It is a big issue for many business people and entrepreneurs whether they can set up a Limited Liability Company (LLC for short) in the US as non-residents. Let’s delve into the US peculiarities as a jurisdiction where non-residents can set up a company, naming the main steps necessary to set up a Limited Liability Company in the US if non-resident.
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Can a non-resident incorporate an LLC in the US?
A popular myth about LLC incorporation in the US is that you need to be an American citizen with a SSN, i.e., social security number, to set up one. This is not the case. You don’t need an American passport or be a US resident, i.e., have a green card, or have a SSN to launch a company in the US.
Take a look at the business opportunities available to US non-residents:
- LLC incorporation in the US
- account opening with an American bank
- access to US domestic payments.
Not a single law stipulates you shall be an American citizen or a green card holder to set up an LLC in the US. Overseas company owners are free to pursue LLC incorporation in the US regardless of whether they are physically located in the country or reside therein. US company owners may be citizens of basically any state or country in the world. Under the US laws, they are allowed to create an LLC in the States.
In case of non-resident entrepreneurs willing to set up an LLC in the US, the latter shall follow rules and laws different from the ones regulating company incorporation for US citizens. This is why getting a thorough understanding of company incorporation procedures in the US is a wise first step for those potential non-resident founders about to set up one.
Advantages for non-resident LLC founders in the US
Now that you know that a US non-resident can pursue LLC incorporation in the country, let’s move to the resulting benefits.
LLC incorporation in the US opens the door to multiple commercial and practical perks for non-residents, hence its high appeal. With LLC incorporation, a non-resident founder gets access to the huge US market, together with local venture capitalists and investors. Moreover, a foreign company based in the US, enjoys higher reputation and confidence against the competition.
Overseas founders enjoy the same benefits US company owners have. The most significant of them are listed below:
- Personal liability protection. Any person who considers launching a business in the US has multiple options to do it. The easiest one is probably to become a private entrepreneur, since in many US states they are not required to go through any registration procedures and all profits will arrive in the entrepreneur’s personal account. Yet you risk your personal assets working as a private entrepreneur, since in this case creditors are free to sue you for any unpaid debts your business has. A Limited Liability Company is a type of business that comes with personal liability protection for the owner. An LLC is a separate legal entity whose owner may not be held liable for any outstanding company’s obligations. The owner’s personal assets and bank accounts may not be seized or sold to settle the LLC debts.
- Pass-through taxation. Unlike corporations, LLCs do not pay double taxes. An LLC distributes all its profits between company owners who pay taxes on an individual basis. This is basically pass-through taxation. With corporations, it is all different. The IRS charges corporate profit taxes both on corporate and individual levels, meaning LLC owners shall submit both corporate and individual tax returns.
- Flexible ownership structure. LLCs can have any number of owners, a.k.a. members. The latter may be natural persons, corporations, trusts, or any other LLCs. It is also possible to set up a single-member LLC, with the only member being a non-resident.
- Flexible management structure. In the US, LLC owners have multiple options to manage their company. LLC members are free to manage it themselves, hire a non-member manager to do it, or set up a management structure headed by the BoD and corporate executives for the above purpose.
- Simplified incorporation procedures. It is not as easy to set up an LLC as an individual business, yet there is nothing extremely complicated about it. All you have to do is file a couple of documents. Depending on a particular state, LLC incorporation procedures for US non-residents may take several weeks.
Here’s when you won’t pay any taxes on your LLC in the US:
- LLC in question is 100% owned by a US non-resident, regardless of whether it is a natural or a legal person
- it has no economic substance in the US
- its income is not effectively related to the US.
To avoid submitting a tax return to the IRS, all LLC members shall be US non-residents.
You will need a foreign bank account for your company to operate as an LLC in the US. For more information as to how you can select the bank account abroad that would work best for you, please contact the International Wealth weathered industry pros who will offer you a free initial consultation on the subject.
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What US states are best for LLC incorporation?
Experts traditionally recommend that non-residents decide in favor of Wyoming or Delaware for LLC incorporation in the US. Most customers require anonymity and in this case Delaware and Wyoming are top choices, as in Delaware LLC owners are not obliged to provide their names and in Wyoming nominee services for foreign LLC owners are an option.
You should choose Delaware only if you plan to transform your LLC into a C Corp in the future to raise venture capital from US investors.
For more information as to how you can incorporate an LLC in Delaware please follow the link above.
If Delaware is not an option in your case, consider LLC incorporation in Wyoming. The reason is simple, Wyoming is the most popular US state among non-residents pursuing online business and e-commerce who need an easy way to set up and manage their companies. Known for its friendly business atmosphere amongst government officials and private businessmen, Wyoming is often referred to as Switzerland of the Rockies.
Learn how to register an LLC in Wyoming as a non-resident following expert advice.
An LLC registered in the name of a non-resident does not require a physical address. Yet, it does need a local registered agent whose actual address may serve as a company mailing address to incorporate a business and set up a bank account in the US.
How to obtain an EIN in the US
Every commercial enterprise operating in the US needs an official ID document for taxation purposes. Yes, we are referring to a tax ID. An American citizen gets a taxpayer identification number, also known as their social security number or SSN. This is obviously not an option for a US non-resident about to incorporate a foreign LLC in the US. Small businesses in the US require an Employer Identification Number or EIN issued by the IRS to operate.
American citizens may apply for an EIN online. The option is available through the IRS website. Non-residents can call the IRS office and email or fax the required SS-4 form to the IRS remotely to make it possible. The above form contains new company info like its DBA or business name, and/or the mailing address of its registered agent. Where for any reason a non-resident fails to apply for their EIN, such US non-resident should apply to the IRS for their Individual Taxpayer Identification Number, a.k.a. ITIN.
Steps to set up an LLC shortlisted
Most US states require that potential LLC founders prepare and register the Memorandum of Association containing the basic company info and pay registration fees for LLC incorporation purposes. In certain states, they require that company founders state their physical business address together with LLC member info.
In case of a multi-member LLC, the Operating Agreement shall be drafted. The latter stipulates LLC management rules and its operating principles. Besides, it lists all LLC owners. Submitting the above agreement to the Secretary of State is not a must.
After LLC incorporation in the US, you shall open a bank account for the company with any foreign bank before the LLC in question is put into use.
The International Wealth experts are happy to render any legal assistance you may require to remotely set up an LLC in the US in the name of a foreign citizen and open an overseas bank account for that purpose.
Supported by International Wealth, you will seamlessly open a corporate bank account in the US payment system for an IT or Fintech company of yours. For more information, please, feel free to contact the International Wealth consultants.
Alternatively, you can apply for a free initial consultation as to LLC incorporation in the US or any other issues bothering you with our experts at email@example.com.