Why is a US LLC the best legal form to invest in cryptocurrencies?

Pourquoi l’entreprise LLC américaine est une forme juridique idéale pour investir dans les cryptomonnaies ?

According to Matthew LopesA tax attorney from Schaefer, an American LLC business option may be an option to create a crypto legacy.

Many small holders and French investors have decided to invest in cryptocurrency, expecting significant returns. Since the drafting of Article 150 VH bis of the General Tax Code occasional economic activities are subject to the popular flat tax of 30% (12.8% income tax + 17.2% social security contributions).

However, during the professional training of activities related to cryptocurrencies (trading, crypto mining, developer, team leader, etc.), it is mandatory to create a company. Without it, the taxpayer exposes himself to an increase in taxation of up to 80% (understanding without trade) and various fines and penalties.

How to draw a boundary? In the absence of precision in the legislature and tax administration, it is difficult to establish oneself. It is therefore appropriate to reflect through a A bundle of clues Related to: the frequency of activities, their size, their complexity in implementation, the mechanisms implemented, etc.

Formation of a French company or business: a false good idea

As a French tax resident, many taxpayers have the idea of ​​forming a French company, such as a SAS or SARL or a micro-business.

Why not create a small business? The micro-enterprise tax system can be disastrous for cryptocurrency-related activity as it is taxed precisely on the turnover achieved, without the possibility of deducting any fees. For example, if a trader invests 50K capital and withdraws 150K, he will not be taxed on the 100K profit, but on the 150K turnover. So small business should be clearly rejected.

Why not form a SAS (SASU) or SARL (EURL)? Beyond their highly complex formality (any capitalistic or intrinsic change in company rules, including daily operating rules, is complicated), there are many other major drawbacks.

First, The investor or entrepreneur cannot pay his dividend or his profit before closing the balance sheet.. What’s worse is that you have to wait 5 or 6 months after the balance sheet is closed (usually held on December 31 every year) to distribute your profits or dividends to you. For example, if your company was formed in 2022, sometimes you may have to wait until May or June 2024 to distribute the profits earned in 2022.

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Then, observe The presence of the most important URSSAF social charges, a monthly salary distribution will cost you approximately 66% of the net pay in the case of a SASU and approximately 50% in the case of a EURL. Income tax and related social security contributions are then deducted from the salary…

American LLC ensures optimal security of your personal assets and your Bitcoins, Ethereum, USDT, USDC.

A US LLC is a limited liability company, which means your personal assets are protected in case your business is sued or defaults.

Once your cryptocurrencies are hosted inside an LLC, the capital thus held is fully protected as these assets are owned by the American LLC.

What is the taxation of a US LLC for cryptocurrency activity?

An LLC is a fiscally semi-transparent legal form, meaning it declares profits in the United States, but the shareholders (natural or legal persons) are personally liable for taxation. This tax status is recognized by Article 7 of the 1994 Franco-American Tax Treaty. In fact, according to Article 7 of the Franco-American Agreement of August 31, 1994, the results of this company are taxable if the taxpayer is resident in France. In France.

The US IRS (That is The US tax authority) declared that cryptocurrencies are assets or property, but not currencies. As a result, gains from cryptocurrency are treated the same as gains from a stock, rental property, or any other passive investment.

An LLC is considered a U.S A neglected company, i.e. a financially neglected firm (financial semi-transparency). The income generated by the company actually passes through it, and then the natural person is taxed with the income tax of the country of his residence. If the LLC has a legal person as a partner, the LLC’s profits will obviously rise in the related legal person’s financial products.

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Therefore, choosing an American LLC status for your activities related to cryptocurrencies is completely legal.

Why Should I Choose an American LLC for Cryptocurrency Mining Business? Beyond the obvious benefit of liability protection, the American LLC will allow the entrepreneur and investor to reduce his professional expenses, thanks to significant savings in social fees and reduced social contributions.

Why choose an American LLC for cryptocurrency trading activity? The IRS (Internal Revenue Service) considers gains and losses on cryptocurrencies as capital gains or losses. In an LLC, capital gains are offset by business expenses. Additionally, the LLC allows cryptocurrency traders to minimize accidental losses. For example, cryptocurrency losses due to hacks or scams have historically been common in cryptocurrency. Individuals cannot deduct these losses as incidental losses. However, you are allowed to do so if you conduct your activity through a US LLC.

Why choose an American LLC for developer operations? The operation of such a function would allow the developer to see that his personal liability is limited and his legacy protected. He can fully collect cryptocurrency services through his US company; Professional expenses can be deducted. U.S. LLCs can also provide a privacy advantage.

In short, what are the advantages of a US LLC for investing in cryptocurrency?

By forming an American LLC to invest in cryptocurrency you can benefit from several advantages:

  • Total operating flexibilityThanks for the very easy formality.
  • Profit distribution is possible when desired : The shareholders or the sole shareholder may be distributed at such time as he decides (for example, monthly).
  • Tax to income tax in his country of residence. For France, profits are taxed at a progressive rate of 0 to 45% + reduced social contributions.

A US LLC provides a legal framework for your activities in cryptocurrency and improves your taxation. It is the perfect tool for raising funds to develop all kinds of crypto projects like NFT projects.

A comparative study of a concrete case with simulation

A developer earns 100K in turnover but spends 30K through his US company for the needs of his professional activities. So his profit is 70 thousand. This developer is a French tax resident. So its line will be:

As part of an LLC:

0% x 10,226 = 0 euros + 15,844 x 11% = 1,742 euros + 43,929 x 30% = 13,178 euros, ie. 14,920 euros in income tax.

+9.8% Social contributions, ie 6,860 euros.

Total: €21,780.

In a small business environment:

Tax turnover, ie 100,000 x 24.2% = 24,200 euros.
Note that it is impossible to benefit from the micro-enterprise regime by exceeding the applicable ceilings for the provision of services of 72,600 euros tax-free for two consecutive years.

In the context of a SAS or SARL subject to the partnership regime:

0% x 10,226 = 0 euros + 15,844 x 11% = 1,742 euros + 43,929 x 30% = 13,178 euros, ie. 14,920 euros in income tax.

+ 17.2% Social contributions, ie 12,040 euros.

Total: 26,960 euros + any URSSAF social charges if monthly distribution by salary

In the context of a SAS or SARL subject to IS:

70,000 x 21% = €14,700

Distribution to shareholder: 55,300 x 30%: 16,590 euros

Total: 31,290 euros + any URSSAF social charges if monthly distribution by salary

Bonus: What if you could access Forex again in Finance?

From August 2, 2022, positions cannot be increased or opened in futures, options, forex tokens etc. On Finance France. However, these positions can sometimes be very profitable.

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Form a US LLC Registering as a US professional allows access to the American Finance platform (thus allowing you to bypass the French and European restrictions in place).

About the author

Matthew Lopes He is a lawyer specializing in international taxation, taxation of cryptocurrencies, formation of US companies and declaration of income of US companies (especially LLC US) in France and USA.

Member of Cabinet Schaefer of Mathieu Kryptofiska and Buildfast LLC.

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