From Germany to the US. With everything the tax office needs to know.

Forming a US company from Germany is straightforward. What matters is what applies at home afterwards: a company is generally taxable where it is managed, and the shareholding must be reported to the tax office. Our partner tax adviser reviews this before formation.

In brief

Entrepreneurs from Germany can form a US LLC or corporation without being resident in the US. If the company is managed from Germany, its place of management is in Germany (section 10 of the German Fiscal Code, AO) and it is generally taxable there. The shareholding must be reported to the tax office under section 138 AO. The tax office decides how to treat an LLC by comparing it with German legal forms (Typenvergleich).

Place of management — the decisive point

Under section 10 of the German Fiscal Code (AO), the place of management is the centre of the company’s top-level management — where the important decisions are made. A corporation (Kapitalgesellschaft) whose place of management is in Germany is subject to unlimited corporate income tax liability in Germany (section 1 of the German Corporate Income Tax Act, KStG), even if its registered office is in the US. For most entrepreneurs this means: if you run your US company from your desk in Germany, it is taxed in Germany. In the US, the annual filing obligations come on top. That is not a drawback of the US company — it simply is not a tax model.

The Typenvergleich: how the LLC is classified

German tax law has no category for the LLC. The tax office therefore examines its characteristics to determine whether it corresponds more closely to a corporation such as the GmbH or to a partnership — the so-called Typenvergleich, a classification by comparison with German legal forms. The German Federal Ministry of Finance set out the criteria for the US LLC in a dedicated letter (BMF letter of 19 March 2004); the classification in the US, the so-called check-the-box election, plays no part in this. The outcome depends on the operating agreement: who decides, how profits are distributed, whether shares are transferable. That is why our partner tax adviser reviews the classification before the operating agreement is drafted.

The notification under section 138 AO

Anyone who forms or acquires a shareholding in a company abroad — of ten per cent or more, or with acquisition costs of more than €150,000 — must report this to the tax office. For companies in third countries such as the US, this also applies as soon as you first have a controlling influence. The notification is made electronically together with the income tax or corporate income tax return, no later than fourteen months after the end of the year. Anyone who fails to make the notification risks a fine not exceeding €25,000 (section 379 AO).

What you need to know

A US company is not a way to avoid taxes in Germany. Anyone who promises that is keeping quiet about the place of management.
The review before formation by our partner tax adviser is included in the fixed price; your tax adviser handles the ongoing tax return.
Annual filing duties apply in the United States even without revenue (Form 5472 with Form 1120), along with state fees and the cost of the registered agent.

The right package

Formation, tax numbers and the review before formation: Global Structure.

Frequently asked questions

Can I form a US LLC as a German citizen?

Yes, without residence and without citizenship in the US. You need a passport, proof of address and, if a company is to be the shareholder, its commercial register extract.

Do I have to pay tax on my US LLC in Germany?

Generally yes, if you manage it from Germany: its place of management is then in Germany (section 10 AO). Our partner tax adviser reviews your case before formation.

Do I have to report the US company to my tax office?

Yes. Under section 138 AO, forming or acquiring a shareholding in a foreign company must be reported — electronically with the tax return, no later than fourteen months after the end of the year. Failure to do so can be punished with a fine.

How does the German tax office classify an LLC?

By means of a Typenvergleich: depending on the operating agreement, like a corporation or like a partnership. That is why the classification is reviewed before the operating agreement is drafted.

Read on

Does a US LLC reduce your tax? The honest answer. – Can a US LLC reduce your tax? For owners in Germany and Switzerland usually not: place of management, classification, reporting duties — with sources.
LLC or GmbH? Rarely an either-or. – US LLC or German GmbH: formation, share capital, notary, liability, tax and obligations compared — and why it is rarely an either-or question.
Form a US LLC. Step by step, from Germany. – Form a US LLC from Germany, Austria or Switzerland: ten steps from the initial review to Form 5472 — with costs, documents and deadlines.
Your own US company. No company needed — at a fixed price. – No company needed: as a private individual or founder, engage FIAON Global directly — US company, EIN, ITIN and account application, fixed price.