LLCs for Non-U.S. Citizens (2024 Guide)
One of the world’s greatest business opportunities is starting a Limited Liability Company (LLC) in the United States. Even as a nonresident, you can start an LLC and fully participate in the U.S. economy. To set up an LLC in the U.S. without being a citizen or a resident of the country, follow the steps below.
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What is an LLC?
A Limited Liability Company (LLC) is a common legal structure for establishing a business in the United States. An LLC combines the level of personal liability protection that incorporation provides for business owners and the substantial tax advantages of a partnership arrangement. It also allows the flexibility of sole proprietorship and partnerships in business owners’ roles.
Why start an LLC in the U.S. if you are a nonresident?
The United States is very popular with foreign investors. Much of the appeal is in the country’s pro-business policies, which extend to non-residents. The corporate tax system offers abundant opportunities for a company to grow and provides a simple LLC structure for comparatively easy, low-cost startup and management over time.
Foreign owners of U.S. businesses further obtain the boost to brand credibility that comes with owning a company that competes in the U.S. market.
Common types of nonresident LLCs operating in the United States include:
- Real estate investment companies that hold real estate interests in one or more states.
- E-commerce businesses that frequently sell products in certain states.
- Companies with license contracts or franchisees in one or more states.
- Service businesses that operate in one or multiple states.
- Various kinds of other nonresident-owned businesses
How is an LLC in the U.S. different for nonresidents?
The process of establishing an LLC in the United States for nonresident business owners is generally the same as for residents – which means making sure you have a physical address in the U.S. (most nonresidents need a registered agent service), a U.S. bank account, and a tax ID. You will probably need to hire an accountant to file an annual report with the state and an accurate income tax return with the IRS and the state where the business operates.
LLC IRS income tax forms for nonresidents of the U.S. include:
- Form 1040-NR: Nonresident Alien Income Tax Return
- Form 1065: U.S. Return of Partnership Income (may be required, based on the ownership structure of your LLC)
- Form 5472: Foreign-Owned Corporation Information Return (required if your LLC is over 25% foreign-owned). Accompanied by Form 1120 (It’s pro forma for Form 5472.)
NOTE: You should familiarize yourself with any current U.S. tax treaties between your home country and the U.S. that are relevant to your LLC for compliance.
What are the two types of LLCs for nonresidents in the U.S.?
You can either opt to form an LLC or a C Corporation. To make your choice between these two approaches, consider which is best for your business’s particular needs and strategic objectives:
LLC
The LLC option gives you management flexibility, which can be especially helpful when operating remotely. For example, pass-through taxation serves to streamline administrative accounting. An LLC also limits your personal liability for legal judgments that may arise in the course of doing business in the U.S.
A Single Member LLC has only one member (owner). It includes all the same rights and responsibilities (for debts, court judgments, and other obligations) under state and federal law that an LLC with multiple members involves.
C Corp
A C Corp business structure can be the right option for those looking to raise large amounts of investment capital. That’s because this approach does not limit the number of shareholders or classes of stock offered. However, C Corp businesses contend with double taxation (first on your profits, then on your dividends from those profits). That can be a serious disadvantage, depending on your business type, investment structure, growth model, and other interests.
NOTE: C Corp refers to Section C of the tax code that applies to this business structure. Later, you will see S Corp mentioned, which refers to Section S of the tax code.
What are the advantages of an LLC for nonresidents?
Arguably, one of the most substantial advantages is that a 100% foreign-owned LLC is taxed as a “pass-through entity.” That means income tax charges are permitted to pass through to the business owner(s) outside the country and, therefore, are not assessed by the United States. Taxation is left to be determined by the LLC owner’s country of residence.
In addition to pass-through taxation, an LLC can also provide many other important benefits including:
- Ease of and efficiency in setting up an LLC
- Strong legal liability protection of personal assets
- Flexibility of the federal income tax reporting system
- Minimal state and federal regulatory requirements
- The vast U.S. consumer market
- Brand reputation as an American business
- Relatively stable political environment
- Readily accessible venture capital
What are the disadvantages of an LLC for nonresidents?
Every business venture in any country has its issues. For nonresident LLCs in the U.S., these include:
- Income tax filing requires Form 1040-NR; your LLC is not treated as a separate entity
- Related Party Disclosure Requirements on LLCs with 25% foreign ownership
- Withholding tax of 30% for some types of passive U.S. income
- Banking problems like issues verifying a nonresident’s identity
- Need for an Employer Identification Number, sometimes without a taxpayer ID.
- Knowledge of tax laws and employment laws when hiring U.S. workers.
Generally speaking, these are usually manageable and not significant impediments to starting an LLC in the U.S.
Which state is best for setting up an LLC?
Various benefits for a foreign entrepreneur forming an LLC may be applicable in some states but not necessarily in all. As a nonresident of the United States, you can select any state you wish to register your LLC. A nonresident of the U.S. must register the LLC in one U.S. state but may operate in numerous states throughout the country. The two most popular states are Delaware and Wyoming.
NOTE: A “foreign LLC” for U.S. domestic legal purposes can refer to an LLC owned by a U.S. resident and registered in one state but operating in others. That is not to be confused with an LLC owned by a nonresident of the U.S.
Registering an LLC in Delaware for Nonresidents
Delaware is the best choice of state for LLC registration if you are ultimately going to restructure your LLC into a C-Corp, maybe to take on investors. Delaware is the global leader in corporate registrations, with an incomparable number of publicly traded companies initiated in that state.
- Business owners seeking venture capital or other investments gravitate to Delaware for registration due to the state’s vast experience with it and its effect on acquiring funding.
- Delaware incorporation is appealing to business owners looking to raise Venture Capital or Private Equity and ultimately take their companies public.
- Delaware judges are highly knowledgeable in corporate case law and exceptionally experienced in adjudicating business disputes.
Registering an LLC in Wyoming for Nonresidents
Best if you want the simplest approach to setting up legal and tax structures and managing your businesses. (Wyoming was the original creator of the LLC framework.)
- Wyoming offers simple incorporation processes and has among the least documentation requirements from businesses after they are registered in the state.
- Wyoming has lower filing fees, reporting fees, and other costs than other states, making it the top choice of small budget-focused business owners.
- Wyoming business taxes are lower overall. The state does not have a corporate or individual income tax. That is a substantial benefit for business owners.
- Wyoming LLC liability protection is greater, even for single-member LLCs, than in other states. So, business owners are at less extreme risk from lawsuits than in some states.
How to set up an LLC in the United States as a nonresident
Each of the 50 states has its own laws governing the formation of LLCs. Your choice of state in which you will register your LLC will impact your costs for taxes, filing fees, recurrent fees, and possibly other factors. Wherever you opt to set up your LLC, you’ll need to complete these steps.
1
Decide on a name for your LLC
Select a name that meets your chosen state’s requirements.
- In most states, your LLC’s name cannot be identical to another registered business or infringe on a trademark.
- The name must not include the terms bank, insurance, IRS, Treasury, FBI, or State Department.
- LLCs must include one of the permitted versions of that abbreviation in their names or spell it out.
2
Designate a registered agent
A nonresident-owned LLC in the U.S. must have a registered agent who receives tax documents, government notifications, etc., on behalf of the business. Your registered agent might be your lawyer, accountant, professional agent, or other party. Your agent is required to maintain a physical street address within the state in which the LLC is registered and must be personally accessible during regular business hours.
Our picks for best registered agent services
3
File Articles of Organization
Filing the Articles of Organization for an LLC (also called the Certificate of Organization or Certificate of Formation) with the correct state agency officially establishes your LLC. The document describes the purpose of the business, names the LLC members, provides basic information about the registered agent, and provides other essential details. Before filing it, you should contact the state office to see if any additional information is required on the document.
4
Obtain an Employer Identification Number (EIN)
Even if your business does not have employees working in the U.S., as an LLC owner, you are required to obtain an Employer Identification Number (EIN) for tax purposes. You will also need it for banking, and if you do hire employees, you will need it for associated routine employer tax filings. Nonresidents can request an EIN from the IRS online, by fax, or through regular U.S. mail.
5
Obtain business licenses and permits
The business licenses and/or permits your LLC may need are based on the state’s requirements for your business type. There are several degrees of business licensing your LLC may need:
- Local general business license: Allows the LLC to operate in a locally governed area
- State business license: Validates registration of the TIN used for the LLC in the state
- State occupational license: Permits restaurants, daycares, professional services, etc.
- Federal license or permit: Allows LLCs in certain industries (agriculture, guns, others).
NOTE: See the Small Business Association (SBA) website for details of licensing requirements in each state and see contact information for licensing authorities.
6
Write an operating agreement
This internal document lays out the terms of membership in the LLC and the rules you want for it. It clearly defines the LLC as a legal entity separate from yourself and others with an ownership interest in the business. It sets forth the hierarchy of management roles, rights, responsibilities, profit and loss distributions, and more.
The state may not require this document, but it may be helpful in opening a business bank account, resolving disputes, and protecting the limits of personal liability.
7
Obtain a U.S. phone line
Banks may require verification by text or phone call to a U.S. phone number. Having a U.S. phone line also gives you a phone number in the country for use on your website and other marketing and sales materials. There are international phone services that enable you to obtain a US phone line from other countries.
8
Open a business bank account for the LLC
Opening a business account at a bank in the U.S. can sometimes be a little challenging for nonresidents, but it is necessary for operating your business smoothly. A bank may ask you to provide the physical address of your registered agent, your EIN, your Articles of Organization, and possibly other documentation. Some banks still require new customers to set up an account in person, but others offer online applications and/or other options.
NOTE: Familiarize yourself with the federal and state laws governing LLCs and additional regulations regarding foreign ownership of LLCs in the US. See additional information in the FAQs.
9
Stay compliant with Federal and state regulations
After you have completed your state registration of your new LLC in the United States, paid the necessary fees, and filed a preliminary report, if required, you will need to maintain regulatory compliance. This may entail filing annual financial reports in addition to standard tax filings, among other tasks.
- Be clear on your LLC’s tax requirements: Pass-through taxation is a benefit for nonresident business owners operating in the US. But, you must consistently meet any US tax obligations that you are required to fulfill. Nonresidents normally pay a 30% income tax rate on US revenues. You are advised to seek guidance from an international tax professional.
- Routinely review state regulations: Along with the ever-changing business environment, laws may be added, modified, or repealed. It’s important to keep up with regulatory changes that can impact your LLC’s status with the state and take necessary steps regarding fees, reporting, enforcement of policies, etc., to maintain your business’s proper legal standing.
How do taxes work for nonresidents with LLCs?
How to file: If you own a single-member LLC, you can file your federal and state income taxes as a sole proprietor. In a multiple-member LLC, you can submit your business income tax filings similarly to a partnership filing. An LLC tax return can be filed as a C or S corporation. Discuss the considerations for each of these options with your U.S. tax attorney or Certified Public Accountant.
Obtaining an EIN for U.S. Tax Filing: You will need an Employer Identification Number (EIN) for state and federal tax filing. (It’s also called a Federal EIN or (FEIN) for IRS purposes. You likely will not have an Individual Taxpayer Identification Number (ITIN) or a Social Security Number (SSN) to submit when you apply for your EIN. So, you will probably be required to fax your EIN on IRS Form SS4.
Obtaining An ITIN for U.S. Tax Purposes: As a foreign citizen and nonresident of the U.S., you can obtain an Individual Taxpayer Identification Number (ITIN) by submitting Form W-7 to the IRS with the required identification.
Do you need a U.S. bank account to start an LLC?
You are not required by U.S. federal or state law to have a bank account to start a Limited Liability Company, however, it is recommended that you open and maintain a business bank account for multiple important reasons. For example:
- Attempting to manage your business and personal funds in the same bank account puts you at risk of unintentionally commingling finances. That can cause you to lose the protection that your limited liability status is specifically intended to provide.
- Keeping separate personal and business bank accounts helps ensure that your LLC is in full compliance with income and expense reporting requirements on income tax filings.
You can open a U.S. business bank account for your LLC as a nonresident of the U.S. by using your registered agent’s address and providing your Employer Identification Number. Some banks may require additional documents from nonresidents, such as your state LLC registration documents and other items. Many banks offer online services for opening a new personal or business bank account.
Do you need a U.S. ID to start an LLC?
You do not need to be a U.S. citizen or resident to start and operate a company in the country, and you also do not need a Social Security Number or a Green Card. Nonresidents of the U.S. are free to register an LLC in the U.S. and operate a company as a foreign business owner. You can obtain an Employer Identification Number from the IRS and an Individual Taxpayer Identification Number as well.
That means you can receive payments from your U.S. sales. You can use your business bank account located in the US, and you can set up your income tax charges from your U.S. business to flow through to your country of residence. You can also limit your personal liability for issues that may arise in your U.S. business operations by structuring your company as an LLC.
Do you need a sponsor to start an LLC?
No, nonresidents of the US are not required to have a sponsor per se to start and run a business in the country. However, any business owned by a nonresident must have a registered agent. This means you must designate a person or a service to accept correspondence, such as government notifications, tax documents, etc., on behalf of your LLC.
The party you assign to act as your business’s registered agent in the U.S. must maintain a physical address in whichever state you choose to establish your LLC. Your agent must also be accessible during regular business hours.
Can a foreign business owner have an LLC in the U.S. and another country?
Yes, you can own and operate a business outside the United States and register and run a business inside the country remotely from overseas if you wish. To set up your U.S. Limited Liability Company, complete the steps outlined above. That includes appointing a registered agent, filing Articles of Organization, obtaining the required licenses and/or permits, and meeting US tax obligations, among several others.
Keep in mind that foreign ownership of an LLC in the USA may present unexpected contingencies. For example, you may be required to apply for either an Individual Taxpayer Identification Number or an Employer Identification Number for tax filing purposes. Obtain some knowledgeable guidance to help you smoothly establish your LLC and avoid unnecessary confusion and delays in launching your business in the U.S.
FAQs
Can I create a Delaware LLC or Wyoming LLC even if I don’t live in that state?
Yes. You are not required to live in the state where you want to start your LLC or even in the US.
How should I start my nonresident LLC in the US?
The process for creating an LLC in a state of the USA is the same for nonresidents as for nonresidents but with a few added requisites. For example, in addition to filing your Articles of Organization with the Secretary of State and paying the required fees, you will need to appoint a registered agent, obtain the necessary US tax identifiers, create an operating agreement, etc.
Will I need to provide a physical address to start an LLC in the US?
If you do not reside in the US, the state in which you submit your registration documents for your LLC will require your foreign business mailing address in your country, which may or may not be a physical address. Your registered agent does need to provide his or her physical address in the state in which you start your LLC.
How long does it usually take for a nonresident to establish an LLC in the US?
The average time it takes for a nonresident to form an LLC in the United States is about one to four weeks. If the registrant has a Social Security number, that can help speed up the process.
Are non-resident LLC owners allowed to contract for the US government?
Yes. Most federal government departments accept bids from any business with the ability to do the work successfully.
Do LLC owners have stock in the company, as in a corporation?
In the US, LLC business owners (members) do not own stock shares like corporation stockholders. LLC owners own a percentage of the business’s financial interest.
Are US business visas available to non-resident LLC owners?
As a US LLC owner, you could apply for a business or investor visa. Explore your options based on how long you plan to stay in the country.
What forms are needed to start an LLC in the US?
Normally, some or all of the documents listed below are among the forms to be signed by the Secretary of State and filed in the state where you choose to establish your LLC:
– Certificate of Formation
– Certificate of Incorporation
– Certificate of Amendment
– Restated and Amended Certificate of Formation
– Restated and Amended Certificate of Incorporation
– Certificate of Correction
– Certificate of Dissolution
– Certificate of Cancellation
– Certificate of Revocation
– Certificate of Renewal from Void
– Certificate of Good Standing
– Change of Registered Agent
Additionally, you will need an operating agreement and other essential documents for internal and external use during your startup in the US.
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