0

Can my S-corp legally own a foreign bank account to collect deposits from foreign clients?

Additionally, can I keep that money in the foreign bank account and pay taxes against these funds from my personal savings account in US (because S-corp is a pass-through entity anyway)?

Note that the intention is to report the foreign bank account with the IRS, it's just easier to have a foreign bank account to collect international payments and protect against currency fluctuations.

1
  • You would likely need to register your corporation with the country where the bank account is located, and would likely have to pay corporate income tax in that jurisdiction, since S-corporation status would be meaningless to the foreign revenue authority. If you have a strong foreign client base, you might want to look into setting up a foreign subsidiary and developing a proper transfer pricing strategy.
    – phoog
    Dec 13 '16 at 4:02
1

It is not illegal for an S corporation to own a foreign bank account, although reporting requirements under U.S. law are strict and the penalties for failure to comply are very severe.

I don't see any obvious reason that it is illegal to pay taxes against these funds from your personal savings account in the U.S., but that could raise an issue of failure to regarding corporate formalities by co-mingling funds, which could constitute grounds to pierce the corporate veil. It would be better to take your funds and put them in an S corporation account and then pay taxes (other than U.S. income taxes) in that way.

1
  • The question seems not to consider the possibility that the foreign jurisdiction might have restrictions on foreign ownership of bank accounts (since the US S corporation will be a foreign corporation from the perspective of that jurisdiction).
    – phoog
    Dec 13 '16 at 3:58

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.