US LLCs can be one of the best legal entities for non-US entrepreneurs. They enable access to all the benefits of a first world jurisdiction, such as banking, payment processing, and good reputation, while maintaining a relatively low tax rate and manageable levels of compliance requirements.
The following article will tell you everything you need to know, to decide if an LLC is a good option for you, how you can open it fast and compliant, and everything else you need to pay attention to when running it.
Chris started Globalization Guide to help entrepreneurs like himself to master the challenge of international business and living abroad. Since then he has helped hundreds of clients with their international structuring.
Table of Contents
The Benefits of the USA as Jurisdiction
There are many good reasons for operating through a business registered in the USA.
Among them are:
⭐️ Very good reputation
⭐️ Internationally competitive set-up and maintenance costs
⭐️ Low barriers to entry
⭐️ Reliable access to good banking & payment processing
⭐️ A favorable tax system
LLCs are easy and straight-forward to incorporate (it’s actually called ‘organizing’ in this case). You do not require a lawyer and therefore setup costs are well within range for founders all over the world. You can have everything set up and running within a week, and for less than 500$, if you choose to do some of the work yourself. A similar company form in Canada will cost you about 2000$ to get going.
Reputation
The USA continues to be one of the leading economies in the world. As such, companies registered here enjoy a high level of trust around the world. Your customers will have no issues deducting invoices coming from your company.
Set-Up and Maintenance Costs
Thousands of LLCs are being organized all across the USA on a daily basis. As such, there is a competitive industry aiming to acquire your business, and most services related to LLCs can be obtained at very affordable rates.
Tax Obligations for Non-Resident Owners
The tax implications of owning and operating a US LLC are clearly one of the most important questions that we have to shed light on. This is also one of the most often misunderstood questions in all of US international tax.
The USA can be one of the biggest tax havens in the world. A US-based LLC opened by a non-US citizen or non-resident can allow for earnings, that are completely tax-free.
The setup can work for all sorts of different business models:
- Consulting & other personal services
- Dropshipping
- Selling digital products
- Amazon FBA
- Freelancing
The Single-Member LLC
An LLC is a pass-through or tax-transparent entity. That means the LLC is not being taxed directly. Instead, the tax obligations of the business ‘pass through’ to the owners (members) of the LLC. They then report them on their personal tax returns.
In cases where there are no tax obligations on the US side, and where the owner is a tax resident of nowhere or a resident of a country with a territorial taxation system, there won’t be any tax to pay at all.
In order to determine the appropriate taxation on the US side, we look at the IRS Taxation of Nonresident Aliens
A US LLC has to meet three criteria, in order to not be subject to US federal income tax
- Be 100% owned by non-US tax residents (either natural or legal persons)
- Have no US presence or economic substance
- The income must not be “effectively connected”
Who Is Considered a Non-Resident Alien (NRA)?
You are a non-resident alien if you are not any of the following:
- A US citizen
- A US permanent resident (i.e. “green card holder”), or
- You have lived in the US enough time to pass the “substantial presence test.”
If any of the above three categories is true for you, then any income generated through an LLC owned by you, will automatically be subject to US tax.
What Constitutes US Presence or Economic Substance (Nexus)?
Here is how it works:
- As an NRA, you are subject to US tax on business income if you are “engaged in a trade or business in the United States“, short “ETBUS”.
- You are ETBUS only if two things are true: (i) You have at least one “dependent agent” in the US. Dependent agents are employees or companies that work almost exclusively for you. And (ii) that dependent agent does something substantial to further your business in the US. Purely administrative jobs are not included under this rule.
- Finally, if you can benefit from an applicable tax treaty, then you’re only subject to US tax if (in addition to being ETBUS) you operate in the US through a “permanent establishment” (e.g. an office or other fixed place of business).
If you don’t meet those conditions, you are not (automatically) subject to US tax on your business.
Even if the LLC generates income in the US, by offering services or selling products into the US, that income is not taxed in the US.
Determining Source of Income
| Nonresident Aliens - Source of Income | |
|---|---|
| Business income: Personal services | Where services performed |
| Business income: Sale of inventory -purchased | Where sold |
| Interest | Residence of payer |
| Dividends | Whether a U.S. or foreign corporation* |
| Rents | Location of property |
| Royalties: Patents, copyrights, etc. | Where property is used |
| Sale of real property | Location of property |
Example #1: Consulting Agency Without Offices or Employees in the US
A social media marketing agency is performing work for US clients. The owner is located in Panama, with a few additional employees in the Philippines. It has no US office or sales agents. All sales are done via phone or automated sales systems.
The company opens a US LLC to bill their clients, and to receive payments in USD in a US bank account. The US clients have no issues claiming the services as business expenses. Since the work is performed abroad, and the owners are non-US citizens/residents the income is not taxed in the US.
Example #2: Foreign Fulfillment by Amazon (FBA) Seller
A foreign entrepreneur uses Amazons marketplace to sell products into the US. He is using Amazon’s “Fulfillment by Amazon” service to fulfill his orders. All marketing and procurement are managed online by the non-US citizen, who divides his time between Thailand, Bali, and Colombia.
His supplier ships the products directly to Amazon’s warehouses, where Amazon employees repackage and ship them to customers all over the US.
Amazon acts as an independent agent with millions of other clients. Amazon is not primarily working for the foreign entrepreneur. Therefore the foreign entrepreneur is not “engaged in a trade or business in the US”. He is therefore not subject to income from selling products into the US.
Filing & Reporting Requirements For Foreign-Owned LLCs
There are three primary filing requirements that affect foreign-owned, single-member LLCs.
- Form 5472 + 1120
- FBAR
- 1040-NR
In 2017 the United States underwent a major tax reform. It significantly expanded filing requirements, and also increased penalties for not filing or filing incorrectly.
Before the tax reform, (only) US corporations with at least one 25% non-US owner or foreign corporations with US trade were required to file the IRS form 5472. Foreign-owned, single-member, disregarded LLCs were exempt from this requirement.
This all changed, and as of 2018, non-US owners of a US LLC will have to file the IRS form 5472 as well.
Technically, a US LLC only has to file this form if it has engaged in “reportable transactions.” Unfortunately, the tax laws define this term very broadly, and therefore in most cases, it’s better to still file the form. Especially since failing to file, or filing incorrectly, carries a potential fine of up to 25.000$.
This website goes into a lot of detail on the change.
IRS Form 5472
Since the form 5472 was used only for US corporations before, the IRS had to make changes to make it useful for LLCs. They took a shortcut, however, and did not change the form completely. Instead, you have to attach it to a pro-forma form 1120, that serves as a cover page.
Your LLC must have an EIN in order to file Form 5472 and Form 1120.
The due date for form 5472 is April 15th.
The Form 1120 will be only partially completed and includes only basic identifying information, not income and tax deductions like on a complete tax return.
On the Form 5472 you will report only three basic financial information:
- The value of the LLC as of the 31st of December of the tax year.
- The amount of money moved from the non-US owner to the LLC in the tax year.
- The amount of money moved from the LLC to the non-US owner in the tax year.
Additionally, the form must also include a non-US taxpayer identification number for the 25% owner of the LLC.
Download Form 5472 here and the official instructions here.
Unfortunately, it’s not possible to e-file this form. You must either mail it or fax it to the IRS, using the following address:
Internal Revenue Service
1973 Rulon White Blvd.
M/S 6112, Attn: PIN Unit
Ogden, Utah 84201
Click here to order your ITIN through Globalization Guide.
Accounting & Bookkeeping For US LLCs
There are no requirements to submit the accounting of your LLC.
So you won’t have to
- ask for and store receipts
- present bills and receipts from restaurants and other places
- complete monthly VAT reports
All you need is a simple profit and loss account, that shows incoming and outgoing payments. You can accomplish that by having simple account statements and screenshots of Payment platforms like Paypal, Stripe, Clickbank, Digistore, and others.
Since you won’t have any tax obligation, when you operate your LLC as a disregarded entity, you won’t have to deal with tax inspectors or audits.
Best US State to File LLC
You have the choice between any of the 50 US states, when registering your LLC. As a non-resident with an LLC treated as a disregarded entity, some of the differences between the states become less important. Differences in state tax rates won’t matter for example, as you will aim to be not liable to pay them.
There are however still a number of criteria that you can consider.
- LLC formation cost: A one-time fee paid to the state to form your LLC.
- Annual franchise tax: An ongoing fee paid to the state to keep your LLC in compliance and good standing. Failure to pay this fee will usually result in the state resolving your LLC.
- Anonymity: A small number of states offer anonymous LLCs. Here the owners of the LLC are not publicly disclosed.
- Other laws and regulations: Some states have more beneficial laws regarding business than others. Wyoming makes it very difficult for example to sue companies, which makes it a very attractive location for a non-resident LLC.
What is the Best State for an Anonymous LLC?
There are only four states that allow anonymous LLCs. Therefore your options for these are limited. However, these states are also among the states with the easiest and most-cost efficient incorporation processes.
Wyoming, Delaware and New Mexico allow you to form LLCs, while keeping your name out of public records. Be advised that these LLCs are not 100% anonymous of course. The registered agent always has to know who is behind an LLC, and disclose this information to the state upon request.
- Delaware does not require listing the names of members and managers of LLCs. It does require a Registered Agent to be listed, as well as the incorporator/organizer. To maintain complete privacy it is required to hire third-party providers for those services.
- New Mexico does not collect any information about members/managers of LLCs. There is also a complete lack of annual reports, fees or taxes. Similar to Delaware, to maintain complete privacy you will need third-party providers.
- Nevada & Wyoming both allow “nominee services.” When you use those services, a nominee will appear in the public records, instead of the real owners.
Side-note: No matter what state or setup you use to incorporate your LLC. When you want to register for an EIN, which you will need to get banking and payment processing, you will have to disclose all of your information to the IRS. This information is not being made public though.
| State | Filing fee | Annual fee | Anonymity |
|---|---|---|---|
| Wyoming | $100 | $50 | ✅ |
| Delaware | $90 | $300 | ✅ |
| New Mexico | $50 | $0 | ✅ |
| Florida | $125 | $138.75 | ⛔️ |
ULTIMATE GUIDE TO OPEN YOUR OWN LLC
In the following section, I am going to show you step-by-step, how to set up your own LLC, receive your EIN from the IRS in record time, open bank accounts fully remotely, and finally how to get payment processing (Stripe) and Paypal, so you can start billing your clients.
- Decide on the state for your LLC
- Choose a name and compare it with your state’s database
- Use a service provider to open your LLC and serve as your Registered Agent
- Apply for an EIN
- Open bank accounts and apply with payment processors
Requirements to Form and Operate an LLC
Tax-ID for Your Company – EIN: Employer Identification Number
The EIN (Employer Identification Number) is a unique 9-digit number assigned to your business by the IRS.
The EIN is used to identify a business for tax purposes with the IRS. Think of it as a Social Security Number for your business.
You will need this number in order to fulfill the filing requirements for your LLC. Having an EIN is pretty much also a non-negotiable when opening a bank account, or applying for merchant accounts with payment processors like Stripe or Paypal.
How to get an EIN as a non-resident without SSN or ITIN
To apply for an EIN you will need to fill out Form SS-4 “Application for Employer Identification Number”.
To obtain an EIN, you need three things:
- a business name
- a US business address
- a brief explanation of the principal business activity and principal product or service the business will offer or sell.
Click here to order your EIN through Globalization Guide.
Bank Accounts for a Foreign-Owned LLC
A company without a bank account is no real company. Aside from receiving wire transfers, paying bills and invoices, you will also need a bank account to use for your merchant accounts and payment processors.
So one of the most important questions to ask is, where and how to get good bank accounts.
There are two categories:
- Traditional banks, like Bank of America, Chase and so on
- Neobanks, like LEVRO or WISE (formerly TransferWise)
The traditional banks generally have higher requirements and internal compliance guidelines. It’s generally not possible to open those accounts remotely. The owner or company manager has to appear in person.
Opening an account with fintechs and neobanks is usually simpler. Their KYC requirements are lower, and there are several options that can be done remotely. Since the available options change regularly, we haven’t included them here. Feel free to reach out, if you need help.
Opening Accounts Remotely
As part of their KYC (Know-Your-Customer) guidelines, traditional banks will require a representative of the company to personally appear at a branch.
There are however some fintechs and neobanks that will allow you to do the verification without having to be physically present.
As of July 2022 there are five neobanks or fintechs that will open accounts with US banking details for non-resident owners of LLCs, fully remotely.
These five options are:
While it’s nice when a neobank allows you to open an account remotely, do your research and think about the ongoing tools and features your business will need. This may save you from having to go through the entire verification process all over again if you ultimately decide you need a different bank.
Opening Accounts in the USA in Person
When you actually step foot into the US, opening accounts for your LLC becomes quite easy. There are literally a hundred options available, including many of the big banks like Chase, Wells Fargo, Bank of America, TD Bank and many others.
Remote Account Opening through Service Providers
There is the option to open accounts without initially having to travel to the US. Through intermediaries that are given power of attorney, you can also open accounts. Often the banks will require a personal visit at some point however.
Need Help Setting-Up Your LLC
At Globalization Guide, we offer the full spectrum of LLC formations and management.
✅ LLC Formation in all states, incl. Wyoming, Delaware, New Mexico, and Florida
✅ Expedited EIN application
✅ Banking & payment processing support
✅ Filing and bookkeeping
Alternatively, follow my guide, on how to open your own LLC fast, easy, and cost-effective with Incfile:
Frequently Asked Questions
Some of the most commonly asked questions about using a US LLC as a non-resident.
What if I sell products online, and my web hoster is located in the US?
No problem. Since you’re renting the server from an independent agent (the hosting provider), you are not ETBUS.
Do I need a US address to incorporate a business in the US?
LLCs are required to have a registered business address. This does not have to be an actual physical address. I recommend using a virtual address service for your business address. This is very useful when applying for your EIN or opening bank accounts.
Do I need bookkeeping for my LLC?
Even if you do not have any US income tax obligations, and do not file a 1040-NR, there are still record maintenance requirements for your LLC. Since you will be required to file Form 5472, you are required to keep permanent books of account or records sufficient to establish the correct of the filed information (Section 6001).
If I incorporate in Wyoming do I need to open the bank account on a branch on that state?
Hello Marino. No, the bank account does not need to be in the state where the LLC is organized. You can open a bank account in any state (within discretion of the bank).
do I need to open a bank account on the same state where I incorporated my LLC?
For example, if I incorporate in New Mexico, am I able to open a bank account in the state of Florida?
Hello Norberto.
You are not limited to banks in the state where your LLC is organized. I have many clients with Wyoming LLCs, and one of the most common states for opening bank accounts is Florida. There are no issues to open bank accounts for Wyoming LLCs in Florida, as an example. The same applies to New Mexico LLCs and LLCs from any other state.
Hope it helps!
Great article with good details. And I have a question about charging EU customer for digital services like – digital marketing and consulting, online courses, online services such as ongoing website support or any other kind of digitally delivered service where no borders apply. I know there is an obligation to register of EU VAT number if you want to sell services to EU clients and also you have to charge VAT, do VAT declarations every quarter and pay the collected VAT.
Do you have some information about that, or you are only focusing on doing business with customers outside EU, only USA and other countries ?
Would be interested in this as well.
Hi there, good article, very informative, though i have a question, what about stock trading? I’d like to know if trading profits (not dividends) are subject to taxes in case of a non-resident LLC whose brokerage accounts are held at us based brokerages?
Thank you so much for this article!! Finally I found a great guide about this subject! 😉
Hi Chris! Nice post.
What part of the IRS code makes it possible for a SMLLC with a foreign owner and no dependent agent in the US exempt from US taxes on income from US clients?
This is something I see a lot of conflicting information about and nothing about on the IRS website… and every accountant I speak to in the US insists US taxes are payable on income from US clients (despite the fact that all services are performed from outside the US and there is no office or agent in the US..)
I am a foreign citizen and I open an LLC in 2019 .. I started selling my services in the US and make transfers to my country and pay taxes locally at my country. Do I have to fill the forms 5472 and Form 1120 in order to avoid paying taxes in the US?.. I already paid taxes in my country.. I am confused..
thanks.
Hi Vivian.
Form 5472 + 1120 are not related to taxes, but to IRS reporting requirements that are more about Anti-Money Laundering and related issues.
You will need to file these forms however.
thanks for the clarification,
But I still need to pay the taxes in the US? If I am paying taxes in my country ..
hello and thank you for your article
please i’ve LLC in wyoming and i’ve opened an account in transfertwise and its activated but the problem is that my account don’t support debit card for business (idon’t know why), please if there is any solution please help
and thank you again
Hello,
I registered LLC and obtained an ein a week ago. Should I fill 5472 and 1120 forms this year if I haven’t made any operations yet? I plan to start my money transactions within a month.
Thank you
If you filed your LLC in 2020, the first requirement to return forms 5472/1120 is before 15th April 2021.
Hi.
Thanks for the article. Just a quick question, if my LLC sells software and apps,.some of them on Google play store and some trough other websites and PayPal. To my understanding I don’t qualify as an ETBUS so I don’t owe any US tax. Is that correct?
By the way do you offer filling services for the 5472 and 1120?
Thanks.
Hi Emil.
I think sales from software through marketplaces lilke the Apple App Store and Google Play Store are considered royalties, and as such are subject to Chapter 3 withholding. Depending on where you are located, you would be able to lower those withholding rates.
I do offer filing services for Form 5472 and 1120. Just shoot me an email to [email protected], or reach out through the messenger plugin.
Hi Chris,
I already have a Delaware LLC and EIN but I want to open a New Mexico LLC, can I use the existing EIN for the NM LLC or do I have to apply for a new EIN?
Awesome article, keep up the good work!
Hi Andreas. The EIN is tied to the individual business, so you have to apply for a new EIN for your new LLC. And thanks!
Hi Chris,
Your information is really useful.
One question, if I am dropshipping from US local supplier to local Amazon buyer. Am I considered ETBUS.
And if I dont have a US bank account. I am just getting the tax permit for tax exemption.
All money transaction will be dome through my individul credit card and Amazon will pay to right away to my bank account.
Am I still liable to file IRS form 5472 and any tax I have to pay ?
Hello,
I’m from Turkey and I live here. I’m going to sell tangible goods on Amazon FBA in the U.S.
My products will come to the U.S. from China and They will stay in Amazon’s FBA warehouses but it can be any state. It will be online E-commerce.
I’m non U.S. resident and I’m thinking to form a Single-Member LLC in the U.S. But I don’t know which state is better. There are 2 options I’m thinking of: Delaware and Wyoming.
If you consider:
*** Sales tax (buyers pay it, not sellers. So, It doesn’t concern me and there isn’t any money comes out from my pocket for sales tax. I just collect it from buyers and pay it to the states. So for sales tax, no matter which state I choose. )
*** State income tax (when I choose one of them to form LLC as a non U.S. citizen, Will I pay state income tax to any other state? There are comments on Quora.com that says there are factors create physical nexus or economic nexus for non U.S. residents Amazon sellers )
*** Also, Is there any Sales tax or Income tax for Local Government (like municipality) for non-U.S. residents ?
*** Federal income tax ( For this, I guess no matter which state I choose. Because there is no difference)
*** Other all details that I don’t know,
Which state would you recommend me to form LLC?
Could you help me with that?
Warmest Regards
Tayfun Duymaz
Hi, thanks for the article.
How do I open a branch (representative office) of a company from another country in the United States? With a physical agent, and, if possible, with a profit. What documents are needed and what is the mechanism of action? Thanks!
Hey Chris thanks for the article.
I recently opened a C Corp in Delaware.
Is there a major difference between the two – is it worth considering closing down the CCorp and instead forming an LLC?
Thoughts?
Hi Drew.
A C-Corp is its own entity for tax purposes. So you will always pay US corporate tax on any revenue you generate. That is one difference, but there are many others. Whether or not an LLC makes more sense in your case, will depend on a number of factors, but I do not have enough information to tell you what’s best for your particular situation. There are many situations, where a C-Corp is a much better option, especially for US residents.
Oh ya Im a Canadian citizen living abroad in Indonesia.
Does that help?
From what I’ve read they are pretty similar as a foreigner in a foreign country, but I could be wrong.
Does Canada still consider you a Canadian tax resident?
Literally just spoke with my accountant — I was technically in 2019 – and I’ll pay those taxes – but this year and moving forward I will not be as I spend all my time out of Canada (I believe you need to be in Canada at least 6 months out of the year to be considered a tax resident) plus I have no assets or anything tied there.
Let’s say for argument sake that I am not considered a tax resident anymore.
Would this have an effect on whether to choose and LLC or C Corp ?
At the end of the FAQ you recommend using a virtual business address, when setting up the LLC. Can you recommend or suggest any?
I have included a link to my recommended address service in my guide:
https://globalisationguide.org/open-us-llc-non-resident/
Hello Chris! awesome work on your guide.
I already formed the LLC in Wyoming a few days ago and the box with the documents has already arrived at my ipostal1 address. What should I do now?
The “scan documents” option is not available to use since is a box/package.
The EIN is already on its way.
Thanks so much!
You can download digital versions of all the documents from Incfile through their website. You can forward the physical documents to your home country via ipostal1. Hope that helps!
Dear Chris how are you! I’m from Uruguay and will start a real estate biz in Florida. Basically I’ll resell houses prior basic remodelations. No doubt that I’ll open an LLC. But I’ll need to send money to that LLC account., my question is: the money must be transferred from a personal account in the US? Or I can send the money from overseas from another account that doesn’t belong to me?
Thanks
So the only forms I need to fill are the 5472 along with the 1120, am I right. And one more thing, I opened my LLC mid December, do I have to file this April?
Yes, those are the only reporting requirements and unless you have income that is effectively connected / US source, you would not be required to file anything else. If you had no reportable transactions in 2019, you only have to report in 2021.
Thanks for this article! I have one additional question: do you have any experience with forming a US LLC but as the single partner of this US LLC is a foreign entity (a foreign business). I am a non-us resident but I would prefer that the LLC is owned by the other foreign company. Would this have any significant impact on the way to start the LLC?
Hi John.
that process has become more complicated, since the responsible party to request an EIN needs to be a natural person now. If no US person with a SSN is part of the foreign entity that owns the LLC, it’s pretty much a dead end, as no EIN can be requested.
Hi Chris,
I already have a Wyoming LLC but I want to have the EIN, can I get it without applying for a ITIN?
Awesome article, keep up the good work!
Hello Marino,
you can apply for the EIN via the SS-4 form. You will find free resources online. I can do this process for you as well. https://pfnl.co/CAb1s
Appreciate the kind words!
Hi Chris, great article! It is the first one that I find with so many helpful details.
I have an LLC -partnership, two members- incorporated in Delaware and I live in Argentina. Question: if I get a Paraguayan residency, and I am still living in Argentina, can I claim not to pay taxes in Argentina because I have a Paraguayan residency? Thanks.
Hi Carlos!
If you continue to live primarily in Argentinia, just having your legal residency in Paraguay would not change your personal tax residency, and therefore not help you to avoid Argentinian income tax.
Hello. So I followd the steps for opening a LLC as an US non resident. As im fro the EU Ive set my peronal adress to Nevada. Now the US Postal Service requires Form 1583 to be signed and notarized before my address can be activated and any mail can be delivered or received on my behalf. But i cant notarize it on “Notarazie” from Incfile because i dont have an US SSN number. What should i do?
Hi Mladen.
You do not need a US SSN to use notarize.com, through the link provided by iPostal1 or Anytimemailbox. All you need is an ID document (passport) and a utility bill for your personal address that you want to verify (in your country).
Hey Chris,
What do you think of South Dakota v. Wayfair (https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.)?
Do you think that non residents that sell products within the US will be subject to sales taxation?
Thanks.
Hi,
I book a 30-min call w u today 4 pm (CET) but have received no email invitation. Could you please follow up by email?
Thanks
Never mind, I just received the calendar meeting request. Thanks!
Hello your artciles are really helpful and insightful
I have reffered your articles to almost 200+ people with the links:
However I Have these questions:
1. I am foregin wanting to do amazon fba business what kind of LLC should I open in the USA is single member LLC fine in order to qualify for
not paying any income taxes in the usa.
2. Lets say I have a LLC in USA and we are doing Amazon FBA business have EIN number as well and are non-us resident all we need to do is
file state tax of our llc and file 5472/1120 forms ?
3. Do we need to file anything else? do we need to maintain books of accounts as well? Do we need a lawayer or CPA to file the above forms?
Hello Viral.
Thank you for sharing my article.
1. A few things have been updated, since I wrote the article. Generally Amazon will be considered an agent these days, so the sale of physical products in the US would be considered US source and you’d have to pay taxes on those profits, regardless of the structure.
2. You’d have to file both the IRS information return Form 5472 and a tax return on your US source income.
3. You need to have proper books for both things above (and also to manage your business the best way). Aside from that it would just be the annual report, depending on the state you are in.
Hi,
What would be the right way to retrieve back the money from the LLC bank? can we just do a transfer of money from the business account to a personal account or as a form of salary or dividend?
Hi Jarvis.
Yes, you can simply transfer the money from your business account to your personal accounts, I like to label them “profit distribution’.
Within your bookkeeping, those payments should be categorized as “owners distribution”, and those payments will be relevant for the IRS information return through Form 5472.
Best regards,
Chris
Hi Chris,
I watched your videos and your explanations are very clear. I still have one question: If you are a non-resident alien and you formed a US LLC using a Registered agent in the state of Delaware but you are based in a foreign country and you gave the IRS that foreign country address as your mailing address, do you have to use that foreign country address on your invoices or you should use an American address instead?
Thank you
Hi,
can i use an offshore company as the owner of the LLC and does this change anything?
Reason is i can recieve dividends tax free but not passthrough.
Hello Yves.
Your case is common for Cyprus residents. It is generally possible to have the LLC be owned by an entity, but there can be complications getting an EIN. Also you would have to look into place of effective management rules.
I opened a LLC but with my own address outside US, will I have to change it somehow or leave it as it is?
Hello Jovan,
you can leave it as is.
Hello,
I have an LLC which I haven’t used since the establishment (2016) so no transaction there, do I have to fill the forms 5472 and Form 1120 in this case?
Thanks in advance
Hello Maksym, if you pay for the annual report of your LLC from a personal account, that would generally be considered a reportable transaction, and therefore you’d need to file Form 5472.
Hello Chris!
You rock! Awesome Article! Thank you! For sure I’m going for a consultation with you pretty soon.
Chris, I have a question:
Since Stripe is getting more strict with non residents what I need to do is to include a resident business partner (with SSN) in my LLC in order to keep my Stripe account working on the long term.
Is it possible to keep that business partner with only 1% of participation in the LLC?
Otherwise, How would work the tax process for me (non resident, non ETBUS) and for that business partner?
Thank you very much!
Hello Tobias.
As soon as there is another member listed on the LLC, it is no longer considered a disregarded entity, but now becomes a partnership. The moment one of the partners is a US person, the partnership becomes a domestic partnership, and all income is considered effectively connected.
Hi Chris
Thank you for the great info. I am a non-US resident/citizen and I have a Wyoming LLC formed in 2019. I haven’t made any sales until now international or in the US as my website is not ready yet, so there is no income yet. Only some little expenses. In the form 5472 I have to report zero amount of money moved from my llc to my account and the amount of expenses moved from my account to the llc?
Do I also have to file a 1040NR form to the IRS?
Thank you very much
Apostolos
Hello Apostolos.
Even LLCs without any business transactions most of the time have to file Form 5472 in their organization year. That’s because the IRS considers the formation costs paid by the member for the company a reportable transaction. If you have not filed yet for 2019, you need to do so until July 15th of this year. You would report the transaction cost in Part V, und Part IV would be zero. You can send me an email to [email protected] if you need further assistance.
Hello, I am Lea from Gabon. I want to open an LLC in New Mexico. Which online company do you recommend for the creation of my LLC?
Hi Lea,
I have written an in-depth guide that you can simply follow: https://globalisationguide.org/open-us-llc-non-resident
hello iam lea from gabon ;i want to open an LLC in new mexico ,which online company do you recommend for the creation of my LLC?
Hi Lea. I have written a step-by-step guide, which you will find here: https://globalisationguide.org/open-us-llc-non-resident
Hi Cris. Thank you for this guide! You says that “An LLC is a pass-through or tax-transparent entity. That means the LLC is not being taxed directly. Instead, the tax obligations of the business ‘pass through’ to the owners (members) of the LLC. They then report them on their personal tax returns. […] there won’t be any tax to pay at all”. You explain that for a single-member LLC. I have a partnership LLC with my wife (both non US citizen). How does it change in this case? Thank you!
Hi Chris,
Thanks for putting this together! It was a great starting place. I ran into a couple of other questions while forming my LLC and found some answers that I thought I would share here and pay your kindness forward. My question was: When filling out the form to obtain an EIN, what should I fill in as the mailing address?
How will it be used by the IRS? Here are some facts I found helpful:
– The purpose of the mailing address is just for the IRS to communicate with you.
– The third party designee at the bottom of the form only applies to the EIN application form. It does not allow the IRS to communicate with your designee in perpetuity.
– You can use the address of your registered agent or virtual office for this.
Given this, I recommend choosing a registered agent who is willing to receive such mail from the IRS among other things. I’ve run into many registered agents in the US who will only receive mail from the SOS and not any other mail. Remember to ask before signing up with a registered agent service.
Hello Sudha,
appreciate the kind words, and the helpful comments.
Great article! I was exactly looking this information.
Just like in the article, I am a Non Resident based out of India and I have opened a LLC in US. I am going to get a contract for an IT project with a US Vendor. I am even getting business insurance for the contract. The nature of the contract will be Corp to Corp. They will pay me biweekly and they said will issue a 1099.
If I have understood the article correctly I should be under no tax obligation. I only have to file Form 5472 and Form 1120. It will be great if you can confirm this for me.
Thanks
Lam
Hello Lam,
yes, as long as you are providing those services from outside the US, that income should generally be foreign source, and not taxable in the US.
Hi Chris
That’s very good article 👍
You have made it very easy for everyone to form LLC!
But I have a question, did these registered company like jumpstart, incfile and Zen will file form 5472 and 1120 for us ?
If no can you please make a post or YouTube video explaining how to file these two Forms.
Thanks in advance 👍
Hello Saleh.
None of the companies that you mentioned, will file Form 5472 for you.
Filing these two forms can be quite complex, and I would not be able to do it justice in a Youtube video. You should hire professional help. I have a CPA on staff, that can take care of these forms for you.
I’m from Argentina working for an Australian Company.
Can I use an LLC structure to just pay myself 40% of the salary and pay Argentinian taxes over this 40% only?
The remaining 60% will stay in USA under the LLC Bank account, will any taxes apply to that?
Technically you would be liable to pay tax on all of you income, even if it remains in the US bank account, as Argentina taxes you on your worldwide income. However, from a practical perspective, it would work as you described.
HI,
My name is Sheraz and I’m from pakistan. Willing to open a non us redisdent llc . I provide internet marekting services in USA and outside the USA.
I want to recieve all payments in USD from PayPal.
My question is that how much tax i have to pay by giving the services in USA and outside the USA. I just want to open a paypal account.
Can you please guide me.
I just read your complete article and found very helpful.
Thanks
From what you wrote, I assume that you are actually providing all of your services from outside the USA, even if you have US customers. In that case you do not create any US tax obligations.
In order to open a US paypal account, you will also need an ITIN, on top of creating an LLC.
Hi Chris,
Thank you very much for these very informative articles and videos!
A question about tax on dividends: I was reading somewhere else that if you’re not a tax resident of a country with with the US has a tax treaty, that you then get taxed on the dividends you pull out of the LLC. Apparently this is at 30%?
I’m considering setting up a single-member Wyoming LLC (with US banking) for an e-commerce site which will be blocked in the US and dependencies (no sales at all there; otherwise sales worldwide).
However I’m a digital nomad, dividing my time between several Asian countries with territorial tax systems, none of which have tax treaties with the US. Will dividends get taxed in this case, or not? Many thanks for any light you can shed on this!
Hello Sergio, thank you for your question.
① The profits you distribute yourself from your single-member LLC are not considered dividends (only corporations can pay out dividends). They are simple called “profit distributions”.
② From a US tax perspective, there is no difference between the LLC and you as the owner of the LLC, so paying yourself does not create any additional tax obligations on the US side, that would not already be present beforehand.
Your income from operating a store without US presence would not create any US income tax obligations, and you can simply transfer the money from your business accounts to your personal accounts to spend it from there. And from what you already stated, since you are either a resident of nowwhere for tax purposes or reside in countries with territorial taxation systems, you also do not have to pay income tax on a personal level.
I hope this answers your question.
Best regards,
Chris
PS: Here you can join our FB group with over 200 LLC owners: https://go.globalisationguide.org/group
I’m a non-US citizen, non-US resident.
If I incorporate a U.S LLC as sole owner (disregarded company), open an account with a US broker, and invest in US stocks, I understand that I pay income taxes in my country of residence, and NOT in the United States. What happens with the “US Estate Tax” when I die, and my (non us residents/citizens) heirs have to transfer my LLC (disregarded company) shares into their name?
Will they liable to pay US Estate Tax?
Hi Tony.
You would pay a flat 30% withholding on any dividends paid out by US companies of which you hold stocks. This can be lowered, if there is an applicable tax treaty in place between your country of residence and the US.
Capital gains that you incur on those stocks would not be taxable in the US.
Regarding the US estate tax: If your assets are above the threshold of 60.000$ at the time of your death, yes, there would be estate tax.
Thank you very much Chris, this clarified a lot of the doubts.
A quick question: if I open my LLC through Incfile, they also provide a registered agent service for the first year. I’m a bit confused about the virtual address creation in your guide. Is a registered agent considered a virtual address or do I need to have both?
Thanks a mil,
Davide
Hi Davide. You need to have both, the address of the registered agent often officially can not be used as the principal business address. They also won’t allow you to forward things like the debit card of your bank etc.
Dear Chris, I’ve read above the question Sergio Valdez asked and you touched the topic of “dividends”. I’m a non-resident alien and a US income securities investor. My broker withholds 30% on dividends payed from US companies. Please confirm: 1) the broker should not withhold to the LLC since it’s an American entity and 2) the LLC doesn’t pay dividends to the owner. So no tax is owe to the IRS? Thanks for you great content! Best regards. Ruslan
Hello Ruslan.
Your broker is correct to withhold 30% of the dividends paid to you from US companies. Since you have single-member LLC, for th purpose of taxation the LLC does not exist, it’s all about the member. Since you are a non-resident, the general withholding of 30% applies. If you live in a country with an applicable tax treaty with the US, you might be able to reduct that rate.
Hi Chris,
Thank you very much for your excellent post; I reside in Europe and want to create an LLC in USA. My business is organizing Photo Workshops around the world, and I have a couple of questions to see if you can help me.
1. What would be the best state to create the LLC?, I will not have physical presence in the USA.
2.Do you know if any special license for organize tours?, or would the LLC be enough?
Kind regards
Hello Pedro.
1. In terms of US taxation, the state will not matter really. If the highest anonymity is important to you, I would go with New Mexico. If you want to open EUR bank accounts, I would choose a non-anonymous state, like Florida.
2. US licenses are almost never required when dealing with worldwide, and digital offers.
I hope this answer was helpful to you. Join our FB group 👉🏼 https://go.globalisationguide.org/group
Chris,
I formed a Virginia-based LLC recently. While I am an US resident, my other two partners in the business, and members of the LLC, are non-resident aliens.
– Is it a fair assumption that for purposes of taxation the IRS will treat my LLC as a C-corp?
– Do I need to file IRS form-8832 and wait for IRS approval before mentioning that in W-9 I provide to my customers? Or can I just go ahead do it in anticipation of IRS approval?
Thanks,
Viv
Hello Viv.
Since you have a multi-member LLC, the default taxation is going to be that of a “Partnership”, unless you specifically request to be taxed differently.
I am not sure about the answer to your second question.
Hope it helps!
Hello Chris! incredible guide!
I wanted to ask you, in incfile if I contract the Gold package, the next year is it the same price? or is that only paid for the first year to create the llc?
If I hire a service agent, does he fill out the annual forms for me? or do I need to speak to a separate accountant?
Hello Nicololo
That price is only for the first year to create the LLC, it’s not a subscription.
The registered agent generally will not handle your annual compliance, only forward documents to you. I do offer all those services, however.
Annual Reports, Form 5472 + 1120 and 1040-NR in cases with taxable income.
Join our FB group: https://go.globalisationguide.org/group
Virtual Business Address USPS form 1583.
I noted that this form must be filled out when trying to obtain a virtual address.
One of the requirements is a photo id with your address on it, now sadly to say, in my country, Passport, National ID, Drivers license, all are valid for 10 years, so hence they don’t have no address on them, in the event you moving around, you don’t have to be constantly renewing these important documents..
Do you know of any of the Virtual Business Address Mail Forwarders that will accept a utility bill or bank statement along with one of these IDs as proof of address?
btw, great articles, i read them all 3x, so much information for the common man to understand the LLC business.
Hello Reginald.
As a non-US resident the requirements for notarize.com are different. All you need is a photo ID document (passport or national ID) and a utility bill.
thanks i will check them out, will be a blessing for me.
Hi Cris,
Thanks for all the information, very useful. I’m based in Ireland and I pretty much followed all your guidelines to open my LLC in New Mexico and virtual mailbox. I’m waiting now for EIN, which is taking way too long.
My question is about Shopify: apparently their payment gateway won’t accept virtual bank accounts like Mercury or Transferwise as they’re not considered ‘real’ banks. It is a pretty big issue for a non-US resident obviously. Do you know a workaround for this?
Instead of using a US bank account to accept payments, am I allowed to us my business account in EURO in Ireland or would that be an issue when I have to file form 5472 and sales taxes (I use a 3rd party warehouse in Nevada)? Thanks a lot!
Hello chris
Very useful guide thanks a lot .
1) I come over some comments where you stated that there is an update in regard to amazon FBA seller ( tax qualification), can you please elaborate?
2) in case that the LLC is performing amazon FBA service and will have to pay tax in us , can you provide more information about those tax ( % from net profit, annual tax , quarterly Vat … )
Thanks a lot
Even though Amazon is not a depended agent, because of the services provided by Amazon, that go beyond just shipping the product to the customers, you could be viewed as having a US agent that significantly furthers your business, and be therefore considered to be engaged in trade or business in the US.
Hello Chris,
Thank you so much for your guide and all your answers.
I’m a non-US resident and I will set up an LLC very soon. I want to know please if I have to pay taxes in these situations:
– I work on Merch by Amazon and other similar websites. They pay me royalties (my applicable withholding 10%) so they already deduce the amount because I filled my tax information as non us resident.
– I want to start selling on Amazon FBM (fulfillment by merchant), eBay and my store to sell physical products to the US and my suppliers are from the US who ship the products to my customers.
Thank you for your help.
Hi, do you know anything about BE-13 survey that all non-US residents have to submit within 45 days from registering a company?
Hi Chris , found your video about LLC for no-resident and its amazing ! can you please help me ? live in Africa i sell on amazon fba as individual with USA payoneer account and its amazing, since September 2020 my local African address is displayed and its really bad ! actually i pay tax on my country and zero on USA with individual seller, i have an LLC in Delaware (never used yet and have no electricity bill or proof of address) and LTD on United Kingdom (just start selling on UK, have proof of address ) can you tell me what is the best solution to switch from individual with the bad local address to a company with uk or usa address, and keep the lowest taxation possible .
Hey Chris
THANK YOU for the AMAZING resource that your articles are. I have found it tremendously helpful. I do have 4 questions I would like clarification on:
1. Agent/Principal Address – I’m looking to start on online service-based LLC, considering Wyoming, Delaware and Maryland (access to physical address). In creating a Wyoming/Delaware LLC can the registered agent and/or business address be in Maryland? Can the business address be in Maryland with an agent in Wyoming/Delaware. Can my home country address be used in either context.
2. If I register in Maryland, I assume this removes any distinction between business address/agent.
3. It is recommended for US resident to register a LLC with a S-Corp designation. Is this an option available to Non Residents.
4. Also would you recommend getting a ITIN first and then an EIN? I read that you can only apply online for EIN if you have an ITIN.
Hello Robbie
1. The registered agent will always need to operate with an address in the state where the LLC is organized. This gives the state a place to notice of lawsuites and other official documents. In most states, any physical office address within the state will meet the requirements. If a state requires a business address within the state, you can generally use a registered agent address.
You can however use the address in Maryland as the principal place of business.
2. If you registered in Maryland, you could use the same address for both.
3. S-Corp treatment is not an option for non-residents.
4. You actually need the EIN, before you can even apply for the ITIN (has having an LLC with an EIN is actually the most common method for non-residents to be eligible for an ITIN)
Hope this helps!
Hello Chris
I am from UK, and just starting a dropshipping business in US. I recently got a virtual office in Delaware. I watched yr video. So now your saying i dont have any tax liabilities only if I hire people that move my business forwards. Im using suppliers to ship the products to customers and i may use a phone service to answer calls from customers. So does this make me tax liable for income tax and to pay sales tax? thank you RIchard
Hi Richard.
If you are buying your product in the US, and it is being shipped from within the US to US customers, then that income would generally be classified as US-source, and you have to pay US income tax on it. If you are shipping from outside of the US, then that is not the case. Sales tax is a separate issue, and will depend on volume and number of transactions in each state.
Chris,
You have provided a valuable knowledge and it is greatly appreciated. I do have another question for you based on some reading I did. Due to my travel and presence in the US, I may be considered a Dual Resident for tax purpose. The US and my home country does have a tax treaty and I am confident that I can establish my residency on this basis.
However, I am still concerned if I would be liable for income tax. For example, if my profits remained in the US and was not remitted to my home country would I be liable?
The remittance or non-remittance of profits generally does not change the taxation in this context. However, I don’t have enough information, to really give you useful advice. Are you in the US on a business visa? Do you pass the substantial presence test?
Hi Chris,
I’m a non professional trader and non resident. Which state would be recommended if I’m looking for anonymity and cost efficiency in a LLC?
Thanks for your help.
Hi Guillermo,
the most cost-effective and most anonymous state for non-residents is New Mexico.
I planing to provide dispatch services for american trucks in USA from abroad. How my LLC be treated regarding ETBUS?
thanks in advance, great article
Hi Ivan,
as you would be providing these services from outside the country, and without any operations in the US, I would assume you to not be liable for US income tax.
Hello Chris,
Is printing on demand and working through US companies considered ETBUS and therefore being under US income tax obligations?
Hi Zack,
since the product is a physical product, and the product is fulfilled from within the US, I would always consider it as US-source income, and therefore taxable in the US.
Hi chris, thanks 💯 4 this great article.. I mean i think i just what was i looking for.. And thanks to you,
👇🏻👇🏻
This is my situation, i’m not US citizen/resident, and i live QATAR.. MY Business is about freelancing,(Digital Services/web design) i just want open US LLC to be Eligible to get the Transferwise debit mastercaed, as they not support my country, the only way is to open a Business account with a country that is accepted like us..
So i need to know this:
(1) i think im clear here from any tax whatsoever, right?
(2) you mentioned somthing about this “Registered Agent”, with yearly fees, so is this a Mandatory?
as you can tell, i don’t really want one.. And which state from the 4 u mentioned It would be appropriate for avoding this “Registered Agent” fees or ongoing yearly fees?!
(3) last but not least what form i requird to file?
Thank u very much, am looking fowrd to work with you to get this done!
Hello Ahmed.
(1) The income you generate through your LLC performing digital services/web services from Qatar would be tax-free in the US, that is pretty simple. After briefly looking over the Qatar tax code, I assume that you would be liable for some level of tax there. Your LLC could even be considered to have a permanent establishment in Qatar, as that is where the management and control lie. Now if this would ever become an issue in Qatar in real life is a different question.
(2) If you do not live in the state where your LLC is organized, you need a Registered Agent. So for non-US residents, this is pretty much always required. Maybe if you had a contact living in the state, he could serve as Registered Agent for free.
(3) If you form your LLC in New Mexico, and without US-income, you only need to file Form 5472 once a year with the IRS.
Best regards,
Chris
Thanks 💯 for your input Chris!
Okay, it’s Print On Demand(POD) OR Dropshipping, also fall into non ETBUS, and only required to is Form 5472 to IRS Every year? Corecct?
Thanks again in advance..
I really like your guide and help and i will recommend you to my friends!!
How can i get you to register my llc?
Hello Mohd, unfortunately I did not see your comment until just now. If you get a notification for this comment you can reply and I can help you to get established.
Thank you for such a comprehensive article Chris!
I have a question. I’m a non-resident alien, opened an LLC in Wyoming on December 2019. Never did any business with it and bot even funded the business bank account.
I forgot to fill the required reporting forms. Is it too bad? Can I still do it or it’s too late now?
Hi DK,
you are most likely not going to have any issues because of this, but technically should have filed. If you have not used your LLC this year either, you can probably get away with it for another year. If there have been reportable transactions during 2020, make sure to file in 2021. You can check our services page, if you need help with that.
Best regards,
Chris
Hi Chris, thank you for this great article and giving us all this info!
If I were to get a US LLC as a resident in the UK, would that mean that ALL of my earnings would be taxed in the UK as income tax? or
Or would I be able to keep the money in the US LLC and only pay myself in the UK the most tax efficient income (which is £50,000 at the moment split between salary and dividends) – also on that, can I even pay myself dividends from the US LLC?
Thanks in advance and I’m looking forward to your reply!
Val
Hi Val.
Yes, generally all of your US LLC income would be taxable in the UK. While keeping your earnings in the US LLC would make the invisible to the HMRC, it would not change the fact that you would legally have to pay tax on it.
You can not pay yourself dividends from an LLC, as it is not a corporation.
Hi Chris
Thank you very much for such a helpful article on your site. It was difficult to find something like this with such detailed instructions. I am also a non-resident of the United States and am planning a business on Amazon FBA, wholesale. On your advice, I have already planned the registration of the LLC in New Mexico. But I still have a couple of questions.
What can you say about the LLC opening in Ohio, Missouri or South Carolina? I myself did not quite figure out what the significant difference with New Mexico is, but I also read somewhere and recommended one of these states.
And the second question is, how easy it is to get and how much does the Seller-reseller permit certificate cost?
I would be very grateful for your answer. Thanks.
For non-residents there is not too much difference between the states. You could also open your LLC in one of the three states you mentioned. A few things will be different. Initial costs, yearly fees, yearly filing requirements etc. From a tax perspective not much difference in most cases.
I am not very familiar with the process and the costs of sales tax permits.
Hi Chris,
This is really the best article on this topic.
From me a small query:
“I am an Amazon Associate (Affiliate). As I am not living in the USA, I am not a citizen of the USA, I don’t have any physical presence in the USA, and I pay taxes in my own country, Amazon doesn’t withhold any taxes when it pays our commissions. I want to establish an LLC in the USA to get my Amazon Affiliate commissions to my LLC. If I use an EIN in the ‘Amazon Associates Tax Submit Form’, do you think Amazon can withhold any amount for tax purposes? For your information: there is a checkbox in the ‘Amazon Associates Tax Submit Form’ where it wants us to provide us if we have any US TIN.”
Thanks in advance, Chris.
Best regards
Hello Kawser, thank you for your comment.
Generally using an LLC does not change the tax obligations of a non-resident – so if Amazon is currently not withholding any taxes on your affiliate commissions, they will not do so when operating through a US LLC either. From a tax perspective a single-member LLC is ignored and it is all about the person that owns the company.
Hello, thank you for your article, very enlightening.
We have an LLC in Florida already established. Currently a law firm provides us with services as Registered Agent and is also in charge of filing the partnership report (we are two partners). But the annual maintenance costs are very high. Is there a way to change the Registered Agent without having to create a new LLC? (surely the firm will refuse to do so). Also, do you provide similar services? Thanks in advance.
Hello Raul.
It is possible to change the registered agent – without having to create a new LLC.
There are some costs attached to making that change, but in general you will save money, as most law firms do charge quite overpriced fees for their services.
You could still have them do the partnership reports, or hire a different CPA to perform that service for you.
Hope it helps! Best regards, Chris
Great article and great effort to reply to every comment. I am living in Singapore and is earning royalties through Amazon KDP (creating, uploading and selling paperback books). I have a 30% tax withholding and my country does not have a tax treaty with Amazon. So I registered a Single Member LLC in Wyoming, is this income from Amazon KDP considered “effectively connected”? Do I need to tax US tax?
Hi Beng.
Registering a US LLC would not help you in reducing the 30% withholding on royalties. Since the LLC is a single-member LLC, and therefore a disregarded entity, the taxes obligations are still just being passed through to you as the member. Since you continue to be located outside of the US, and unfortunately can not take advantage of a treaty that would reduce the withholding tax, nothing really changes.
Hi Chris!
Thank you very much for such a helpful article. It was difficult to find something like this with such detailed instructions. I am also a non-resident of the United States and am planning a business on Amazon FBA. On your advice, I have already planned the registration of the LLC in New Mexico. But I still have a couple of questions.
1. What can you say about the LLC opening in Ohio, Missouri? I myself did not quite figure out what the significant difference with New Mexico is, but I also read somewhere and recommended one of these states.
2. What should I pay attention to when registering an LLC in order not to pay taxes in the USA as a non-resident? What document will confirm my status?
I would be very grateful for your answer. Thanks.
Hi Gor! Maria here, part of the Globalization Guide Team.
Regarding your questions:
1. New Mexico’s State fee is $50 compared to Ohio ($99), and Missouri ($52). In this case, is up to you saving a couple of dollars and going with the most recommended option. Here’s our article What Is the Best State to Form an LLC for a Non-Resident?
2. For taxes every case is different and it depends on many factors, especially with Amazon FBA.
I would recommend you to book a consultation with Chris (book a consultation), this way he can review your case and help you make the right decision.
You can also join the conversation in our Facebook Group. You will find more than 700 business owners who could share their experiences with you.
If you have any inquiry, do not hesitate to drop us an email to: [email protected]
Regards,
Maria
Hi, Chris!
So, if I withdraw money from business bank account (Nex Mexico LLC, owned by non USA resident), to personal bank account and spend it freely, or even use business cards for payments – do I need to pay any taxes or do anything about it?
Thanks!
Hi Dusan.
That is not the right question to ask. Whether or not you have US tax obligations will not depend on the bank account from which you spend the money. If you want us to assess your business case, you can schedule a consultation in the services menu.
Best regards,
Chris
Hello Chris, I love your article and I really helpful. I have a question.
I want to open an llc as a non- us resident in Wyoming and have member who will own 30% of the company but they are not part of the administration but just passive member by interest and are all non us citizen like me. We will run our business from our country and will or may have us customers and may build our service using us company api.
1. Can we be tax free as we are to pay tax in our country ?
2. If we are not tax free then which tax form is best ? S Corp or which ?
Because most of my members don’t know anything about digital world and are far from me. So I want a situation that even if we need to pay tax. I want the company pay all the taxes and then we just share profit accordingly.
With more than one member your LLC will be classified as a partnership for US tax purposes. The classification as S-Corp only is an option for LLCs owned by US persons. You may want to look into setting up a C-Corp, instead of an LLC, if you want the c-corp and not the members to pay taxes.
Dear Chris,
i am non USA resident witn no phisical presens in USA i am going to open LLc in Wyoming. LLC-one owner.
Do you now if i using Printful print on demend servis and ship to buyer do i have phisical presens in USA with that servis ?
Since the products are being fulfilled from within the US, it could very likely be considered US-source income.
Hello Chris, great article!
I would like to know, whether and how I should prove that My LLC:
1. Is 100% owned by non-US tax residents (either natural or legal persons)
2. Have no US presence or economic substance
3. No have “effectively connected” income
4. Is not an ETBUS
Wehether I should submit additional documents and evidence somewhere and where?
Thanks a lot
Dear Goce,
you do not have to submit documents or evidence to any institution, if there are no doubts raised.
Thanks for sharing your great article. Could you please guide that if a non resident owned 100% share in a C corporation, is it required to file 5472 along with 1120 for C corporation.
Hello Ed.
Yes, as soon as a non-US person owns at least a 25% stake in a US company, be it an LLC or a C-Corp, that company has to file Form 5472.
Hi Chris,
I’ve setup my LLC and just got my EIN. I’m just wondering whether it is necessary to also apply for ITIN? What would be the benefits of having it? Would it be very difficult for us (non-US citizens/residents) to obtain it?
Thanks in advance.
Hi Felix.
In most cases it’s not required to have an ITIN. However, having an ITIN does often make it easier to operate in the US. Paypal Business for example is only possible with an ITIN.
If you have an LLC + EIN, then the process to obtain it is quite straightforward. Send me an email to [email protected], and I can help you get yours.
Best regards,
Chris
Hello, Chris. My name is Dimitar, I am nonresident alien. I saw the services that are offered on your website. I have a few questions. About this package:
“US LLC Formation for Non-Residents (fast track company formation)”, what does “fast track company formation” mean? Does it include “Fast-Track EIN Application (4-business days turnaround)”, or fast EIN needs to be purchased separately? How long does the whole process take? And when I click on the US LLC Formation package, it shows me that the package includes: “Banking Application”, what is this service. Is this a bank account, if so, which bank?
Kind Regards,
Dimitar
Hi Chris,
Thank you for your helpful post. I want to set up an LLC in the U.S as a non-US citizen/resident. I own a company in Australia and I want my Australian company to be the owner of U.S LLC. Is it possible to form an LLC under a foreign company’s name?
Hi Dhiren,
from an ownership structure it is possible to do that. However, when an LLC is completely owned by another entity, it will stop being taxed as a disregarded entity, and will be taxed as a C-Corp.
If i got my llc today , do i need to file the proforma 1120 and 5472 this year itself.
Hi Tavishek,
if your LLC was organized in 2021, then the first year that you have file Form 5472 is in 2022.
Hi Tavishek, you only need to file Form 5472 in the year after your LLC was created.
Best regards,
Chris
Hello Chris, I came across your video on YT and it seems like you are helping a lot of people through your comments. I appreciate you for helping others.
I hope you are well, man.
My name is Vas. My hometown is in India.
I want to start a Digital Marketing Agency serving the US, UK, CA, and AUS.
1) I am not sure where to form an entity between the US vs UK vs CA vs AUS w.r.t being tax efficient. a little bit of saving money, traveling to cheap countries, and working remotely but “not STAYING” in “INDIA” and working.
2) Is it good to register in Delaware or New Mexico as the filing and annual fees are high in Delaware. lol
3) If I am selling my services to the US market or the UK market with a single-owner US LLC – all the earning that I earn will pass through and it will lead to an INDIVIDUAL (me) paying ONLY income tax based on Indian Laws. Right? ( I am just making it clear, Chris )
Thanks.
Hello, Chris,
Could you please clarify the case: we are two non-Us-residents and open LLC partnership in Delaware selling digital software. Will we also be tax-free in the US and the only taxes we’d need to pay are our personal ones in the country of residency?
Is it possible as a non-resident to do this and get a personal social security number? or is this not advised?
The reason I ask is that I would like to open a RobinHood trading account and it is not available in the UK (yet). In order to open an account, you need to provide a SSN.
Regards
It’s not possible to get a Social Security Number as a non-resident. You can get an ITIN (Individual Taxpayer Identification Number). Some services will accept that as a replacement for a SSN, but not all do.
Since a non-US resident won’t have to pay taxes in the US with his Wyoming LLC, whose job is it to ensure that such an individual will pay taxes wherever he has to, if at all? Will some agency in the US do it? Or will only a person himself be responsible for that and nobody US will care?
Hi Caven,
it’s the personal responsibility of the person owning the LLC to follow the tax laws in their country of residence.
Hello Chris
Thanks for the helpful post.
Does it make me ETOB if I own an LLC and I sale tangible goods in US but the goods manufacture and ship from my home residence country directly to the US customers?
Thanks in advance.
Hi Roy.
As long as you are fulfilling from outside of the US, the income would not be considered US source (which is the question that is relevant here). Even when shipping to US customers.
Best regards,
Chris
Hello Chris,
First, thank you for this amazing ressource!
I followed your steps and set up a virtual address with Anytime Mailbox and I’m filling with incfile. But they don’t accept my Anytime Mailbox address: “It appears that the address provided is an “Anytime Mailbox” Address, and the state will reject the filing because of that.”
How did it work for you?
Thank you,
Sabine
Hi Chris, great articles, I visited from your Youtube page but could use clarification on one issue.
Most questions seem to involve drop shipping, however, my business is classified as offering marketing and consulting services.
I promote events that are hosted in my home country and for those events, I offer a travel package that includes a cruise from Florida.
My question is, would I, as the foreign owner be exempt from paying US taxes, my home country does not have income tax.
Thank you and continue the good work.
Thanks for this very useful guide. Its one of the best LLC resources I’ve come across.
I am planning on registering a New Mexico LLC, address in NYC.
The company is for a webshop selling products from Asia to the US market. My partner and I are both non US residents / nationals.
My question is regarding a single vs a 2 member LLC:
What is the most simple and economical in terms of speed of setup, initial cost and ongoing cost?
Thx.
Great site and a lot of helpful information!
I got few quick questions (1 member non-resident LLC):
1. when do I have to apply for ETOB (after first year or straight after formation)?
2. does Wyoming sales tax apply to ETOB (will I still have to pay some tax in US)?
3. can my business address for New Mexico LLC be in Hong Kong?
4. with anonymous LLC will there be a problem to create BREX account?
Thanks in advance.
Hi Dommy.
1. There is nothing to apply for here.
2. Sales tax is often disconnected from income tax since there are different regulations that govern these.
3. Technically it could. But coming to point 4., I recommend avoiding using non-US addresses, since often these can make getting approved for banking more difficult.
4. Within the US the differentiation between anonymous or non-anonymous does not really matter. Brex will open accounts for LLCs registered in any state.
Best regards,
Chris
Hi,
I am planning to start a LLC in Delware or Wyoming. When I open a bank account do I need to make some initial deposit? I already have a Payoneer account.
Thanks
Most of the banks that currently will open accounts for non-residents do not require an initial deposit.
Hello,
Excellent guide, Chris!
I was wondering whether you could make a distribution in a foreign currency. For example, you get paid in euros by a client, so that you have euros in the bank. Now, do you need to convert it to dollars first, or could you distribute the euros directly to a personal bank account in euros? I wonder how it would show in IRS forms.
Thanks a lot!
Hi Lucas.
Sure, you can distribute in any currency. On the IRS forms you convert the amount into dollar equivalency. The IRS sets an exchange rate for each year that can be used for that purpose. If you do have accounts outside of the US, you should look into FBAR and if it applies to you.
Best regards,
Chris
Thank you for this very useful article,
I have a question please :
How much Tax shoul I pay if I create an LLC in New Mexico, and I make 20.000 dollars per year as a revenue from sales?
I’m living in Morocco. Shoul I pay taxes in Morocco ou in the USA?
Thank you.
Best regards.
Hi Jamel,
that is unfortunately not a question that I can answer without more information about your business model.
Generally you will pay US income tax in US source income, and as a tax resident of Morocco also have to make sure you follow the local tax rules.
For personalized advice, you can always schedule a consultation here: https://calendly.com/chrisnatterer/us-llc-consultation
Hi Chris,
Many thanks for your very comprehensive write up and we do appreciate your kind consideration for replying to to each comment. I would like to know that we are two partners one is US resident and another is non-US resident have formed a partnership in the US as LLC with multiple partners;
1. Do we still need to file form 5742 for the non-resident partner?
2. IF the partnership (multiple members lLC) has no business activities through the year in 2020 except payment of the formation fee , is it still necessary to file the informational return 1065 for the tax year 2020 as it was formed in Feb 2020?
Looking forward for your kind response.
Ed
An LLC with multiple partners is considered a partnership. Form 5472 only applies to disregarded entities (single-member LLCs).
Form 1065 has to be filed, even if the LLC did not generate any revenue in the tax year.
Best regards,
Chris
Chris
Is there any issue to setting up an LLC is Nevada? Or anything more detrimental than the states you suggest?
john
Hi John,
Nevada is a fine state to set up an LLC. Maybe it has slightly higher costs than Wyoming and NM, due to the required business license, and the higher initial filing fees, but that’s it.
Hi,
I want to register LLC in USA as Non-Resident, Can you please guide me? I am contacting you after seeing your youtube video.
Thanks
Shoaib
Hi Chris,
Thanks for all this information so useful!
With a Non-Resident Alien single-member LLC in New Mexico and non-ETBUS, will I have to pay the Franchise Tax of 50$ in NM(no sales in NM and in the US)?
Best Regards
Hi Fred,
there is no Franchise Tax in New Mexico.
Hey Chris! Thanks for making the complex simple with this article. I want to form an LLC with a foreign corp (Mexico) as the sole 100% owner. That Mexico corp is 82% foreign owned, with an 18% ownership from an individual US citizen stockholder. Think that would expose this LLC to US taxation? The business is foreign, operations are non us and that stockholder would not really be in the LLCs incorporation documents.
Hi Chris, thanks for this valuable guide, it has been extremely helpful.
I’ve got a question about the business address and the foreign qualification:
I’m a non-U.S. resident, and I’m forming my LLC in Delaware to sell on Amazon in Europe.
To form the LLC I’m required to provide a business address, and I happen to have a brother living in Florida from which I can borrow his address.
Now, given the above information, I’m having the suspect that by operating with this setup I will have to foreign qualify my business with the state of Florida, as the business address should be considered as where the business is operated. Needless to say, this status would trigger the need to pay taxes in Florida, lose my anonymity and pay a second registered agent in Florida.
– Can you confirm the above?
– How can I avoid falling into the foreign qualification? Because this would apply to where ever I register my business address, even with a virtual address I guess.
Thanks so much for your precious insight, I appreciate it.
Kind regards
Lele
Thanks for this comprehensive guide!
A quick question. As a non-citizen, non-resident with an LLC not operating in the US, I understand that I won’t have tax liability with the IRS. The LLC won’t be owned by me, but by an overseas corporation I am a majority stockholder in (70%).
HOWEVER – I did live in the us from 2010-2018 under a nonimmigrant visa, so I have an SSN and a filing history. Do you think it would create problems if I use that SSN to get the new LLCs EIN quickly? Will the IRS think it is US owned when it isn’t?
Hi Chris,
Great article here on LLC setup for NRA. I live in Australia and looking to start wholesaling properties in the U.S and digital real estate (affiliate sites) business, later acquiring rental properties in US.
I’m guessing that makes the income taxable in U.S and have to setup a C-Corp structure and maybe setup child structure under the C-Corp for rental properties (LLC or Trust). Would you be able to write about C-Corp setup for NRA and how to go about the tax obligations (State and Federal), taxes on net profit and dividends if owned by an Australian Company and how to set it up to make it most tax efficient as well?
Thank you
Hi Chris, Thanks for your wonderful article. We have a LLC entity in usa Delaware which has 3 non usa partners. We are an offshore entity where all the work is perfomed from India and we have opened this entity to collect sales invoice from usa clients. I would like to clarify below-
1. With 3 non usa partners, will this LLC needs to file 1065 pass through tax return ?
2. Whether all partners who are based out of india needs to file 1040 NR ?
3. Whether income from this LLC of any of partner will be taxable in usa ?
Thanks in advance!
Hi Chris,
Thanks for all this info! My question: my wife and I want to start an LLC together (we’re non-residents), are we a disregarded (pass-through) entity or not? We won’t have an office and employees in the US
Hi Lennart.
A multi-member LLC is still pass-through, but not a so-called disregarded entity, but a partnership. In many regards similar, but overall a bit more complex than a single-member LLC.
Hi,
Let me introduce my business and what I do first:
I am currently living in Malta but just formed a LLC in the US Colorado state a couple weeks before. I am currently waiting for my EIN as I have submitted my SS4 form to the IRS by EFAX.
The business I am considering doing is dropshipping in general but its split into 3 different businesses.
I know that you said that I don’t need to pay any taxes in the US if i buy goods from my Chinese supplier and they basically ship everything for me to customers all over the world since its a nonresident alien individual not engaged in a trade or business within the US . However 2 of my dropshipping business will probably be considered as engaged in a trade or business within the US but im not sure yet, can you confirm if it is?
1. Dropshipping on facebook marketplace: listing products from Walmart,costco,homedepot,amazon,ebay etc… to the facebook marketplace and once the customer buys from me , I will purchase it from either Walmart,costco,homedepot,amazon or eBay and they will ship it to the customers in the US. Will that be considered as engaging in a trade or business in the US? Will I need to pay US taxes for that? Even though Walmart,costco etc… is not a dependent agent for me as they do not depend on me only since they sell their goods to other businesses too , am I still required to pay taxes in the US?
2. Print on demand on ETSY: I design a picture or hire fiver designers to design something for me and I sent it to the print on demand company in the US and they basically print my designs on their products and ship the products to my customers that placed an order on ETSY. Will I need to pay US taxes for that? Even though you said in your youtube videos that print on demand company in the US is not a dependent agent for me as they do not depend on me only since they print for other businesses too , am I still required to pay taxes in the US?
3. No.3 is actually the normal drop shipping on shopify , I purchase product from Chinese suppliers and they ship to my customers all over the world.
How will I be taxed in my situation? Since I know for sure that for No.3 I don’t need to pay taxes in the US but what about No.1 and 2?
Lets say If No.1 and 2 is taxable in the US and No.3 isn’t then would I be taxed like this?:
For example: I made $100,000 in profit from my 3 drop shipping business but $50,000 is made from No.3 drop shipping from china ( which is not taxable in the US) and the other $50,000 is made from No.1 & 2 (Print on demand on Etsy and facebook marketplace drop shipping from Walmart,costco,homedepot etc…). If No.1 & 2 is considered as a US sourced income then the $50,000 will be subject to the federal tax in the US and the other $50,000 from No.3 pays no tax in US?
Please let me know if No.1 & 2 is considered as an US sourced income or not and whether I should pay tax in the US or not and if yes, will I be taxed like the above example?
if I don’t need to pay taxes in the US then do I have to pay my country’s income taxes even though I won’t be transferring the money I made from my US bank to my local bank? Since I will be using debit/credit cards issued by US banks in Malta
OR
If I pay taxes in the US then do I have to pay taxes AGAIN in Malta even though US and Malta has tax treaty?
Lastly I heard that non us resident is not subject to self employment tax , is that true?
Sorry for all these questions, I would really appreciate it if you can help me out.
Thank you!
I wanted to take a moment to express my sincere appreciation for the amazing guide that you have provided. I must say that I was blown away by the depth and breadth of information that was covered, and the clarity with which it was presented.
From start to finish, I was thoroughly engaged and found myself eagerly absorbing all the valuable insights and practical tips that were shared. It is abundantly clear that you have put a tremendous amount of time, effort, and expertise into crafting this exceptional guide, and I am truly grateful for the hard work and dedication that you have demonstrated.
You rock, Chris!
Hello,
In the comment replying to amazon FBA question you said amazon is considered an agent when selling physical products, i want to form a LLC for KINDLE eBooks AND physical book selling on the kindle store, i get royalties, should i still pay taxes in the US?
Thanks
Hi Alex.
On the royalties there should be automatic tax withholding by Amazon. The amount depends on where you are located and if that country has a tax treaty with the US that specifies a percentage different than the default 30%.
Hi Chris,
If I have a US LLC, don’t live in the US, don’t sell or provide service in the US but receive payments in US LLC bank account for services rendered in my country (not USA). What forms should i file?
Thanks
Hello Lee.
Your compliance requirements will look roughly like this:
– Maintain Registered Agent
– Depending on state: Do nothing, file an annual report, or pay franchise tax
– IRS Information Request: Form 5472/1120
Hope it helps!
Hi, thanks for such a detailed article first of all.
I’m a freelance software engineer, and planning to open a US based LLC,
After a successful setup, if I register on freelancing platforms, like Upwork, Freelancers.com
How can I make myself to appear as a US person (legally) because I’d already have an LLC
Hey Chris,
Great stuff! I can see this article is still getting some traction after 3 years, amazing.
Question for you: Is there any specific steps to perform if the LLC is created first as an RA in 2022 but then on the second year (2023) of operation the sole owner becomes NRA?
It seems like a change of status and wondering if there is anything else to file than Form 5472 + 1120 / FBAR / 1040-NR ?
Thanks