I will be forming an LLC where I will be the sole member/owner to open a business bank account. I will initially transfer an amount X of money from my personal bank account to this LLC account. The LLC will not conduct any actual business, it will only serve as a “holding” company for my transferred money. The LLC account is a checking account with no earned interest. As such it will not generate any income. I will be using this LLC account only for my personal expenses (cash withdrawal, credit card expenses, etc). Is this intended use legal? Will the initial funding of my LLC account from my personal account be treated as an income for the LLC and subject to taxes? Are there any other  tax considerations I should be worried about being that the account will only have expenses and no income? I’m not a US resident or US citizen. Thanks.

– Federico

 


Answer

Most states do not allow an LLC to be formed that do not have a business purpose and as such those LLCs can’t be used to hold an asset to protect it from creditors.  Nevada is the only exception that comes to mind, but there may be more.  So for most states, any assets held by the LLC should have a business purpose, such as running a coffee shop or renting a house, otherwise you run the risk of having the corporate veil pierced and opening those assets to creditors. 
 
Since there would be no business activity or income, there would be no impact to your taxes.  
Many non-U.S. citizens choose to form an LLC because they are unable to own an S-corp which have similar tax treatment and usually much better than C-corps.