Why Non-Residents Form a U.S. LLC

A U.S. LLC offers non-residents a flexible, tax-efficient business structure recognized worldwide. Whether you're running an e-commerce store, a SaaS company, freelancing for U.S. clients, or investing in U.S. real estate, an LLC provides the legal framework to operate professionally in the United States.

LLC Structures for Non-Resident Owners

The IRS treats LLCs differently based on the number of members (owners) and the tax elections made. Understanding the structure that fits your situation is critical for both compliance and tax optimization.

Single-Member LLC (Disregarded Entity)

A single-member LLC owned by a non-resident individual is classified by the IRS as a disregarded entity. While the LLC itself does not file a standard income tax return, the IRS requires foreign-owned disregarded entities to meet specific reporting obligations under Treasury Regulation §1.6038A-1.

Multi-Member LLC (Partnership)

When two or more non-residents form an LLC together, the IRS treats the entity as a partnership by default. The LLC must file Form 1065 (U.S. Return of Partnership Income) and issue Schedule K-1 to each member. Non-resident members may also need to file individual U.S. tax returns depending on whether the LLC earns income effectively connected with a U.S. trade or business.

Electing Corporate Tax Status

Some non-residents choose to have their LLC taxed as a C-Corporation by filing Form 8832 (Entity Classification Election) with the IRS. This can be beneficial in specific situations such as when seeking U.S. venture capital or structuring for treaty benefits. We advise on whether a corporate election makes sense for your circumstances.

Form 5472 & Pro Forma 1120: What You Need to Know

If you own a single-member LLC as a non-resident, Form 5472 is the most important annual IRS filing requirement you'll face. The IRS uses this form to track reportable transactions between your U.S. LLC and its foreign owner or other related parties.

What Are Reportable Transactions?

Reportable transactions include any monetary exchange between you (the foreign owner) and your LLC. Common examples include:

• Capital contributions: Money you transfer into the LLC's bank account to fund operations
• Distributions: Profits you withdraw from the LLC
• Loans: Funds lent to or borrowed from the LLC
• Expense reimbursements: Business expenses paid personally and reimbursed by the LLC
• Rent or service payments: Payments between the LLC and related entities

The Pro Forma Form 1120

The pro forma Form 1120 is filed alongside Form 5472. For a disregarded entity, this is not a full corporate tax return — it is a cover sheet that identifies the LLC. You write "Foreign-Owned U.S. DE" across the top of the Form 1120, complete the identifying information (name, address, EIN), and attach Form 5472. No income, deductions, or tax amounts are reported on the pro forma 1120 itself for a disregarded entity.

Choosing the Best State for Your LLC

Each U.S. state has its own LLC laws, fees, and privacy protections. For non-residents, three states consistently stand out due to their favorable business environments, low maintenance costs, and strong privacy provisions.

The right state depends on your business type, growth plans, and whether you need to open a physical bank account. We assess your specific situation and recommend the state that aligns with your goals — and we handle the entire filing process with the Secretary of State.

EIN and ITIN for Non-Residents

Employer Identification Number (EIN)

Every U.S. LLC needs an Employer Identification Number (EIN) — the business equivalent of a Social Security Number. The EIN is required to open a U.S. bank account, file tax returns, and hire employees or contractors.

Non-residents cannot use the IRS online EIN application. Instead, the application must be submitted by phone, fax, or mail using Form SS-4. We prepare and submit your EIN application and typically obtain your number within 1–3 business days by fax.

Individual Taxpayer Identification Number (ITIN)

Some non-residents may need an ITIN in addition to their LLC's EIN. An ITIN is a tax processing number issued by the IRS to individuals who are required to have a U.S. taxpayer identification number but are not eligible for a Social Security Number. You may need an ITIN if:

• Your LLC earns income effectively connected with a U.S. trade or business
• You need to file a personal U.S. tax return (Form 1040-NR)
• You claim treaty benefits requiring a U.S. tax ID

The ITIN application is filed using Form W-7 and requires certified copies of your passport or other identifying documents. As a Certifying Acceptance Agent (CAA) or through our partnerships with CAAs, we can streamline this process so you don't need to mail your original passport to the IRS.

Our LLC Formation Process

We handle the entire formation process remotely — you don't need to visit the United States. Here's how it works:

Annual Compliance Requirements

Forming your LLC is only the beginning. Staying in good standing with both the state and the IRS requires ongoing compliance. Missing deadlines can lead to state dissolution, IRS penalties, or loss of liability protection.

Tax Obligations for Non-Resident LLC Owners

Tax obligations for non-resident LLC owners depend on the type of income the LLC earns and how the LLC is classified for tax purposes.

Effectively Connected Income (ECI) vs. Non-ECI

The IRS distinguishes between income that is effectively connected with a U.S. trade or business (ECI) and income that is not. This distinction determines your U.S. tax liability:

• ECI: Income from business activities conducted within the United States (e.g., services performed in the U.S., sales through a U.S. office). ECI is taxed at regular graduated rates and requires filing Form 1040-NR.
• Non-ECI (FDAP): Fixed, determinable, annual, or periodical income from U.S. sources (e.g., interest, dividends, royalties). Generally subject to 30% withholding (reduced by applicable tax treaties).
• Foreign-source income: Income earned entirely outside the U.S. through a non-resident single-member LLC is generally not subject to U.S. federal income tax.

State Sales Tax

If your LLC sells taxable goods or services to customers in a U.S. state where you have nexus (a sufficient business connection), you may be required to collect and remit state sales tax. This is separate from federal income tax. Following the South Dakota v. Wayfair Supreme Court decision, economic nexus thresholds now apply in most states — meaning even remote sellers can trigger sales tax obligations.

We help non-resident LLC owners determine their sales tax obligations and can refer you to specialists for sales tax registration and filing if needed.

Our Non-Resident LLC Services

We provide comprehensive, end-to-end services tailored specifically for non-resident LLC owners. Whether you're just getting started or already have an LLC that needs tax filing, we can help.

• Full LLC Formation: State filing, registered agent, Operating Agreement, EIN application, and BOI report — all handled remotely.
• Form 5472 & Pro Forma 1120 Preparation and Filing: Annual compliance filing for foreign-owned single-member LLCs, prepared and e-filed on your behalf.
• Form 1065 Partnership Returns: Full preparation and filing for multi-member LLCs, including Schedule K-1 distribution to all partners.
• Form 1120 Corporate Returns: For LLCs that have elected C-Corporation status, we prepare and file the full corporate return.
• Form 1040-NR (Non-Resident Individual Tax Return): If you have ECI or need to file a personal U.S. return, we handle the complete preparation and filing.
• ITIN Application Assistance: We assist with Form W-7 preparation and document certification.
• Registered Agent Services: We serve as your LLC's registered agent, ensuring you never miss important legal or state correspondence.
• Annual State Compliance: Annual report filing, franchise tax payments, and state good standing maintenance.
• U.S. Bank Account Guidance: Recommendations and support for opening a U.S. business bank account as a non-resident.
• Tax Planning & Advisory: Ongoing guidance on structuring your LLC for tax efficiency, treaty benefits, and compliance.

Frequently Asked Questions