Taking and receiving profits from your US LP

If you have built a successful business in the US, you need to know how to take out or distribute the profits that have built up in the company. This page covers it in detail.

Unlike a C Corporation, a partnership is treated as distributing its profit for tax purposes at the end of the financial year. The profit is then taxed at the partner level, even if it stays in the company's bank account.

1Distributing profits

All profits on the company's books at year end are paid out to the partners or booked as paid out. The company must pay 37% withholding tax to the IRS.

The partners report their share of the profit on their US income tax return and then receive a refund of any tax overpaid through withholding.

Which tax obligations apply in your country of residence depends on where you live. Where a double tax treaty is in place, you usually owe no further tax in your country of residence, provided you can show that the US company carries on a genuine trade or business.

2Ways to reduce profit

To keep the tax burden as low as possible, you can reduce the company's distributable profit through a range of measures. We outline them in the next section.

Unlike with a corporation, with a partnership it is generally not possible to avoid a distribution that is taxable for you personally by investing the profit, for example in real estate.

Which of these solutions works best in your situation must therefore be clarified in advance. In your case, a C Corporation may be the better entity.

2.1A foreign company invoices the US company

You set up a foreign company in a low-tax country with a US tax treaty (such as Malta or Ireland). It invoices the US company for things like:

• Head office functions (accounting, logistics, management, marketing, website development, etc.)

• Specialist work (you have a software developer you "lend" to the US company for, say, $2000 a day)

• Renting out specialist machinery, tools and staff (a camera operator, for example, can rent cameras owned by his British company to the US company).

• Purchasing company (so that part of the margin is earned in the foreign company).

• License fees (if you own licensable intellectual property)

2.2Loans from the foreign company

The foreign company can make loans to the US company , and the US company can deduct the interest as an expense. Mezzanine capital, for example, currently carries interest of 10-15%, so there is real room to work with.

2.3Business expenses & investments

Deducting travel and meal costs is a rather joyless subject in the US too. Business meals are only 50% deductible. Hotel costs are fully deductible.

Other business expenses are treated fairly generously. Since you will usually have a Visa or Mastercard linked to the company's US business account, you can use it to pay business expenses directly.

As of 2026, capital assets can be written off immediately, that is, deducted as business expenses. Assets acquired after January 19, 2025 qualify for 100% bonus depreciation, made permanent by the One Big Beautiful Bill Act of 2025; the immediate expensing limit under IRC § 179 for 2026 is $2,560,000 (Rev. Proc. 2025-32). It was introduced with the 2017 US tax reform.

2.4Loans to managers and members

The US company can make loans to its managers and partners. This is not unusual in the US and is fine as long as the arrangement is at arm's length.

As usual with such arrangements, it must be structured correctly, above all in terms of the interest rate, the loan term and avoiding a disguised profit distribution.

Learn more about taking a loan from your own US company under a commercial agreement.

2.5Company retirement plans

Only makes sense if you live in the USA. Profits put into a company retirement plan are, up to a certain limit, not taxed.

2.6Salary

Another very popular way to take money out of your company without paying high tax on dividends is to pay a salary to the director, which usually means yourself.

Bear in mind, of course, that this salary is subject to ordinary income tax. So here too, think carefully in advance about whether this step, which also involves some effort, is really worth it.

Learn more about paying yourself a salary instead of distributing company profits.

How the LP is taxed on an ongoing basis is explained on the page on US LP taxation; our LP services page gives a full overview of the entity, and the US Company Formation section brings together all formation topics.

In short

• For tax purposes, the LP distributes its profit at the end of the financial year; the profit is taxed at the partner level, even if it stays in the company account.
• The company pays 37 percent withholding tax to the IRS; the partners report their share and get back any overpayment.
• With a tax treaty, there is usually no further tax in your country of residence once the LP is shown to carry on an active business.
• Profit can be reduced through invoices and loans from a foreign company, business expenses, loans to partners, company pension plans and salary.

How we help you

• LLC and LP Tax ReturnForm 1065 and K-1 for your LLC or LP.
• Tax structureA clean structure between parent company and US subsidiary, or between you and your US company, coordinated with your accountant.
• PayrollPayroll, payroll taxes and filings for your employees in the USA.
• Form a Limited PartnershipThe US LP for structures with a general partner and limited partners.
• US Tax ConsultationYour US tax question, answered by people who know both sides.