21%. This is the percentage you could save on taxes on your online business profits, if you form a US LLC for your online business as a non-US resident. If you make a pure profit of $50,000 after a year of hard work, you can sleep easy at night knowing you do not have to pay Uncle Sam (US government) $10,500 in taxes at the end of the year, LEGALLY. Whether you want to travel to exotic places like a digital nomad or invest the $10,500 back into your business is up to you. The decision is in your hands.
Setting up a U.S. company may sound daunting and complex at first, but not if you read this guide.
In fact: The strategies in this post have helped thousands of our clients run their online businesses with a US LLC from their home country, generating millions in revenue, tax-free!
Registering an LLC in the US if you are a Non-US Person is the first option you should consider before looking at other popular options like Hong Kong, Estonia, Singapore or United Kingdom. If you ignore the US LLC, you are missing a great opportunity as an entrepreneur to create a low-maintenance, tax-free business structure in a first-world jurisdiction.
At the same time, you are missing out on the advantages of doing business as a US LLC would bring, such as superb banking options, vast payment processing selection, good reputation, access to the US market, solid legal system, to name a few.
If you are still not convinced about the benefits of a US LLC, please read The 9 Benefits of a US LLC for Non-US Residents.
From a foreign entrepreneur's perspective, there are two business structures in the US that you should be aware of: the Corporation and the Limited Liability Company. Before you start a business in the US, it is essential that you know the difference between these two forms.
In US law, a corporation is a legal entity separate from the natural persons who own or manage it. A corporation comes into being when a state issues a certificate of incorporation to the entity, giving it the power to sue and be sued, sign contracts, and other legal documents.
The shareholders of a corporation are generally exempt from liability for the debts of the corporation as long as they perform their duties as directors or officers under the corporation's bylaws — this protection is known as "limited liability." The corporation is virtually the same as similar company structures you see in other countries, such as the Ltd in United Kingdom, SARL in France and PT in Indonesia.
"The current federal corporate income tax rate for a US corporation is 21%", and state corporate income tax rates vary from state to state. You pay the state corporate tax in the state where the corporation is incorporated. After paying the corporate income tax, if you want to distribute the profits after taxation to yourself as a shareholder, you declare dividends, which may or may not be taxable depending on where you live.
Before we go into the main star of the show, the LLC, let us do a detour to the partnership structure, as this will help you better understand the LLC structure in the next section. A partnership is another type of legal entity that is formed by two or more people, called "partners," who establish and agree to share profits and losses while dividing management of the company. A partnership exists as a legal entity, but it is not a separate tax-paying entity and is not taxed under the law. Instead, it is treated as a pass-through entity where the profit or loss is passed through to the partners and each partner is taxed under the individual income tax.
To recap, as a pass-through entity, partnerships are not taxed as a business, but their owners are taxed on their income from the business.
Recommended Reading: How to Form a Partnership LLC
Most countries have the equivalents of "Corporation" and "Partnership" in their territories. But most of them lack an equivalent to the US Limited Liability Company (LLC). If you take the word "limited liability company" literally, it is easy to equate it with a similar "limited company" structure in your own country.
As with football in the US, the LLC in the US is not what you think it is, and requires you to exercise some closer scrutiny.
In the US, "the limited liability company (LLC) is a legal form similar to a corporation and a partnership." "The LLC is a hybrid structure that combines features of partnerships and corporations with the limited liability protections of a corporation and the flexibility and tax efficiency of a partnership." The owners of an LLC are called members. Members of the US LLC can be either individuals or organizations.
From a tax perspective, it is essentially a pass-through entity. This means that an LLC is not taxed in the US like a corporation, but rather the members of the LLC are taxed individually, like a partnership. Also, it is important to note that a US LLC can be formed and owned by a single member, unlike partnerships, which must be owned by at least two members. LLCs formed by a single person are referred to as Single-Member LLCs. If there are more than one member in the LLC, it is commonly referred as a Multi-Member LLC.
Recommended reading: Single-Member LLC (SMLLC) vs Multi-Member LLC (MMLLC)
What is the tax advantage for you as a foreigner? As mentioned above, US LLCs do not pay corporate income tax. Instead, profits and losses are passed through to the owners, and each owner reports his or her share of the company's profits on his or her personal tax return. This seemingly unremarkable feature of pass-through taxation is a great advantage for foreigners not living in the US.
By forming a US LLC, the Internal Revenue Service (US Tax Authority) sees your US LLC as a transparent entity "(Disregarded Entity)" and does not tax it. Instead, the IRS will basically look through the company and try to determine if you, as the member, are taxable.
From the IRS point of view, if you:
you are regarded as a Non-Resident Alien. Yes, this term is archaic, but you don't get the opportunity to be an Alien every day.
"As a Non-Resident Alien, you will only be taxable on US-Source income effectively connected to a US Trade or Business." There is also the tax on FDAP income that applies to passive income, but we will leave that for another day as we are assuming you are starting a US company to build an active business.
To explain it further, first we need to dissect two technical terms, namely "engaging in a US Trade or Business" and "US-Source Income."
The general consensus is that your US LLC is engaged in a trade or business in the U.S. (ETBUS for short) if the following conditions are met:
Unfortunately, what is considered "substantial, continuous, and regular" is not precisely defined in US law. However, it should not be taken literally, as a look at a document from the Treasury Dept. Office of Tax Policy on the attitude of the US trade and business community toward e-commerce will shed some light on this issue:
Electronic commerce permits a foreign person to engage in extensive transactions with U.S. customers without entering the United States. Although such a person is clearly engaged in a trade or business, questions will arise as to whether he is engaged in a trade or business in the United States or has a permanent establishment in the United States. Therefore, it is necessary to clarify the application of the U.S. trade or business and permanent establishment concepts to persons engaged in electronic commerce. In developing principles to classify these activities, it will be important to consider the extent to which electronic commerce simply represents an extension of current means of doing business, the tax consequences of which are understood. For example, to the extent that the activities of a person engaged in electronic commerce are equivalent to the mere solicitation of orders from U.S. customers, without any other U.S. activity, it may not be appropriate to treat such activities as a U.S. trade or business. It will also be necessary to consider whether it is appropriate or practical to treat foreign persons engaged in electronic commerce with U.S. customers as being engaged in a U.S. trade or business if they are physically located outside the United States.
Your US LLC has to be deemed as a business engaging in a Trade or Business in the US (ETBUS) and the US Source Income (more on this below) that are effectively connected to this US Trade or Business are subject to tax. Being ETBUS is your first line of defense — if you are not ETBUS, you are not subject to US Federal taxes.
Other than the ETBUS concept, there is the Source of Income concept that you need to understand. In taxation, Source of Income is the location (or country) where a specific item of income is deemed to have originated or is deemed to have been generated.
From the US Taxation point of view, a nonresident alien (NRA) is usually only taxed on US-sourced income but not Foreign-Sourced Income. The following are the general rules for determining US source income that apply to most nonresident aliens:
Let's use the table above and a concrete example: If you provide internet marketing services to a US client through your US LLC and you do not employ any employees or exclusive agents in the US, your income is considered income sourced outside the United States and therefore not subject to US federal tax.
In most cases, the United States does not tax income sourced outside the United States. However, there is a caveat: if your Foreign Source Income is attributed through a physical office of yours in the US, that income is taxable if you are deemed ETBUS, according to IRC §864(c)(4). However, if you hire an agent who is not exclusive and does not negotiate and close sales in the US, even if he/she performs the work through his/her own office, your Foreign Source Income would not be considered Effectively Connected Income to a US trade or business.
One important point that even confuses the most experienced accountants is that the assessment as " Engaging in Trade or Business in the US" (ETBUS) comes first and the income from US sources that's actually connected to that " US Trade or Business" comes second.
In other words, you have to check if you're ETBUS, and only then check if you have US source income; if both criteria are met, then only you're liable for US Federal taxes. But, if you are not ETBUS, you are not taxable even if you have US source income.
As we see above, once you become ETBUS, you will require to inspect your Source Income to determine if they are foreign or US sourced. Another way to avoid the trouble of determining if you are ETBUS and have generated US Source Income is to use the Permanent Establishment concept found in tax treaties.
If your country of residence has a double taxation avoidance agreement or so-called tax treaty with the United States, you can take advantage on the Permanent Establishment concept instead of relying solely on the US Trade or Business concept. In international taxation, the concept of "permanent establishment" refers to a company that has a fixed place of business (and other criteria specified in the tax treaty) in another country and is subject to income tax there.
When there is a tax treaty between your country and the United States, IRS allows the definition of Permanent Establishment to take precedence over the definition of the US Trade or Business in the Internal Revenue code. So even if you are engaging in a US trade or business but do not have Permanent Establishment in the United States, you will not be subject to federal taxes on your active business income. To see if your country has a tax treaty with the United States, please refer to the IRS tax treaty list.
We hope we have not lost you already with our boring monologue. If you are still stumped after reading, we can suggest some shortcut hacks to make your US LLC tax-free.
Below are some things you need to keep in mind to avoid triggering US federal tax obligations:
Disclaimer: As with all shortcuts, these are general guidelines that will suffice in most cases. For very complicated situations, it is best to consult a US accountant or attorney familiar with international taxation.
While your foreign-owned single-member US LLC is generally not subject to US income tax (as we discussed above), there is one important annual reporting obligation that every non-resident owner should know about: Form 5472.
Under IRC §6038A, a foreign-owned US LLC that is treated as a disregarded entity must file a Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) together with a pro forma Form 1120 for any tax year in which the LLC had "reportable transactions" with its foreign owner. In practice, this includes almost any movement of money between you and your LLC — capital contributions, distributions, loans, and expenses paid on behalf of the LLC all count.
A few important points:
This is an area that trips up many non-resident LLC owners who assume that a "tax-free" LLC means "no paperwork at all." The filing obligation exists even if you owe zero tax.
StartFleet's Business Plan includes Form 5472 / Pro Forma 1120 filing. If you are on another plan, you can add it as a standalone service here. We are also working on a comprehensive standalone guide to IRS tax reporting obligations for foreign-owned US LLCs — stay tuned.
If you have been following US business news over the past year or two, you may have come across the Corporate Transparency Act (CTA) and its requirement for companies to file a Beneficial Ownership Information (BOI) report with FinCEN (the Financial Crimes Enforcement Network). When this requirement first took effect in January 2024, it caused widespread confusion among foreign-owned LLC owners.
The good news: the situation changed significantly in 2025.
In March 2025, FinCEN issued an interim final rule that removed domestic reporting companies — including US LLCs — from the mandatory BOI filing requirement. The U.S. Treasury Department simultaneously confirmed it would not enforce BOI-related penalties against domestic entities and their beneficial owners.
What this means for you as a non-resident forming a US LLC:
For the most current and authoritative information, refer directly to FinCEN's official BOI reporting page.
Note: Regulatory environments, particularly around financial transparency, can change quickly. We recommend bookmarking FinCEN's page and checking it periodically, or asking your StartFleet team at the time of formation for the latest status.
As you can see, the Non-US Resident US LLC is a very powerful company structure for non-US entrepreneurs and founders. You can use the knowledge of ETBUS, Permanent Establishment, and Source Income to structure your US LLC wisely and minimize your tax burden in the United States.
On the other hand, if you form a US Corporation instead of an LLC, you will be subject to US federal taxes automatically, so it is really important to consider whether you need a Corporation at all. You can read our detailed comparison in our LLC vs C-Corp guide.
Of course, the LLC structure should not be used as a blanket solution for all cases. There are instances where a US LLC may NOT be appropriate for you as a non-US business owner looking to minimize your tax burden:
Forming a US LLC from abroad is entirely possible — our clients do it every day from dozens of countries. But it is worth understanding what the process actually involves, particularly as a non-resident, before you decide how to approach it.
Not all US states are equal for non-residents. Wyoming, Delaware, New Mexico, and Florida are the most popular choices, each with different annual fees, privacy protections, and maintenance requirements. Getting the state wrong at this stage is a costly mistake — moving your LLC to another state later (redomestication) is possible but adds time, cost, and complexity.
For a full breakdown, see our guide: Best US States for Foreigners to Form an LLC.
Your LLC name must be unique within your chosen state and must comply with that state's naming rules — for example, it must include "LLC", "L.L.C." or "Limited Liability Company" and cannot include certain restricted words. Name availability changes daily. You will also want to check that your chosen name does not conflict with an existing federal trademark, which is a separate process from the state name check.
See our naming guides for Wyoming, Delaware, and Florida LLCs.
Every US LLC must have a registered agent — a person or company with a physical address in your LLC's state who is available during business hours to receive legal documents and government correspondence on behalf of your company. As a non-resident without a US address, a professional registered agent service is not optional; it is a legal requirement.
Many formation services treat this as an add-on and charge an extra $50–$150 per year on top of their base fee. At StartFleet, registered agent service is included in all plans from day one — so you will not face any hidden charges or surprise renewal costs.
The Articles of Organization is the formal document filed with the state that legally creates your LLC. Each state has its own form, filing fee, and processing timeline. Wyoming charges a $100 state filing fee, with same business day processing.
Your EIN is your LLC's federal tax identification number, issued by the IRS. Without it, you cannot open a US business bank account, enter into many payment processor agreements, or file required returns. For non-residents without a US Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), the EIN application process is more involved — it requires filing IRS Form SS-4 by mail or fax, since the online application is not available to non-residents. Standard processing takes 30–50 business days. StartFleet's Startup and Business plans include an Express EIN service with a faster turnaround of 11–14 business days.
This is often the step where non-residents run into the most friction. Most traditional US banks require applicants to appear in person at a branch, which is not feasible for non-residents forming their LLC remotely. Online-first banks such as Mercury, Relay, and Wise Business are generally more accessible — but each has its own eligibility criteria, and applications are sometimes declined without a clear explanation.
Navigating which bank will accept your LLC, in your industry, from your country of residence, is something StartFleet helps you with as part of every plan. Read our full guide on opening a US business bank account as a non-resident for more.
Here is a realistic picture of what forming and maintaining a US LLC as a non-resident will cost:
Many standalone formation services charge the state fee, a formation fee, and a separate registered agent fee on top. StartFleet's plans bundle all three. View our full pricing breakdown.
Wyoming is our top recommendation for most non-US residents, due to its strong privacy protections, no state income tax, low annual fees ($60 annual report), and straightforward maintenance requirements. Delaware is the preferred choice if you plan to raise venture capital or issue equity to US investors. New Mexico is worth considering if you want the lowest possible ongoing costs — it has no annual report requirement. Nevada also has a favorable business climate but tends to have higher administrative costs than Wyoming. For a full comparison, see our Best US States for Foreigners guide.
Yes. You can name your foreign company as the sole member of your US LLC. The foreign company becomes a member of the US LLC, allowing for consolidated ownership and management. This is a common structure for non-residents who already operate established businesses abroad.
It depends on the bank. Some US banks require an Individual Taxpayer Identification Number (ITIN) if you do not have a Social Security Number (SSN). However, many online-first banks used by non-resident founders — including Mercury and Relay — do not require an ITIN as a condition of opening an account. As StartFleet customers, we refer you to banking partners that do not impose this requirement. You can also read our guide on ITIN vs SSN for a detailed comparison.
Non-US citizens typically do not need an SSN to open an LLC bank account. If you do not have an SSN, some banks will accept an ITIN instead. Many online-first business banks used by non-resident founders do not require either.
Yes. A non-resident can open a US business bank account for their LLC. However, traditional brick-and-mortar US banks generally require in-person account opening, which is not practical for non-residents. Online-first banks (Mercury, Relay, Wise Business) are the most commonly used alternatives. Each has its own eligibility requirements and not all non-resident applications are approved — which is why having guidance through this step matters. Our guide to opening a US bank account as a non-resident covers the process in full.
Annual compliance requirements vary by state. In Wyoming, you are required to file an annual report and pay a $60 annual report fee (due on the first day of the LLC's anniversary month). In New Mexico, there is no annual report requirement, which significantly reduces annual maintenance overhead. In Delaware, you will owe an annual franchise tax of $300 due on June 1 every year. Additionally, if your LLC had transactions with its foreign owner during the year, you are required to file a Form 5472 / Pro Forma 1120 with the IRS (see above). Read our full annual compliance guide for non-resident LLC owners.
Yes. A non-resident can sell products or services in the US through their LLC. Depending on the type of product or service, you may need to comply with state business licensing rules, collect and remit sales tax in states where you meet the economic nexus threshold, and follow any applicable import/export regulations.
The exact requirements depend on the state and the formation service you use. Typically you will need:
No US address, SSN, or visa is required to form a US LLC as a non-resident.
With StartFleet, the timeline depends on your chosen plan:
All plans include registered agent for year one, and US bank account setup assistance.
No. LLCs do not issue shares of stock. Instead, LLC owners hold a membership interest — a percentage ownership stake in the company — rather than shares. How membership interests are allocated, transferred, and managed is typically governed by the LLC's Operating Agreement. Unlike corporate shares, membership interests are not standardised instruments and their transfer is usually subject to restrictions set out in that agreement. This is one of the key structural differences between an LLC and a corporation — for a full comparison, see our LLC vs C-Corp guide.
StartFleet helps you with your US company formation. Apart from helping you to register a US company, we offer a lot more:
Formation plans start at $349 total (including registered agent + bank account opening support). View full pricing.
Recommended Readings:
Kathleen Schweitzer is an international taxation expert, providing strategic counsel to businesses with complex compliance, tax and financial issues in an effort to help them grow their business globally. She often gives lecture on U.S. tax developments, transfer pricing, taxes on the sale of goods and services, U.S. tax policy development, taxation of internet commerce and multi-jurisdictional global tax planning. Kathleen enjoys reading, photography, cooking and spending time with her husband and eleven-year-old daughter.
Building an online business is a lonely endeavor.
Join our newsletter to get stories of successful global entrepreneurs on how they build their online business.
.jpg)
