Optimize the Accounting of your LLC

You cannot have salaried employees in Spain hired directly by your LLC, as this would create a "Permanent Establishment" and require you to pay taxes as a Spanish company.
However, you can hire freelancers, as long as they don't work exclusively for you or use permanent physical facilities in your name.

Of course it's possible! You can even register your business without having to travel, obtain a visa, a social security number (SSN) or an individual taxpayer identification number (ITIN). U.S. regulations do not impose restrictions on business formation for citizens around the world, except in some countries subject to trade sanctions.

If the LLC operates online without a physical presence in the United States, has no employees or dependent agents, and none of its partners are residents or citizens of the United States, it will be classified as Foreign Owned and will not be considered “Engaged in Trade or Business.” in the US» (Engaging in Trade or Business in the United States). By not having the ETBUS designation, it benefits from a territorial exemption in tax terms. In short, if the LLC meets these requirements, it will be exempt from taxes in the United States. Otherwise, you will not enjoy the exemption and must obtain an ITIN number and pay taxes in both the US and your country of tax residence.

Any entrepreneur can benefit in various ways to reduce tax payments at the end of the year. However, digital businesses (such as Amazon FBA, marketing specialists, consultants, coaches, mentors, therapists, etc.) that are also NOT face-to-face, have the potential to completely replace the role of the self-employed in Spain.

The LLC offers the possibility of billing WITHOUT VAT, NO SELF-EMPLOYED FEE, WITHOUT MANAGEMENT, and also allows you to pay less Income Tax at the end of the year by subtracting DEDUCTIBLE EXPENSES to the profits of that fiscal year.

If you have a physical 100% business, such as a restaurant, barbershop or beauty center, the LLC is not the only solution, but a tool that should COMPLEMENT your SL. This will allow you to generate expenses and pay less taxes in Spain at the end of the year.

Typical case: Juan, owner of a laundry, invoices and earns €1,000 net in April from his SL.

Theoretically, Juan would pay a % on the profits (Profit Tax), with a general rate of 25%. This means that €250 goes to the Treasury. Then, you withdraw €750 from your individual, which is again taxed in your personal income tax, say a 20%, resulting in €150 for the Treasury. Although there are other fixed costs (Self-Employed Fee, management), in this case there is not much room for maneuver. The result: Juan receives "net" of less than €600.

With LLC: Juan invoices €1,000 net from his SL, but this time he has an LLC.

It generates an expense of €1,000 from the LLC, labeled “web management and social networks.” Juan pays €1,000 from the SL to the LLC. In the eyes of the Treasury, the SL has earned €0 that month. You save 25% of taxes for free. It is true that those €1,000 will later be taxed in personal income tax, but a FREE 25% is nothing to sneeze at.

End of story. Things become incredibly simple with an LLC.

• During each tax return in Spain, in the personal income tax you must indicate in the section “Income allocation regime” the data of your LLC and your profits for that fiscal year.

• Model 720 (Informative): The LLC must inform the State Tax Administration Agency (AEAT) about the assets and rights located abroad that belong to it, provided that the total value exceeds 50,000 euros. This filing is made annually and includes detailed information about bank accounts, securities, insurance, property, and other relevant assets.

• Related transaction information: In the event that the LLC carries out transactions with related parties, whether they are people or entities with which it maintains a special relationship, it is necessary to maintain documentation that supports said operations and establishes its market value. In the case of an inspection, this information will be required to be provided to the AEAT.

Annually, we will file the following forms with the IRS on your behalf:

• Form 1120: This document informs the IRS about the income and expenses incurred by your LLC during the tax year.

• Form 5472: This form provides the IRS with information about the type of business and the details that will be filed on Form 1120.

Counting from the year you founded the company and every 5 years, you must fill out a BEA report:

• BE-13: This form allows the Bureau of Economic Analysis to know how much money enters and leaves the country through companies.

Additionally, if you operate or plan to operate in the United States, you may need other forms. Initially, if your activity is focused on Europe, you probably don't need to worry about them:

• Form W-7: Used to request the ITIN number from the IRS, similar to the EIN, allowing you to comply with your tax obligations in the country.

• Form 1040NR: This form is essential at the end of the tax year to demonstrate to your country of tax residence that you have paid taxes in the United States, which could allow you to deduct them in your country of taxation.

• Form 8-BEN: Requested by companies that must pay taxes on behalf of your company in the United States. In this case, the ITIN will be required.

• FIRPTA 8288-B: If you are a foreigner, or an international investor, you must take into account the tax withholding on the sale of FIRPTA properties.

It depends on the type of client and where they are located:

✅ B2B (European companies): No VAT is applied thanks to the reverse charge, provided that your LLC does not have a permanent establishment in the EU.
✅ B2C outside Europe: There is no VAT.
✅ B2C in Europe: The first ones €10,000 per year are exempt from VAT thanks to the one-stop shop (OSS) regime in force since 2021.

💡 What if I exceed €10,000 in B2C sales in Europe?
If you pass that threshold, you would have to apply the VAT of the customer's country and register in the OSS. However, you can avoid this management by using a Merchant of Record (MoR) as Paddle or Lemon Squeezy, who are responsible for collecting and paying VAT for you.

So, in most cases, Yes, you can invoice without VAT. with an LLC… as long as you structure your business well. 🚀

Before making any expenditure, it is crucial to keep a detailed record of it. You can use a spreadsheet like Excel to keep track efficiently, and in order to make this task easier for you, we will provide you with a template to use.

That said, it is important to note that there are certain expenses that your LLC will be able to deduct, and therefore, you will need to keep the corresponding invoices and transfer records and ensure that they are registered in the name of your LLC:

1. Common Deductible Expenses:

   • Office expenses: Rent, office supplies, utilities.
   • Personal expenses: Salaries, benefits, training.
   • Equipment and Supplies: Purchase and maintenance of equipment, business supplies.
   • Business trip: Transportation expenses, accommodation, business-related meals.
   • Marketing and publicity: Costs associated with business promotion.
   • Interest and Commissions: Interest on business loans and credit cards.

2. Automobile Expenses: If the LLC uses vehicles for business purposes, it is possible to deduct automobile-related expenses, such as gasoline, maintenance, and depreciation.

3. Business Education Costs: Costs associated with continuing education or business-specific training may be deductible.

4. Commercial Insurance: Insurance premiums for commercial coverage, such as liability insurance, may be deductible.

5. Charitable Contributions: Donations to charities may be deductible if they meet certain requirements.

6. Commercial Taxes and Licenses: The fees and licenses required to operate the business are deductible expenses.

Keep in mind that you will not be able to deduct expenses that are directly linked to the country, such as offices or property, as this could create tax complications for your LLC by operating exclusively from your country of residence.

If your LLC makes a clear separation between business and personal accounts, maintains accurate accounting in Excel, meticulously saves all invoices, and has an Operating Agreement, you have no reason to worry. However, if not, there is the possibility that a judge in the United States will 'pierce the corporate veil', putting the legal protection of the LLC at risk. For this reason, it is essential to rigorously comply with all the aspects mentioned above.

It is only required that the company be duly incorporated and current with all its documents, including the EIN number (company tax identification), and the manager's updated passport. It is not necessary to have a Social Security Number or ITIN. We cannot guarantee account opening, as banks must conduct a security check called KYC (Know Your Customer), which is mandatory under federal regulations established in the Patriot Act, before approving a customer. .

In the event that we are unable to register your business within 60 days due to an error on our part, we will refund the full amount you paid, with no questions or explanation required.

You must present clear documentation demonstrating that there is no Permanent Establishment in Spain.
Always have on hand:

• Operating Agreement establishing effective management outside of Spain.

• Manager contract.

• Bank statements and invoices for expenses and income.

• Forms 5472 and 1120 filed in the U.S.

This will help you clearly defend your case.

Yes you can, but keep in mind that any profit generated from crypto or NFT transactions must be declared on your Spanish personal income tax return under the income attribution regime. The Treasury closely monitors these activities, so keep accurate documentation of all transactions.

The easiest way is to use platforms like Wise, Payoneer or Stripe, which allow you to receive payments in euros, easily convert currencies, and transfer funds to your European bank account from the LLC.

YeahEven if you don't have any profits, you'll need to file information forms 5472 and 1120 in the U.S. each year to keep your LLC active.
In Spain, if you don't have any real profits, you won't be required to pay personal income tax, although it's a good idea to keep supporting documents to prove your lack of income.

It is not legally mandatory in all states, but it is highly recommended. The Operating Agreement protects your limited liability, strengthens your position against tax audits, and prevents misunderstandings about who actually exercises effective management of the company.