LLCs for Non-US Citizens

What is a Non-US Citizen?

Before we continue, we should probably define what a non-US citizen is because “non-citizen” is a broad term, as it applies to any non-legal member of the US. For the purposes of starting a US LLC, non-citizens living inside or outside of the US can both legally form a US LLC. However non-citizens don’t all fall into the same category.

In IRS documents, people who are not US citizens are referred to as “aliens.” The term “alien” refers to people born in other countries who do not hold US citizenship (not the aliens from outer space with their flying saucers). A non-citizen can be classified as a resident alien or a non-resident alien. You are considered a resident alien if you meet one of two tests, the green card test, or the substantial presence test. If you do not meet those tests, you are considered a non-resident alien. Both non-resident and resident aliens can form US LLCs, and the only real difference is the tax forms they’ll file come tax time.

Can Non-US Citizens Own LLCs?

Whether you’re living in Maine or Mongolia, you don’t need to be a US citizen to own an LLC. In fact you don’t even need to step foot in the US to start an LLC. If you have an internet connection you can start your LLC from anywhere in the world.
It should be noted that owning an LLC does not authorize you to work in the US. If you want to work for your LLC, you’ll need to obtain a proper visa and work authorization. This means that you can run your LLC from afar, or hire someone else to work the business, but you won’t be authorized to fly into town and start pouring coffee at Danish Bill’s Coffee & Espresso, LLC.

Benefits of LLCs for Non-US Citizens

• Asset Protection. Whether you are living in the US or abroad, or happen to be the one foreign member of a multi-member LLC, an LLC protects your assets all the same. Things like your home, vehicles, and bank accounts are insulated from lawsuits or bankruptcy. This means that while the powers that be may be able to go after the LLC’s accounts, everything you’ve worked for in the US or abroad, is generally safe and secure.
• Ease of Maintenance. LLCs are relatively low maintenance compared to corporations. You don’t have to worry about electing a board of directors, holding shareholder meetings, or maintaining meeting minutes. LLC owners who aren’t US citizens already have a ton on their plate with regards to getting an EIN, a business address, opening a bank account, and figuring out taxes. LLCs—with their reduced paperwork, flexibility in decision-making, and general minimal annual upkeep—are excellent choices for non-US citizens looking to start a business in the US.
• Economic Access. Forming an LLC in the US not only grants you access to and a foothold in the world’s largest economy, it also lends your business credibility with customers from all over the globe.
• Pass-Through Taxation. LLC taxes are about as simple as business taxes come. Unless it files for a different tax classification, an LLC is a pass-through entity. This means that the profits and losses of the business are passed through to the tax returns of the members of the LLC.

  Note: A non-citizen LLC can elect to be taxed as a C corporation, but in order for your LLC to elect S Corp taxation, the LLC members must be US citizens or resident aliens.

How to Form an LLC in the US as a Non-Citizen

The process to form an LLC in the US is not unlike the process US citizens undertake. Hiring a registered agent, crafting an operating agreement, and choosing a state and name for your LLC are the first steps you’ll need to take when forming your business. However, your LLC is truly created by filing your Articles of Organization with state authorities.

While US citizens and non-citizens follow similar steps in order to successfully form their LLC, there are a few hoops that non-citizen LLC owners will have to jump through. Getting an EIN, listing a business address if you’re not in the country, and opening a US bank account for your LLC are a bit more involved for non-citizens.

Get an EIN

An EIN acts as a Social Security number for your business and is necessary for most LLCs. Obtaining an EIN for citizen-owned LLCs is pretty straightforward, and can be done online in a matter of minutes. Non-citizens without a taxpayer identification number (such as a Social Security number or ITIN) can’t file online. Instead, they have to file by phone (if they live outside of the US) or else mail or fax an IRS Form SS-4 form.

You’ll need the following information to successfully fill out Form SS-4:

• Name of your business
• US business address
• Explanation of your LLC’s main line of merchandise sold, construction work done, products produced, or services provided
• Name of LLC member with primary control over the business
• Business start date
• Fiscal year end month
• Expected number of employees for coming year
• Third party designee (someone you authorize to receive your EIN and other communication from the IRS), if applicable

Northwest can help non-citizens get an EIN with our EIN obtainment service.

Get a Physical US Mailing Address

US citizens generally have a footprint inside the US, which makes it easier for them to list a physical US mailing address. While you aren’t required to have a US mailing address (LLCs that don’t expect to receive mail, order business cards, or interact with US customers may not need an address), you may find a US address helpful when it comes time to open a bank account for your LLC, take out loans, or simply look like a credible business.

If you live in the US, you can always use your home address as your business address—though that comes with its own issues, such as privacy, junk mail, and other annoyances. If you live outside of the US, you’ll need to hire a registered agent in the state where your LLC is organized. This might tempt you to use their business address for all your address needs. This isn’t wholly advisable, however, as your registered agent’s address is meant to receive official state and legal documents, not bills, magazine subscriptions, or a birthday card from Uncle Bob.

Need an address? As your registered agent, we allow you to use our business address on official state filing documents (not business cards or subscriptions to Redbook). We also include free limited forwarding of regular mail.

Open a US Bank Account

You won’t be able to open a US bank account for your LLC until you’ve received your EIN, so don’t skip that step. While there are a few US banks that will let foreigners open an LLC account online, most want you to walk in and hand over the documents personally. Most people usually have to fly to the US and walk into a bank to open an account.

Every US bank is different and has its own rules and regulations. The only way to know exactly what you will need to open a business account is to contact the bank where you want to open an account. Most banks will require at least:

• Passport and an ID card/driver’s license from your home country
• Articles of Organization
• LLC Operating Agreement
• EIN
• Proof of your LLC’s US address. Some banks may also require you to list your address from your home country.

The bank you choose may have additional requirements regarding necessary documents, which is why it is important to call ahead and ask. Once you’ve opened your US bank account, your LLC will be ready to accept payments, pay employees (if you have any), pay bills, and file taxes.

Non-US Citizen LLCs and Taxes

Let’s start by saying that if your LLC is doing business in the US, whether it’s a drop-shipping business, real estate holding company, or just a local coffee shop, the IRS is going to want their cut. It is important to remember that we are professional registered agents and business formation gurus, not tax geniuses. However, we can offer you a basic breakdown of what the IRS will expect from non-US citizens come tax season.

Non-Citizen Single-Member LLC

LLCs are pass-through entities, which means that in general, an LLC’s income and expenses will be reported on the owner(s) income tax return, which is IRS Form 1040. If you are considered a resident alien, 1040 is the form you will need to file. If you are a non-resident alien, you will need to file IRS Form 1040NR.

Non-resident aliens will also likely need to file two extra forms, Form 5472 and Form 1120 with your return. Normally, these forms are just for corporations, but the IRS notes that foreign-owned disregarded entities (that’s the default tax status for single-member LLCs) may also need to file. These forms allow the IRS to keep tabs on US businesses that have foreign ownership (or foreign businesses that do business within the US). If applicable, these forms will need to be filed every year, even if your LLC has no income.

Foreign-Owned Multi-Member LLC

If your LLC is owned by you and one or more members, the IRS will consider your LLC a partnership for tax classification purposes. An LLC taxed as a partnership will need to file Form 1065, including Schedule K-1. Together these filings report the profits and loss of each partner. There is no Form 5472 (or 1120) filing requirement for a multi-member LLC with foreign members when taxed as a partnership.

In addition to the Schedule K-1 for each partner, the LLC may have to file Forms 8804 and 8805 if the LLC has income connected with a US trade or business. Individual members report their share of profits on their personal tax returns (Form 1040NR for non-residents).

With so many forms and moving parts with the US tax system, it is probably a good idea to contact a tax professional to help guide you through the entire process, at least for your first year of business.

Welcome to the US!

As you can see, it takes a bit of work to start and maintain an LLC in the US as a non-citizen, but that shouldn’t deter you from reaching for your dream. Ready to make your dream of owning a business in the US a reality? Learn more about…

How to Do Business in the USA