Legal Question in Tax Law in Delaware

Federal income tax on corporation owned by alien non residents

I am resident of an Eastern European country. Since 1995 I own a Delaware corporation.

Process of incorporation was carried out by local law firm in my country (thru one

of Incorporationg agent in Delaware).

As I was told by lawyers that my corporation was going to be an ''offshore'' company, and as such

not subjected to any major US tax as long as it does not conduct any business within the US.

I was paying to local law firm ammount of cca. US$ 650 for yearly administration of my company,

which included ''all formalities required by the US authorities'' as they said.

Recently, I discovered that I was possibly misinformed and that federal

corporate income tax is imposed to Delaware corporations (as opposed to LLCs), regardless

of the fact that they do not conduct any business in the US, and are owned by non-residents.

I'am pretty sure that the only ''formality'' that my law firm did was filing

Delaware Franchise Tax Report and paying Registered agent service.

I understand that I should convert my corporation to LLC as soon as possible,

but am I liable for last 6 years of taxes? In what way can IRS punish corporation

and/or its directors if they are not US citizens?

Thanks in advance

Asked on 12/09/01, 9:41 pm

1 Answer from Attorneys

Lawrence Graves Coolidge & Graves PLLC

Re: Federal income tax on corporation owned by alien non residents

You should ask this question of your current lawyers.

There are a number of possible paths to avoiding US taxes, and you should get advice from a competent international tax lawyer before taking any further actions.

Best wishes,


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Answered on 12/10/01, 2:31 pm

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