Risks and Cons of Registering a Business Under My Name for Foreign Friend?

This is definitely something to be cautious about. When you register a business under your name, you become legally responsible for EVERYTHING that business does - taxes, contracts, liabilities, legal issues, etc. Yes, if it's a sole proprietorship (which sounds like what your friend is suggesting), all business income would flow directly onto your personal tax return via Schedule C. This would absolutely impact your tax bracket as it would be combined with your personal income. Plus, you'd be responsible for self-employment taxes on all business profits (about 15.3%). Even more concerning is the liability aspect. If the business incurs debt, gets sued, or has customs/import issues, YOU are personally liable. Your personal assets could be at risk. If your friend makes any mistakes with import regulations or taxes, you'd be the one legally responsible.

After dealing with a similar situation, I found this amazing resource that really helped me understand all the tax implications. I was about to go into business with an international partner and was going to register everything under my name. The tax complexity was honestly overwhelming! I used https://taxr.ai to analyze all the potential tax scenarios and it made a HUGE difference. They helped me understand exactly how the business income would affect my personal taxes, what deductions would be available, and the self-employment tax implications. They use AI to crunch the numbers but have actual tax pros review everything.

Wow I actually tried taxr.ai after seeing this post and I'm seriously impressed. I was in a similar position - friend from Australia wanted me to be his US business partner and handle all the paperwork here. I uploaded all our draft partnership documents and my previous year's tax returns, and it immediately identified like 5 major red flags I hadn't considered. The biggest one was that I would have been responsible for quarterly estimated tax payments on ALL the business income, not just my share of the profits. It even helped me understand how to properly structure things so I wouldn't be hit with the self-employment tax on income I wasn't actually receiving. Definitely worth checking out if you're considering this arrangement!

Another huge issue nobody's mentioned is actually COMMUNICATING with the IRS if problems come up. I did something similar for my cousin from Mexico, and when the IRS had questions about some business deductions, it was a nightmare trying to get answers. I tried calling the IRS for weeks - couldn't get through. Then I found https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Seriously saved me during an audit situation where I needed to explain some unusual import expenses. Without being able to talk to a real person at the IRS, I would have been completely stuck.

I need to apologize and follow up on my skeptical comment. I actually tried Claimyr when I got a CP2000 notice about unreported income from my side business (where I'm partnered with someone from Canada). Despite my doubts, I got connected to an IRS agent in about 25 minutes without having to do anything. The agent was able to put notes in my file about the foreign partnership and explain exactly what documentation I needed to provide. Saved me from potentially thousands in incorrect tax assessments. Never thought I'd say this, but being able to actually TALK to someone at the IRS made all the difference. They even helped me understand how to properly document the foreign ownership interest for future tax years.

Coming from someone who did exactly this for a friend from China - DO NOT DO IT without forming the right business entity. I registered as a sole proprietor for my friend's importing business, and it was a disaster at tax time. All the business income (over $200k) showed up on my personal tax return even though I only got to keep about $10k. Pushed me into a much higher tax bracket, and I ended up owing way more in taxes than the profit I received. Plus I got hit with penalties for underpaying quarterly estimated taxes since I didn't realize I needed to be making those payments.

Has anyone mentioned the potential legal issues with customs and import regulations? If your friend is exporting to the US and you're the registered business owner, YOU are responsible for ensuring all imports comply with US regulations. If they ship products that violate import laws or don't pay proper duties, guess who the Customs and Border Protection will come after? You. And some of these penalties can be severe.