msustik[at]gmail.com wrote:

- quote -

IRS has no access to your banking activity, unless you
deposit or withdraw $10,000 or more in currency. Latter must
be reported by the financial institution to IRS.

In an IRS audit, they may look at your banking activity, but
if it's in a separate account for the purpose and
corroborating records support what you're doing, there's no
problem. Therefore, this activity can be run on Sch C 1040,
and presumably there will be a profit (an annual loss could
eventually be questioned as an activity not-for-profit).

Fred F.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I am contemplating starting a small business in the USA, and
would appreciate opinions on the tax and legal implications.
The following (hi)story will best explain what I am
intending to do:

A friend of mine has been running a shop in (East) Europe by
producing custom items for European and overseas customers.
He finds the buyers mostly through the internet and word of
mouth. He has bugged me for years to get involved in the US
operations, which I am finally considering.

Since the bank system is still quite backwards in his
country, he recently asked me a few times to help transfer
payments to him. I have family there too, and have left a
an ATM card there for emergencies prior to all this. So a
few (6-8 customers in 7 months or so) sent me a check and my
friend withrew the amount using this card. This was
extremely cost effective, considering that normally the wire
transfers cost him $50 on occasion and was also taking a
long time (the receiving bank sat on the money for over a
week). When using my card there is only a small ATM fee
and amazingly the exchange rate is as good or better than
the one offered by his bank.

However, I started to get worried that if this becomes
regular, then I may run into the IRS or whatever if large
amount of monies are being moved on my personal account. So
basically I wish to start a small business, that does
exactly what I described above, plus provides some other
services to my friend. Here is a list of things that I
could do:

1. Get involved in marketing, design a web page, hand out
printed material to prospective buyers etc.

2. Provide phone support. Calling Europe can be expensive
for some, and there is a 6 hour difference. Some customers
may want a US ear.

3. Transfer the money through a business account (I would
rather not use my personal account for this). I checked,
and a business account can be easily set up at my bank as
soon as a sole propriotership or an LLC is formed.

Here is what I would NOT do:

A. Buy materials, design product, arrange/hire workmanship.

B. Buy product, store product.

C. Sell the final product, package the product, ship to customer.

Note, that my friend will probably not want to have a
business registered in the US. I do not wish to be his
employer, and I do not want to employ him either. I simply
would like to provide the services described in 1-3 to him.

So what tax or else obligations would I face in the above
scenario? I really appreciate your attention and answer.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >