving product for the parent company. These businesses are contractors, perhaps American contractors.

The sales take place, on servers overseas, connnected to bank accounts through maybe Alertpay or a similar non-American payment provider, connected to a bank account in a foreign jurisdiction in the name of the foreign corporation, in an example where you are actually selling something and not acting as an affiliate.

The problem of course is that YOU UNDER THE NEW CALIFORNIA LAW, and NOT AMAZON, have just become liable for the sales tax in this scenario if you ARE LIVING IN CALIFORNIA, and it is a tax YOU HAVEN'T COLLECTED!!!!

Why, and how?

You're Nevis Corp. is doing business in Nevis, but it IS AFFILIATED WITH YOUR CALIFORNIA Company, right?

Amazon doesn't have a California affiliate necessarily in this scenario, but Nevis Corp. does, and that California subsidiary definitely does!

Who is on the hook here for the sales tax?

That California subsidiary and it's tax matters partner, i.e. YOU!!!

As I've said, I don't think this tax survives the "International Shoe Doctrine," but I wouldn't set up an affiliate operation and fail to pay the tax just to find out.

That involves potential criminal liability.

How does Haliburton set up in the Bahamas and pay no tax? Well it performs services OUTSIDE THE US through that parent company, and IT enters into those contracts in that foreign nation.

It's U.S. business is most likely conducted here, but it is such a small portion of the business it doesn't matter.

Of course the secret for a products company is to build in the company you own in China, ship to Panama, where you sell from your Chinese subsidiary, to your Nevis parent company, that is managed by your Nevada LLC. Then those products you plan to send to the US are sold at a markup which is essentially the retail price, to a Texas based subsidiary LLC which has nothing to do with the Nevada management company, and all of your profit is locked in overseas, in the form of accounts recievable that get paid from the profits when you sell the final goods to consumers here in the U.S. for a $0.01 profit over the "wholesale" price.

That's how I think it's done, but like I said, even I as an attorney want someone to check my work, and get a blessing from the various state departments of tax involved and the IRS.

Also they would need to report those foreign owned corporations and bank accounts to comply with IRS regs.

I looked into an LLC - but California whacking you with another $800 every year just to have an out-of-state LLC put me off.

So I went with Skimlinks and Viglink - and although I'll end up paying a percentage to them, it's a completely legal option for me until I can move out of California.

@Kindsvader - The ceiling is $10,000. Then you have to report via FBAR by June 30th every year. Of course, this only applies to yankees and the OP isn't one.

@Orange - Can you explain your reasoning for setting up a separate US business underneath the foreign company? If you're the advertiser then the situation might be different, but as an affiliate there is no reason (legally or otherwise) to have a corporate presence in every market you advertise in.

@Jan - Financial privacy is a thing of the past. Don't assume simply because you've incorporated in one jurisdiction and hold your money elsewhere that nobody knows. There is always an electronic paper trail these days.

I tried setting up an llc and while that part might have been easy, I could not find a bank that would allow me to set up an account online or over the phone. Believe me, I tried several, including wells fargo, and every one of them wanted me to come in person so they could see who I am.

Someone from one of them said it's actually a law that banks have to know their customers on a personal basis. I don't know if that's actually true but it seemed quite a pain.

Just my experience,
Kim

@Kimberly - These are the so-called KYC (Know Your Customer) guidelines. Banks have to see you face to face in order to open your account. One way to get around a flight is to look for banks headquartered elsewhere with a local branch. Otherwise, you're gonna have to hop on a plane.

Unfortunately, it sold before I had a chance to jump on it. Rents for that type of property are in the $650 to $850 range. Lots more deals in the area, especially Chandler and Gilbert. Check Zillow.com.

PhilG

kidsvater,

So I hadn't looked at these rules in a while regarding taxes on foreign corps, but I perused them again, and is it just me or has the U.S. created a tax regime that is far more harsh than other countries regarding foriegn investments?

I mean the only way for a "United States Person" which includes domestic entities, US Citizens and Green Card holder to not be immediately taxed by both the U.S. and the country where an investment is made is by essentially finding a business partner who is a foreign national and not a permanent U.S. resident from a country that doesn't have similarly punitive tax rules for foreign investments to be the majority shareholder of a foreign corporation.

They way I read the U.S IRC, US persons can own 49 percent of a foreign corporation and it doesn't become a Controlled Foreign Corporation subject to tax under subpart F. I've read a KPMG report to the Canadian government that purports that the United Kingdom has similar attribution rules for "entities" that own foreign subsidiaries, but not for individuals, so a UK partner who owns 51% of an IBC could potentially provide for both parties enjoying significant tax savings if managed properly.

Thank you for the information jan,

I will try to find out, although I am not sure Amazon worth the try. I used to sell on them and make a decent income few years ago.

Their terrible customer service for seller made me move to eBay on no time.

I think you hit the nail on the head here jan.

if you make a good living on amazon, and it is taken away you uses your smarts to get yourself out of bad situation. It is another reminder to use all to not have all you eggs in one basket, one system, one income. The internet allows you to create multiple incomes in various ways, that way if one system collapses, you have many other ways to cover your arse.

Good profits to you. :-)

The big problem is that if you set up an LLC or Corporation in a state other than the one where you live, you will have to file to do business in your home state. There are fees associated with that, and you will have to pay taxes in your home state.

If you set up overseas, you face serious problems in regards to the foreign controlled corporation statutes with the IRS.

There are ways around it, like having a foriegn national as a partner who owns at least 50 percent of the company. You still potentially have foriegn bank account reports you will need to file with the IRS.

There are more complicated strategies involving the use of foriegn charitable trusts that neither you, nor another American controls that limit your exposure as a U.S. resident, and which potentially reduce your tax liability, but they are pretty damn complicated too.

The simple reality is that if you live in California, are an Amazon affiliate, and have a SIGNIFICANT income from this source, the BEST way to protect it would be to MOVE to a jurisdiction that won't be enacting an affiliates tax. If it doesn't make economic sense to do that, well, then your best bet is to complain to your state legislators.

I'm in Oregon, and there is no sales tax, so hopefully nobody here will try to box Amazon into collecting sales taxes from customers. From what I understand, that is the issue - Amazon wants to stay sales tax free.

Your approach is a valid option. The one drawback is that you actually have to have a valid business in the foreign state and do your business from there or you have to register as a foreign corporation in your home state, which may have more tax and cost consequences than are worth it. California is one of the states that is very picky about taxing anything that even comes close to their state, so people should just get good legal and tax advice if they choose that route.

I am in Illinois and got the same letter in April but was not doing enough to justify going the foreign corporation route. My son got a notice too, but he lives in Iowa now, so he got reinstated by simply updating his address with Amazon. My approach was to just change the affiliate link to my son's and I will just help out with his student loan payments that way.

Jan - Why were you booted in the first place ?

This thread has had a lot of back and forth, then just stopped. I am in Connecticut, Amazon dropped me, and other affiliates have brought concern. Did we establish that I can't just open a Mail Box and LLC in New Hampshire, then pay taxes on my own income?

This whole thing is just silly. The Server is in Texas, my assistant is in Hungary, my sales are digital downloads from around the world, and Connecticut wants to get paid, because I did? They already got me on income taxes, no idea why I should be paying for sales taxes too.

Hi Jan,
I am trying to get your Physical Product Course but I cant find the buying page. Is it still on sale. I am realyy interested. Thanks

You did a very good job on getting your Amazon account bank. However, I am new to your idea on getting it back. I would still ask from a legal advice so that I wouldn't mess things up.