US LLC from Chile: The 50% Rule and Its Four Ways Out

0:00Can a Chilean own a US company?

Catalina builds software in Santiago. Some of her income is client work. Some will come from licensing a product she's built. So, can she have a US company from Chile? As far as America goes, yes. No social security number, and no trip to the US. Cheyenne, in Wyoming, is two hours behind Santiago in July, and four in January. But Chile asks a question most videos skip. Not where you live, but what kind of income the company will earn.

We're BaseAcross. We set up US companies for founders outside America, so we'll be straight with you. Let's join the dots, one at a time.

0:39The reason: card payments

First, the reason. For most founders in Chile, it's card payments. The big card processor doesn't take Chilean businesses, and a US company is often how founders here get access. A US company with a US bank account lets you apply. It can still decline. And the state follows the plan. A Wyoming LLC for a business you run yourself. A Delaware C-Corp if US investors want shares.

1:07The 50% line: when Chile treats the income as yours

Now the line that matters. Chile has a rule for foreign entities, of any kind, that Chilean residents control. Control means owning half or more of the company's capital, profits or votes, counting related parties too. If you're over that line, Chile can treat the company's passive income as yours as it accrues, before anything is paid out. Passive means dividends, interest and royalties.

So the first question isn't which state. It's what kind of income the company will

1:39Four ways out of the rule

earn. But there are four ways out. The rule doesn't apply if passive income is a small share of all the company's income. Or if passive assets are a small share of what it owns. Or if that income is already taxed abroad at a high enough rate. Or if the passive income in the year stays under a set amount, measured in Chile's indexed unit. If any one of them applies, the rule doesn't.

That's why a services business with little passive income usually falls outside the rule. A product that earns licence fees is where it starts to bite.

2:14Catalina's year, worked through (an illustration)

Here's the guide's own illustration. Catalina's company earns three hundred million pesos in a year, after costs. Half is client services. Half, a hundred and fifty million, is licence fees for her product. Licence fees are royalties, so they're passive. Half her income is well above the small-share line. Her LLC pays no US tax on them, so the tax-abroad exit doesn't work either.

And a hundred and fifty million pesos is above the yearly amount. So the licence fees are treated as hers as they accrue. The services income isn't caught. That's an illustration, not a quote, and the peso value of the yearly amount changes every day.

2:57Forming it and the bank

Then the company itself. Start with your contador. What kind of income it will earn, and what the central bank wants for the investment. A registered agent gives the company an address in its state, for legal papers. The EIN, without a social security number, is a paper form to the IRS. And the bank is the easier part here. One of the US fintech banks takes applications from founders in Chile, and another account can give you US account details.

When you pay from Chile by card, check the rate and the fees.

3:31Two countries: residence, the treaty and Form 5472

Last, two countries and one calendar. If the company has a fixed place of business, or a dependent agent, in Chile, Chile can tax what it earns through Chile. Ask early. You're resident in Chile after a set number of days in any twelve months. And there is a tax treaty with the United States, signed in 2010, now in force. It caps US withholding on some payments. Work done in Chile generally isn't US income.

The company still files a report with the IRS every year, even without sales, and missing it is expensive. It's a company report with a pro forma return, not the personal non-resident return some videos mention. It's usually due in the spring, and there's a form to ask for more time, filed before the deadline.

4:20The order to do it in

So here's the order. First, what kind of income the company will earn. Then the exclusions, with your contador. Then form, and bank. Put the IRS report and your Chilean return on one calendar. The full guide, with every source and a checklist for your contador in English and Spanish, is linked below. And Catalina? She asked her contador about the licence fees first.