Ok I checked my notes and rechecked with my US cpa. Based on their advice doing an election as a disregarded entity is a really bad idea. Because you are treating your limited company differently under two separate tax regimes - transparent in the US and non transparent in the U.K. LLC is not the same as a limited company in the U.K. C Corp is considered the equivalent US entity, hence the need for 5471 etc. Similarly LLCs and partnerships don’t issue dividends like limited companies do. The advice I got is it is best to match your company tax structure as closely as you can in multiple tax regimes to avoid ambiguities in the law. This has all kinds of impacts such as tax treaty implications for double taxation and matching the wording of US tax forms. Treating them differently is at your own risk and you better have a solid legal argument to back it up. A U.K. partnership / sole trader is more like a disregarded entity for tax purposes. My CPA said they confirmed all this with a foreign tax attorney in California.
Anyways I’ll probably get another opinion with someone else based in the U.K. Goes to show there is no one right answer... and you should ask experts, preferably multiple
Anyways I’ll probably get another opinion with someone else based in the U.K. Goes to show there is no one right answer... and you should ask experts, preferably multiple
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