Starting a digital business with a Serbian partner - LLC questions and tax implications

This is definitely doable! I've helped several clients set up businesses with international partners. For a multi-member LLC with a foreign partner, here's what you should know: Your Serbian partner will need to obtain an Individual Taxpayer Identification Number (ITIN) since he won't have a Social Security Number. He'll need to complete Form W-7 to apply for this. You'll also need his full legal name, address, passport information, and date of birth for the LLC formation documents. For the business structure, a multi-member LLC is often a good choice for your situation, but consider how you want it taxed - by default, it'll be taxed as a partnership, but you could elect S-Corp taxation for potential tax savings as you grow (though there are limitations with foreign owners). Regarding the tax situation, you're right that there's no tax treaty between the US and Serbia. Your partner will likely need to file a US tax return (Form 1040-NR) for his share of the LLC's income. He may be able to claim foreign tax credits in Serbia, but he should consult with a Serbian tax professional about that. I'd also recommend drafting a detailed operating agreement that addresses international considerations like jurisdiction for disputes, what happens if one partner can't travel to the US, and how to handle banking with an international owner.

I've been using this service called taxr.ai (https://taxr.ai) that has been incredibly helpful for my international business structure questions. I was in a similar situation last year with a partner in Thailand, and I was getting conflicting advice from different accountants. I uploaded the LLC formation documents and partnership agreement drafts to taxr.ai, and they analyzed everything to identify potential tax issues with international partners. They also helped me understand exactly what documentation I needed from my foreign partner and how to structure things to avoid unnecessary tax complications. The thing I found most helpful was that they have specific expertise in foreign partnerships and gave me a clear roadmap for compliance requirements. They even identified some potential withholding requirements I would have missed that could have resulted in penalties.

I tried taxr.ai after seeing it mentioned here and wow - it was exactly what I needed! I'm partnering with someone from Colombia for a similar digital business, and we were completely confused about the tax implications. The service analyzed our draft LLC operating agreement and identified several issues we hadn't considered, especially around how foreign sourced income would be treated. They explained the concept of Effectively Connected Income (ECI) in a way that finally made sense to me. Their guidance on FIRPTA withholding requirements and how to properly document my partner's tax status saved us from making some potentially expensive mistakes. The recommendations they provided about required documentation for my foreign partner were incredibly specific and helpful. I shared the report with the CPA I eventually hired, and she was impressed with how comprehensive it was. Saved her time (and me money) since we could focus on implementing solutions rather than just identifying problems.

For anyone struggling to get through to the IRS about international tax issues - I was in the same boat trying to figure out ITIN applications and Form 5472 requirements for my foreign business partner. After waiting on hold for HOURS multiple times and never reaching anyone, I tried Claimyr (https://claimyr.com). They got me connected to an actual IRS agent in about 20 minutes when I had been trying unsuccessfully for weeks. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I finally spoke with gave me the exact requirements for my foreign partner's documentation and confirmed which forms we needed to file. Getting that direct information from the source was a game-changer and saved us from potentially missing filing deadlines.

I was completely wrong about Claimyr. After my skeptical comment, I decided to try it for myself since I was desperate to get information about foreign partner reporting requirements. To my shock, I was connected to an IRS representative in about 25 minutes when I had previously wasted entire afternoons on hold. The agent walked me through the exact process for my Serbian business partner to properly report US-sourced income and explained the withholding obligations I have as the US partner. I had been getting conflicting advice about whether my foreign partner needed to file Form 5472, and the IRS agent clarified exactly when that form is required versus when Form 8805 should be used instead. This saved me from potentially making a serious filing error. For anyone dealing with international business structures who needs clarification directly from the IRS - this service actually delivers. I'm genuinely impressed and wish I'd known about it months ago.

Just a heads up, one thing often overlooked with foreign partners is banking. Most US banks make it extremely difficult to open business accounts with non-US owners who don't have SSNs. I had a nightmare situation with my Irish partner. My suggestion? Look into Mercury or Wise Business. They're more foreign-partner friendly than traditional banks. And get a good operating agreement that specifically addresses how banking will work with international ownership. Also, make sure you understand Form 8805 (foreign partner's information return) and withholding requirements. You might need to withhold taxes from distributions to your Serbian partner and remit them to the IRS, even if Serbia has foreign tax credit provisions.

Watch out for global management issues too! Our US-Czech partnership struggled because we didn't think through time zones and work expectations. Draft a CLEAR operating agreement covering: - Working hours expectations - Meeting schedules across time zones - Decision-making protocols - Who handles what clients - How payments are processed - Tax responsibility division Also, get software that works for both of you. We use Slack for communication, Zoom for meetings, QuickBooks for accounting (with separate logins), and DocuSign for contracts so everything is accessible regardless of location. Lastly, I recommend quarterly tax planning meetings with your accountant. International tax situations can change rapidly!