US Company Formation for Non-Residents: LLC or Corporation, Taxes and State Selection
Can you register a company in the United States while living and working abroad? For many international entrepreneurs, the answer is yes.
A US company can provide a recognised legal structure for signing contracts, organising ownership and working with international customers. Depending on the business model, a limited liability company may also offer favourable US federal income tax treatment.
However, an LLC and a corporation do not follow the same tax rules. Choosing between them is often more important than choosing the state of registration.
This guide explains the principal requirements, when an LLC’s overseas business profits may fall outside US federal income tax, and why Delaware, Wyoming, New Mexico and Florida deserve consideration.
For service information, visit our USA company formation page.
Why Do Non-Residents Register US Companies?
The appeal extends beyond taxation.
A US entity can give an international business a defined ownership structure, continuity beyond its founder and a framework for entering commercial agreements.
The principal advantages can include:
- Foreign ownership: Ordinary LLCs and C Corporations generally permit full foreign ownership, subject to industry-specific restrictions.
- Limited liability: Owners generally benefit from separation between company obligations and personal assets, subject to applicable exceptions.
- Remote formation: Registration can often be arranged without travelling to the United States.
- Flexible structures: An LLC can accommodate owner-managed businesses, while a corporation provides a share-based ownership framework.
- Commercial opportunities: A US entity may suit particular customers, investors or financial service providers, subject to their acceptance requirements.
Owning a US company does not itself provide a visa or permission to work in the United States. Formation and immigration are separate matters.
LLC or C Corporation: What Is the Difference?
An LLC is a legal structure created under state law. Its federal tax classification depends on its ownership and any tax election.
A C Corporation is generally a separate corporate taxpayer.
| Structure | Usual federal income tax treatment | Main consideration for non-residents |
|---|---|---|
| Single-member LLC | Disregarded as separate from its owner unless corporate taxation is elected | The foreign owner’s circumstances and the income’s connection with the US determine the income tax position |
| Multi-member LLC | Partnership unless corporate taxation is elected | Partnership returns and potentially withholding obligations require separate assessment |
| C Corporation | Separate corporate taxpayer | Generally subject to federal tax on worldwide taxable income |
| LLC electing corporate taxation | Taxed as a corporation | Does not retain the default disregarded or partnership treatment |
An S Corporation cannot have nonresident alien shareholders. It is therefore generally unavailable to individual owners who are non-US citizens and nonresident aliens for US tax purposes.
Can a Non-Resident-Owned LLC Have No US Federal Income Tax?
Yes, this can be a legitimate outcome in suitable circumstances.
Consider a single-member US LLC owned by an individual who is neither a US citizen nor a US tax resident. The LLC has not elected corporate taxation.
Under the default federal classification, the LLC is disregarded as separate from that owner for income tax purposes. Its business activities and income are therefore assessed at owner level.
A nonresident alien is generally taxed on relevant US-source income and income effectively connected with a US trade or business.
Where the business earns foreign-source service income, performs its work entirely outside the United States and has no US trade or business or other taxable US connection, that income may fall outside US federal income tax.
The reason is the owner’s tax status, income sourcing and business facts—not simply the existence of an LLC.
Example: Services Performed Abroad
An overseas consultant owns a single-member US LLC and performs all consulting work outside the United States.
For service income, the general sourcing rule looks at where the services are performed. A customer’s US address does not, by itself, make work performed abroad US-source service income.
This example requires reassessment if the owner performs work in the US or introduces US staff, business premises or other material US activities.
Different sourcing rules apply to goods, royalties, property income and other income categories. Online trading should not automatically be treated like overseas consulting.
Does “No US Income Tax” Mean No Tax Anywhere?
The owner’s country of tax residence may tax the LLC’s income or distributions.
It may also classify the LLC differently from the United States. A structure treated as transparent for US purposes might be treated as a separate company elsewhere.
Before incorporation, obtain advice covering both sides of the arrangement: US treatment and treatment where the owner lives and manages the business.
The objective is a structure that works across the relevant jurisdictions.
Why Is a C Corporation Different?
A US C Corporation generally pays federal corporate income tax at 21% of taxable income and is generally taxed on worldwide income, subject to applicable deductions, credits and specific rules.
Living abroad and serving customers outside the United States does not automatically exempt its profits.
A further tax layer can arise when profits are distributed. Dividends paid to foreign shareholders are generally subject to US withholding at 30%, unless an applicable treaty or other relief reduces the rate.
A C Corporation may nevertheless suit a project that needs share-based investment arrangements or plans to raise external capital.
It should be selected for the company’s commercial and ownership requirements, with the corporate and shareholder tax consequences included in the assessment.
What Registration Requirements Are Similar Across States?
Although forms and procedures differ, the basic formation framework is broadly comparable.
Expect to address:
- An acceptable company name.
- A registered agent with an appropriate address in the formation state.
- Formation documents filed with the relevant state authority.
- Ownership and management arrangements.
- An LLC operating agreement or corporate governance documents, as appropriate.
- An Employer Identification Number, or EIN, for applicable reporting and operational needs.
- Any licences and additional registrations required by the activities.
Formation providers and financial institutions also require identification and supporting information for onboarding. These documents are separate from the information appearing on a state’s public formation filing.
A registered agent’s address serves a legal function. It should not automatically be treated as the company’s operating premises or an address acceptable to every bank.
Foreign founders do not necessarily need an SSN or ITIN to obtain an EIN. The appropriate application route depends on the responsible party’s circumstances.
Which States Are Worth Considering?
There is no universally best state for every non-resident.
For a business operated entirely abroad, administration and recurring costs may be important. For a business with US employees, premises or inventory, the location of those activities becomes particularly relevant.
| State | Why consider it? | Main distinction |
|---|---|---|
| Delaware | Established corporate law and specialist business courts | Particularly relevant to projects requiring sophisticated corporate governance |
| Wyoming | No state corporate or personal income tax | Annual reporting and a state charge still apply |
| New Mexico | Limited recurring state registry administration for LLCs | LLCs do not file routine annual or biennial reports with the Secretary of State |
| Florida | A practical option where the business will genuinely operate in Florida | Annual reports and the applicable fees must be budgeted for |
Delaware: Corporate Law and Ownership Arrangements
Delaware’s attraction includes its developed corporate law and Court of Chancery, which handles important business and corporate disputes.
It is worth considering where a company anticipates negotiated investor rights, ownership changes or complex governance arrangements.
Delaware also forms LLCs, but it should not be selected solely on the assumption that registration produces a tax-free business.
LLCs have an annual state tax obligation even though they do not file an annual report with the Division of Corporations. Corporations follow separate annual report and franchise tax requirements.
Wyoming: An Option for an Owner-Managed Business
Wyoming has no state corporate or personal income tax. This makes it worth comparing for a business that does not need to be established in another particular state.
However, maintaining a Wyoming entity involves annual reporting and the applicable state charge.
The absence of Wyoming income tax also does not remove federal obligations or taxes arising from connections with other states.
New Mexico: Reduced Recurring Registry Administration for LLCs
New Mexico is worth considering where a founder prioritises straightforward ongoing LLC registry administration.
An LLC does not have the routine annual or biennial Secretary of State report requirement applicable to certain other entity types.
That distinction does not remove registered agent costs, federal reporting or any applicable business taxes and registrations. Corporations have different requirements, so the LLC position should not be applied to them.
Florida: Relevant When Operations Are There
If the proposed business will have staff, premises or significant operations in Florida, forming there may simplify the registration arrangements compared with forming elsewhere and then registering in Florida.
Florida requires annual reports. Its published standard annual report fees are $138.75 for an LLC and $150 for a profit corporation, excluding late charges or additional services.
The state should be assessed against the actual operating plan rather than treated as a universal low-tax option.
Can You Register in One State and Trade in Another?
Yes, but additional obligations may arise.
A company formed in one state may need to register to do business in another state where its activities meet the relevant requirements. This is commonly called foreign qualification—even when the company was formed elsewhere within the United States.
Tax obligations are a separate assessment. Physical or economic connections can create state tax responsibilities, including sales tax obligations for certain remote sellers.
Choosing Delaware or Wyoming does not prevent another state from applying its rules to activities connected with that state.
What Must a Foreign-Owned LLC File?
A foreign-owned single-member LLC can have reporting obligations even when no federal income tax is payable.
Where it has reportable transactions with its foreign owner or another related party, it generally must file Form 5472 attached to a pro forma Form 1120.
Reportable transactions can include owner contributions and distributions, including transactions connected with formation. A company with no customer revenue may therefore still need to file.
The initial penalty for failing to file Form 5472 correctly and on time is $25,000.
A multi-member LLC generally requires a partnership reporting assessment, commonly involving Form 1065. Additional withholding and owner-level filings may apply where there is effectively connected taxable income.
Agree the reporting responsibilities before formation and keep records of movements between the company and its owners.
What About Beneficial Ownership Reporting?
As of this article’s publication date, entities created in the United States are exempt from federal FinCEN beneficial ownership information reporting under the Corporate Transparency Act.
A US-created LLC owned by an overseas person remains a US-created entity for this purpose.
This exemption does not remove IRS reporting, state disclosures or the identification requirements applied by banks and service providers. Separately, certain entities formed outside the United States and registered to do business there remain within the federal reporting framework.
Banking and Payment Services Need Separate Assessment
A US entity and EIN may support an application for business banking or payment services, but acceptance depends on the provider.
The owner’s residence, business activity, customer locations and expected transactions can affect eligibility.
Before formation, identify the intended providers and review their requirements. This is particularly important where the business will be managed entirely abroad.
For additional background, explore our USA company formation FAQ.
Discuss Your US Company Formation With BRIS GROUP
The right choice begins with the business model: who owns the company, where work takes place, how income is earned and whether there will be US operations or outside investors.
BRIS GROUP provides international company formation services from its main office in England.
Share your intended activities, ownership, country of residence and banking requirements so that the appropriate formation scope and an individual quotation can be considered.
Visit our USA company formation page for service information.
This article provides general information. Federal, state and overseas tax treatment depends on the entity’s classification, ownership and actual activities.