How to Start an LLC as a Non-U.S. Resident (Step-by-Step Guide)
Starting an LLC in the United States can seem daunting, but by following these detailed steps, you can navigate the process with ease and confidence.
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For non-U.S. residents, forming an LLC is an attractive option, as it can be a gateway to entering the U.S. market while maintaining legal and tax benefits.
A non-resident is someone who doesn’t have a substantial presence in the U.S. but has citizenship, which presents challenges if you’re trying to set up an LLC. While non-residents are able to form LLCs, there are often additional steps necessary, Note that non-U.S citizens face similar challenges and can learn from this guide as well.
How is the process different than a resident starting an LLC?
While LLCs owned by those without residency are largely the same as resident-owned LLCs, there are a few extra steps and challenges to consider before embarking on the formation process.
- Registered agent requirements: Any registered agent appointed to an LLC must have a physical address located within the state where the LLC is formed. Typically an LLC owner can act as their own registered agent, but for owners who do not live in the United States, they will need to use either a registered agent service or appoint someone known to them as their registered agent.
- Additional documentation: There may be identification documents required from owners, in place of things like Social Security Cards that a resident may have. The exact filing requirements will vary based on the state where an LLC is formed.
- Banking: If LLC owners want to open a business bank account in the United States, it can be difficult to do from overseas. Owners may need to visit the U.S. to open and manage bank accounts due to financial regulations.
- Taxation: American tax law is complicated, especially for foreign-owned LLCs. Most likely, LLC owners will need to understand tax obligations both in the United States and in their home country.
Going into the process understanding these challenges can make it smoother and faster to form an LLC in the United States.
How to start a non-resident LLC in the U.S.
1
Choose the right state for formation
The choice of state can significantly impact your LLC due to differences in state laws, taxation, and annual fees. States like Delaware, Wyoming, and Nevada are popular among non-residents due to their business-friendly regulations and relative anonymity offered to owners.
You should also assess the legal environment, including the ease of doing business, legal protections for company owners, and the state’s history of business litigation. Economic factors such as state taxes (some states offer no state income tax) and incorporation fees should be considered.
If needed, you can contact state business offices or consult with legal professionals specializing in business formation to get detailed, state-specific advice.
2
Select a unique name for your LLC
Each state has specific naming requirements, such as prohibitions against certain words and phrases or requirements that clearly indicate the business is an LLC. Be sure you choose a name that meets these guidelines to avoid denial, as well as something that captures your business’s mission.
States will also require business names to be unique. You can use online tools provided by the state’s business registration entity to ensure your desired name is not only available but also compliant with state regulations.
Name reservation: If you are not ready to file your Articles of Organization immediately, consider reserving your name to prevent others from taking it. This reservation typically lasts for a set period, such as 120 days, depending on the state.
3
Appoint a registered agent
A registered agent is a designated individual or business entity responsible for receiving legal documents, government communications, and official notices on behalf of a business entity, such as an LLC. The registered agent must be available during business hours to receive legal documents on behalf of the LLC. This role is crucial for maintaining compliance with legal requirements and must be named on LLC formation documents.
It is best to select a registered agent who has experience dealing with owners living abroad and can provide additional support such as notifications of filing deadlines and changes in state law that may affect your LLC.
You may consider using a professional registered agent service, especially if privacy is a concern or if you do not have a physical location in the state.
Our picks for best registered agent services
4
File Articles of Organization
In some states, this may be called a Certificate of Formation or something similar, but will serve the same purpose. This document serves as the official formation certificate for your LLC and must include details like your business name, principal business address, registered agent name and mailing address, and the names of the members.
Many states allow for online filing, which can expedite the process and be simple from abroad. However, mailed submissions are also common and may be necessary if additional documentation is required. State fees vary but generally range from $50 to $500. Processing times can also vary, with some states offering expedited services for an additional fee.
5
Create an operating agreement
An operating agreement outlines the governance and financial arrangements of your LLC and can help prevent disputes among members by clearly defining roles, responsibilities, and procedures. While this document is usually not required for formation, it is key to running a successful business, especially when owners are not local and may be collaborating with others.
Operating agreements generally include things like the contributions of each member, allocation of profits and losses, member voting rights, management structure, and protocols for changing the membership structure or dissolving the LLC.
You may choose to seek professional help to draft an operating agreement, in order to ensure all legal bases are covered, particularly in complex or multi-member LLCs.
6
Obtain an Employer Identification Number (EIN)
An EIN is essentially the SSN (Social Security Number) for your business and is required for U.S. tax purposes, hiring employees, and opening business bank accounts. This is especially important for non-U.S. citizen LLC owners who may not have their own tax identification in the United States.
The application can be completed online through the IRS website or by mailing a completed Form SS-4. Non-U.S. residents without a Social Security Number can still apply for an EIN by indicating their status on the form. There is no cost to obtaining an EIN.
7
Apply for ITIN, if needed
If you expect to have additional personal tax obligations outside of your business, it can be useful to apply for an Individual Tax Identification Number (ITIN). For example, if you need to file a personal U.S. tax return or are receiving income such as rental income from U.S. property, an ITIN would be necessary. The IRS issues ITINs, which can be applied for online.
8
Open a U.S. business bank account
Most LLCs will choose to open a bank account specifically dedicated to their business. Not only does this make accounting simpler, it can ensure the liability protection of an LLC remains in place. Often, this is more important for owners who may not otherwise have a bank account that complies with U.S. regulations.
However, this step can be one of the most challenging due to the requirements for physical presence. Some banks may allow remote opening through specialized services or international branches.
Typically, you will need to provide information such as your EIN, Articles of Organization, operating agreement, and proof of identity. Some banks may require additional documentation.
Check out Found, Relay, and Mercury for remote banking options.
9
Comply with additional requirements
It is critical for any LLC owner to stay informed about and comply with local, state, and federal regulations, including annual report filings and LLC tax obligations. These will vary by state and local regulations, and maybe even the type of business.
Based on your business type and location, specific licenses or permits may be required to operate legally. These can vary significantly from one locality to another, so be sure to understand what is relevant for your LLC going in.
File a BOI report
In an attempt to thwart money laundering, the federal government now requires all LLCs to file a Beneficial Ownership Report, which provides a list of LLC owners to the Financial Crimes Enforcement Network, or FinCEN. Learn more about the BOI report.
Why start an LLC in the U.S. if you don’t live there?
There are many reasons an entrepreneur may choose to form an LLC in general – for non-U.S. residents, there are additional benefits that come into play. Here are just some of the reasons you may choose this option:
- Access to the U.S. market: Forming a U.S. LLC allows non-residents to operate legally within the US, tapping into one of the world’s largest and most diverse markets.
- Limited liability protection: LLC owners can benefit from limited liability protection, which means personal assets are protected from business debts and legal actions.
- Flexibility in management: LLCs offer flexibility in management and don’t require members to be U.S. citizens or residents, unlike other business structures.
- Favorable taxation: LLCs can be tax-efficient, potentially avoiding double taxation, depending on the owner’s country of residence and federal tax treaties with the US.
- Ease of setup: Compared to other business entities, setting up an LLC can be straightforward, with fewer requirements and formalities.
- Enhanced credibility: Having a U.S. company can enhance your credibility with customers, suppliers, and investors.
For these reasons and more, LLCs are a great option if you are looking to start a US-based business without residency
What types of LLCs are there for non-residents?
Anybody, whether a resident or not, who chooses to form an LLC will have some decisions to make about the type of LLC they want to form.
The first choice will be between a single-member LLC and a multi-member LLC.
- A single-member LLC is operated by just one individual, making it a simple option for management and tax reporting. This is often an alternative to sole proprietorships, chosen by solo entrepreneurs who want to establish a presence in the U.S. market.
- A multi-member LLC is made up of two or more members, which allows for shared ownership. The members can be any combination of residents or non-residents, who will enjoy flexible profit distribution in exchange for a more complex operating agreement.
Additionally, there will be a distinction to make between a member-managed and a manager-managed LLC.
- A member-managed LLC involves all members (owners) actively participating in the management of the business. This is similar to a partnership in that each member has a say in the company’s daily operations, often using an established voting process to make decisions. This is a straightforward structure, typically preferred by small businesses.
- A manager-managed LLC has one or more managers appointed to handle all business operations – these managers may or may not be members of the LLC itself. This is generally considered an investor-friendly option, especially for owners who are not skilled in business management or large companies.
All of these LLC types have benefits and drawbacks and can be applied by non-U.S. resident owners effectively.
Pros and cons of a non-resident LLC
Pros
- Establishes a legal and commercial presence in the United States, one of the world’s largest economies.
- Members’ personal assets are protected from business liabilities, reducing financial risk.
- A potential for tax efficiency, including avoiding double taxation, depending on your home country’s tax treaty with the US.
- LLCs can choose between member-managed or manager-managed structures to suit involvement level.
- Relative simplicity in setting up compared to other business structures, with fewer bureaucratic hurdles.
- Operating a US-based LLC can enhance your business’s credibility with international banks, vendors, and customers.
Cons
- Navigating US, and possibly international, tax laws can be complex and require professional assistance from a CPA.
- Opening a bank account can be difficult without a physical presence in the US; some banks may require a visit.
- Keeping up with federal and state regulations requires attention and can be more cumbersome from abroad.
- Must appoint a registered agent in the state of formation, adding to the initial setup costs.
- Understanding and managing cultural differences and local business practices can be challenging.
- Depending on the state, you may face higher fees for legal and consultation services.
Which states are best to start a non-resident LLC?
When choosing a state to form an LLC, consider several factors, including the state’s legal environment, taxation policy, and the cost of doing business. Two states often stand out as favorable options: Wyoming and Delaware.
Wyoming
Wyoming is appealing due to its business-friendly tax policies, including no state income tax and low fees. The state also offers a high level of privacy for Wyoming LLC owners, as it does not require member names to be listed on formation documents.
Delaware
Delaware is another popular choice for its well-established legal framework that provides clear, reliable laws for businesses. It is known as the “corporate capital” of the U.S. due to its business-friendly courts and laws. Additionally, Delaware’s Court of Chancery is well-regarded for its expertise in corporate law, providing a level of predictability and security for business disputes.
Both states offer distinct advantages that can be beneficial for LLC owners living abroad depending on their specific business needs and goals.
FAQs
To start a non-resident LLC, where should you start?
The process begins with thorough research to choose the best state for your LLC, considering factors such as legal requirements, taxation, and business environment. Following this, you should check for name availability, appoint a registered agent, and gather the necessary documentation to file your Articles of Organization with the state.
Does a non-resident LLC need a bank account?
While not required, having a U.S. bank account is highly advisable for handling transactions within the U.S. efficiently. This can be challenging as many banks require physical presence for account opening. However, banking affiliates like Found, Relay, and Mercury offer services tailored for non-residents, which can facilitate this process.
If you’re not a US resident, how does you pay LLC taxes?
Non-resident LLC owners must navigate both U.S. and their home country taxes. An LLC is a pass-through entity, meaning it does not pay taxes at the business level. Instead, profits and losses are reported on the personal tax returns of the owners. Non-residents will typically only need to pay tax on income effectively connected with a U.S. trade or business.
Is a sponsor needed?
No, you do not need a sponsor to form an LLC in the US. The process is open to anyone, regardless of their nationality or residency status.
What forms are required to start a non-resident LLC?
The primary form needed is the Articles of Organization, which is required for all LLCs and must be filed with the state where the LLC is being formed. Additionally, non-residents will need to apply for an Employer Identification Number (EIN) from the IRS, which is necessary for tax purposes and to open a bank account.
Are fees higher to start a non-resident LLC?
The basic fees for forming an LLC, such as filing fees for the Articles of Organization and annual report fees, are generally the same for residents and non-residents. However, non-residents may face additional costs for services like hiring a registered agent or for more complex legal and tax advice.
Do non-resident aliens and green card holders need an ITIN to start an LLC in the US?
Non-resident aliens looking to start an LLC in the United States will generally need an Individual Taxpayer Identification Number (ITIN) if they do not have a Social Security Number (SSN). However, for non-residents who already have a green card, an SSN would be used since green card holders are considered residents for tax purposes.
Can my registered agent address be used for my U.S. banking account?
Typically, you cannot use your registered agent’s address as the primary address for your U.S. banking account. Banks typically require the physical address of your business operations or your personal address to comply with regulatory requirements.
How are nonresident LLC taxes different than resident owners?
Non-resident LLC owners file different forms and pay a different rate than resident owners and are taxed at 30% and must have a tax agent calculate their taxes owned.
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