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Old 03-04-2009, 05:32 PM
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Tax on payment collection or only on commission

I have a BPO business. I have clients in US who pay me for the services. They normally do a wire transfer to my home country form US on monthly basis. As the payments are between $100 to $250 and the wire transfer cost me $50. So I loose lot of money as wire expense.

My friend in US is ready to open a sole proprietor company in US and his new company will act as a payment collector for my offshore company only. He will not need any employees for the New Company as the only job he has to do is make one wire transfer every month to my company account which out side US. I have agreed to pay him 5% commission on all payments received in his US company account. I will sign a contract with him for this service. My average invoices for month is around $20,000.

What will be his taxes in US. Will he be taxed on the total money coming in his account or for commission only which is his actual income? What will be the forms he needs to fill every year?



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Old 03-05-2009, 02:19 PM
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Your friend would only pay tax on the profit he makes, in this case, it is to the extent of his commission of 5%! If your friend operates this business as a sole proprietorship, he will be required to file a schedule C along with his individual tax return.

However, I suggest that your friend open a corporation or an LLC to ensure that he is not personally subject to any potential business lawsuits. If he is not incorporated he would be personally liable to potential lawsuits and his personal assets would be exposed!

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