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How can they sue the company if it's a separate entity from yourself?
I'm not just talking about suing, but sequestering records to the end of fact finding.
To answer your question: easy. If you have a controlling interest, in any way shape or form including signature power over accounts, than you aren't seen as separate from the company as far as tax liability goes and probably as far as any liability goes if the litigating attorney is good enough.
The strategy is to make it as difficult and expensive as possible to get information and to prosecute a case. However, the federal government has unlimited resources.
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And how could it be considered tax evasion or avoidance if it's a foreign corporate entity with no ties to the US, except that its CEO is from US?
See the above answer. You really have to look into this, as the IRS covers all of its bases. Read the law on it, which is readily accessible on the IRS website.
It is virtually impossible to 'avoid' taxes merely by incorporating offshore, that is unless you are being deceptive in some way or otherwise breaking the law. When that occurs, you are thereby evading.
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Would me being a US citizen automatically qualify it as a US company?
No, but it also doesn't matter that it is a foreign company as far as your tax liability is concerned. Its illegal to keep the money that you have earned expatriated without paying taxes.
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I assume I'll have to pay taxes on the money I bring back as income (salary I pay myself) but I have no problem with that.
Yes, and you have to claim all of your earnings every year. Meaning, that owning a foreign corporation doesn't allow you to keep money offshore to grow tax free. Look into it.
Some of the current loopholes (not sure if they are closed yet) allow(ed) US owned foreign corps to keep some money offshore without immediately paying taxes on it. The senate tends to periodically fight for such loopholes for their wealthy constituents.
However, I'm not sure how it works as there is no readily available info on how these mega corps are legally allowed to accomplish this. I'm sure that you would have to hire an expert attorney to guide you if you were to do something like that.
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Actually, if it is a foreign corp, there is no such thing as repatriation, but to spend the earnings you'd have to pay yourself a dividend, which is taxable.
I'm positive that you have to claim and pay taxes on all of the money that the offshore corporation makes every year.
Now, you don't have to pay yourself if its a C-corp, and thereby you can avoid the personal income tax.
However, you still have to pay corporate tax. When you eventually pay yourself, you have to pay the personal income tax in addition to the corporate tax that you already paid. But that's the same exact setup that is afforded domestic corporations.
In any corporation, if you don't need to keep the money in the corporation for further business activity, then its cheaper to "pass the money through" and pay yourself without paying the corporate tax.
Thereby, you avoid the corporate tax and only pay personal income and associated taxes.
However, I think that a lot of corp owners find many many ways to pay for a lot of their life expenses with the corporations money, thereby using money for life expenses that is only ever going to be taxed at the cheaper corporate rate.
There is an art to this, and its best to consult a CPA about the best ways to go about this. If you are audited and it is found for instance that you paid your vet bills with the corporations money, then there will be financial hell to pay.
Successful use of money taxed at the corporate rate, for life expenses and if done legally, is an example of '"tax avoidance" which is legal. As opposed to "tax evasion" which is illegal. Tax evasion is hiding your control of foreign corporations, hiding accounts, etc...
But like someone else said, you have to consult a professional. Actually, i would most definitely only consult an tax attorney who is well familiar with the taxation of offshore corporations. That should be the bulk of his business. Forget your run of the mill CPA's for offshore corporation strategies.
My non-professional advice is to always stay on the right side of the IRS, and do everything else in your power to protect yourself from absolutely everyone else (ex-wives, trip and fall people, business rivals, etc...) Offshore corps can be much more effective in thwarting these people than the IRS.
Dodging the IRS seems to be worth too much potential trouble and penalty for the gain. They are the single greatest risk to your freedom.
For fun, see if you can discover how OJ Simpson has been able to shield a lot of his assets from the Brown family. He is probably one of the best modern day examples of successful asset protection. Although, I do know that his NFL pension plays a large part in that. For the most part, pensions can't be attached in settlements.