Vincenzo Villamena, CPA & founder of Entity Inc., helps global entrepreneurs with U.S. incorporation, tax filing and compliance.
American and non-American entrepreneurs living overseas can benefit from forming a U.S. limited liability company. LLCs are a flexible and accessible U.S. business structure that offers financial legal liability protection for the owners as well as the opportunity to access U.S. markets.
Benefits Of Establishing An LLC
For Americans living and working abroad, setting up a U.S. LLC can offer tax advantages, particularly for freelancers and self-employed professionals.
Compared to other U.S. corporate structures, the pass-through taxation structure of an LLC means the company’s income is not taxed at the entity level. Instead, it passes through to the owner’s personal tax return, simplifying U.S. tax filing.
Owning an LLC also offers legal protection to the owners. This means that it protects personal assets from business debts, and it protects the owner personally from being held legally responsible for issues relating to the business.
A U.S. LLC can also enable invoicing through a professional entity and can simplify access to U.S.-based banking services, which can otherwise be challenging if you don’t live in the U.S. Additionally, forming a U.S. LLC can support the use of various large payment platforms, which often prefer U.S.-registered businesses and which are widely used and trusted by U.S. consumers.
Additional Benefits For Foreign Entrepreneurs
Foreign entrepreneurs can benefit from forming a U.S. LLC, particularly those running online businesses, consulting services or e-commerce ventures. Essentially, a U.S. LLC can open up access to the internal market of the world’s largest economy.
Another benefit is credibility. Owning a U.S.-registered LLC can increase trust with international clients and partners, offering a professional image. For e-commerce entrepreneurs, I’ve found a U.S. LLC can simplify registration on e-commerce platforms. Similarly, access to U.S. financial systems allows non-residents to open business bank accounts, use payment processors and generally operate efficiently within U.S. markets.
The U.S. LLC also offers a straightforward structure compared to other jurisdictions, and there’s no requirement for directors or shareholders to be U.S. citizens or residents.
The Challenges
Starting an LLC in the U.S. can involve what is sometimes complex admin and ongoing fees for compliance with varying state regulations.
Entrepreneurs may also become subject to U.S. self-employment taxes and fewer fundraising options compared to corporations.
To manage these challenges, ensure that an LLC is the right structure for you, your business activities and your long-term business goals. You should also research state laws so that you understand what is required of you in terms of compliance.
How To Establish A U.S. LLC
Setting up a U.S. LLC involves a few straightforward steps.
1. Consider engaging a professional incorporation agent.
Engaging a professional incorporation service or agent can help ensure that the process is completed correctly and help you keep compliant with state and federal requirements after you’ve formed a U.S. LLC. (Disclosure: My company helps with this, as do others.) These experts can also apply for an employer identification number (EIN) on your behalf and advise on bookkeeping and tax obligations.
If you decide to work with a U.S. incorporation agent, look for someone who is experienced and has transparent pricing, good customer reviews and high-quality client support. Avoid agents with hidden fees, or those who are slow to respond to your questions. You may also want to look for ongoing compliance services to help meet legal requirements.
2. Choose the right state for your needs.
Non-residents often register in business-friendly states like Wyoming, Delaware or Nevada due to low taxes, minimal filing requirements and strong privacy protections. Make sure to carefully consider which is the right state for your needs.
3. Choose a registered agent.
All U.S. LLCs must have a registered agent in the state of formation by law. The purpose of a registered agent is to serve as a reliable, official point of contact between your company and the government, ensuring that legal and administrative documents are properly received and handled. Think of them as a designated “receiver” for important paperwork on behalf of your business.
Any resident of a given state can be a registered agent. However, if you don’t live in the state you incorporate your business in, you’ll likely need to contract a registered agent service.
4. Establish a U.S. business address.
With regulations like the Corporate Transparency Act, foreign-owned LLCs will need to have a physical U.S. business address in order to open a U.S. business bank account. You can register a U.S. company with a virtual address in many states, but U.S. banks typically require a physical business address (not a virtual office, mail forwarding service or P.O. Box) when opening a business bank account, especially for foreign-owned LLCs.
5. File the articles of organization.
This is the foundational document that officially establishes the LLC. It includes basic information such as the business name, address and registered agent details. The articles of organization are created automatically when you provide the information to the state in question.
6. Obtain an employer identification number.
An EIN is required for tax purposes, opening a U.S. bank account and to hire employees. The EIN is issued by the IRS and also identifies the LLC for federal reporting.
Final Thoughts
Establishing a U.S. LLC as a foreign non-resident or American abroad can open the door to opportunities and benefits, but it’s important to ensure that you incorporate in the right state and in the right way for your situation. Setting up a U.S. LLC can be a straightforward and efficient way to do business in the U.S., even if you don’t live in the U.S.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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