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My spouse and I currently live in the US. We plan to move back to my spouses home country, where we will live and work long term. Our current plan is to have my spouse start a company in the foreign country and we both work for/on in. I would like to start the company earlier, while still in the US so that we don't have to start the company fresh when we get there.

My spouse can't work in the US, so it would just be me working for the company. I wouldn't need the money the company earned now, so I would just want to leave it in the company. I believe I wouldn't be required to pay taxes if the company doesn't distribute the funds and I don't own any shares in the company, but I am concerned this would look like tax fraud.

If I don't own the foreign company, and I don't receive any payments from the company, then how (if needed) do my spouse and I report earnings for US taxes purposes?

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It is tax fraud

And breach of employment law

If you are working for a company you don’t own, that company must pay you the minimum wage for your work and that must be taxed. Any profits the company makes also need to be taxed, either in the USA or where the company is domiciled. If there is no tax treaty between the USA and that country it will need to pay taxes in both places.

If you do own the company then it doesn’t not need to pay you a wage - your interest in the ongoing health of the company is generally enough compensation. However, the company will therefore make more taxable profit.

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  • In the scenario where the OP is an owner and the company is not a U.S. company and all of its income is from clients, for example, in Germany paying for services provided in Germany, where does U.S. income tax come in to the picture? – George White Jan 9 at 4:33
  • @GeorgeWhite a) because the work is done in the US b) because the OP is a US citizen - the US is one of 2 jurisdictions that tax their citizens irrespective of where they earn their income – Dale M Jan 9 at 5:11
  • In my hypothetical the OP is not earning any income, just building the value of his equity in the non-US company. – George White Jan 9 at 18:53

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