You’ve probably heard a dozen times, “Open LLC for Non-US Residents – that is the best way to go.”
And it’s true — one of the best routes a foreigner who wants to do business or buy real estate in the US can take is opening an LLC for Non-US Residents. However, for nonresidents, that route has a few extra steps than it does for US citizens.
Here at Nonresident Investor, we’ve been through the process of opening an LLC for Non-US Residents dozens of times. That turned us into legitimate professionals who know each stumbling point and have the answers to most (if not all) questions foreigners might have about the process of opening LLC for Non-US Residents.
We know just how complicated the paperwork might seem. What’s more, we also know how difficult it can be to get your bearings and see the process of opening an LLC for Non-US Residents from start to finish. That’s why today, we’re going over all the details you need to know in order to open a US LLC as a Foreigner, including:
- What an LLC for Non-US Residents actually is,
- Why nonresidents opt for opening LLC for Non-US Residents in the US,
- Which states are the best to open a US LLC as a foreigner, and, of course,
- Which steps you need to take in order to open your very own LLC.
What Is an LLC for Non-US Residents?
Foreigners, non-resident aliens, and US citizens alike (as well as Green card holders) can open an LLC — a limited liability company.
An LLC is a type of business structure. You can open a single-member LLC (where you’ll be the only member and owner) or a multi-member one.
On the surface, an LLC is no different than any other corporation or entity. However, the clue to what makes it so special (and a valuable asset) lies in the name — it provides you with limited liability.
An LLC protects the members or owners from specific liabilities, which means you can’t be personally held responsible for the debts that your business might acquire.
For example, let’s say you’ve opened an LLC for Non-US Residents in order to buy a real estate property or open a business. Somewhere down the road, your business (or yourself) get in a dispute with creditors, clients, or renters and you get sued. If you lose the dispute in court, your business may take a hit (as in, you might lose the money invested in your business), but your personal assets (like your real estate properties, other businesses, and the money in your personal accounts) will stay protected.
That’s what “limited liability” means.
What Does It Mean to Have an LLC for Non-US Residents?
In the day-to-day business, having an LLC for Non-US Residents means that there’s a firm distinction between your business and personal “persona.”
Your business finances need to be decisively separate from your personal ones, and the two should never mingle because that might lead to you losing your limited liability status.
It’s vital that you distinguish your LLC from your personal finances by:
- Including the suffix “LLC” in the name of your business,
- Set up a business bank account,
- Never mix your personal and business finances,
- Pay your business expenses with your business card, and
- Include the title as the LLC owner or member in your professional signature (when handling documents related to your LLC).
What Are the Benefits of LLC for Non-US Residents?
Plenty of foreigners, especially aspiring real estate investors and online business owners who work abroad, are unsure whether they need a business entity in the US. What’s more, they are also unsure whether the LLC route is the best one for them or not.
LLC for Non-US Residents offers a myriad of benefits to nonresidents who are looking to start their next business adventure in the US.
An LLC is basically a cross between a partnership and a corporation. However, it allows for more freedom when it comes to the structure than both of those entities.
When you set up an LLC for Non-US Residents, you also set up an Operating Agreement that’s basically a description of how your LLC will be run. It includes information about who the members are (or who the owner is if it’s a single-member LLC), who is the managing partner, which roles the other members have, and how the profits will be distributed among the members.
Although that might seem like a lot of information you have to give, compared to corporations, this structure is actually quite lax. You have the freedom to structure your LLC for Non-US Residents in any way you see fit.
As mentioned, liability protection is one of the biggest benefits of LLCs. Since we’ve already explained that, we won’t dwell on it any further. However, it is important to mention that the “limited liability” also protects you from your partners.
Should you form a multi-member LLC, you won’t be held personally liable for potential wrongdoings of your co-owners or other members.
LLCs offer plenty of tax benefits to their owners. Depending on which type of LLC you have (single or multi-member), you’ll either be taxed as:
- A sole proprietorship, or
- A partnership.
In both cases, you’ll be taxed as a pass-through entity, which means you won’t be subject to the corporate income tax. Instead, you’ll be taxed as an individual (under the individual income tax law). The income of your LLC will pass through you (and other members of the LLC) and you’ll report them on your annual personal tax returns.
The Simplicity of Procedure
An LLC for Non-US Residents is simple to form (even for nonresidents) and even simpler to run. You don’t have to bother with shareholders, appoint board directors, or hold board meetings. All you really have to do is make a few annual reports.
Why Do Foreigners Opt for an LLC for Non-US Residents?
Most people, even the business-savvy ones, tend to see entering the US business market as something unattainable. The reality is much different — it’s quite easy to open and maintain a business in the States, even if you’re a nonresident. All you have to do is form an LLC for Non-US Residents.
Generally speaking, there are two different reasons foreigners opt for opening an LLC for Non-US Residents in the US:
- They want to have a US company for their offshore online business (that doesn’t have a US-sourced income) — this allows them to have a tax-free business for which they only have the obligation of filing the annual 5472 Form.
- They want to have a US company with US-sourced income (be it from real estate or other business ventures) — real estate investors and other foreign LLC owners that do trade or business in the US, for which they have the obligation of filing the 1065 Form and 1040NR Form.
Let’s take a look at how an LLC for Non-US Residents would be beneficial for both of these options.
A Tax-Free Business
The US generally isn’t that well-known as a tax haven. However, we’re here to tell you otherwise.
The States can definitely be your tax-free safe space. For many entrepreneurs from various fields, the US offers a chance to have a tax-free, low-maintenance business in a world-renowned jurisdiction.
Quite a bit of business people pick the US for their new (mostly online) entrepreneurship adventures.
Why? Because, in order to do your business through your US LLC, you need:
- An EIN, and
- A bank account.
That’s really it. If you have that, you can do your business with the US LLC. As long as you’re not providing services in the US, you won’t be taxed for the income you acquire from the services you provide elsewhere.
However, there are some stipulations:
- You can’t have a US-sourced income,
- You can’t conduct your business on US soil,
- All LLC owners and members must be non-US citizens (that includes Green Card holders),
- Your LLC can’t have any employees or agents in the US, and
- You can’t reside in the US for more than 183 days during one year.
As an LLC for Non-US Residents owner, you don’t have to pay taxes for your non-US-sourced income. What’s more, other taxes are also lower for people who operate their LLC businesses from outside of the US or have a passive income (like real estate investing).
Most foreign LLC owners opted for this particular structure specifically because of these tax benefits that LLCs offer. However, there are other reasons as well.
Access to US payment processors
You’ll be hard-pressed to pick a payment processor in the US because there are so many. From traditional American banks to payment processors like PayPal, Wise, Stripe, etc., the US is a land of opportunity in this aspect as well.
Furthermore, owning a US LLC also gives business owners a chance to open a proper US bank account more easily. Plenty of foreigners open LLC for Non-US Residents for this reason alone — because it gives them access to American banks.
Access to the US market
The consumer market in the US is one of the largest in the world. In fact, it’s so huge that it contributes around 30% of the entire global consumer expenditure. By opening an American LLC, you’re gaining access to that market. You’re gaining the ability to sell your product or services directly to US clients who will, in turn, see you as more trustworthy, because your company carries the US seal of approval, so to speak.
Doing business through a US LLC means acquiring a specific type of reputation. Issuing invoices with an American LLC stamp on them gives you more credibility and makes your company more reputable in the world.
Low fees for maintenance and setup
Setting up an LLC, thus giving yourself a window into the US market, costs money. However, depending on where you do it, it can cost you an affordable amount of money. We’ll dig a little bit deeper into this topic later on, but let’s just say that, if you know where to go, opening a US LLC can be quite a cheap endeavor.
Straightforward annual compliance
Bookkeeping, book auditing, monthly reports, receipt saving — none of that applies to LLC owners. Since your LLC will be foreign-owned as well as an entity that doesn’t generate US-sourced profits, all you really have to do is:
- Pay a reporting fee every year,
- Have a Registered Agent service (which we’ll talk about more later), and
- File Form 5472 for disregarded entities.
Real Estate Investment
The second reason foreigners open US LLCs is that they want to have a business with US-sourced income, which includes investing in real estate.
The real estate market in the US is booming. The existing home market in the US had a value of $2.3 trillion in 2022. What’s more, historically, real estate is one of the safest and most profitable investment opportunities out there.
So, it’s no wonder that people are flocking to the US real estate market. But it’s not just US citizens who are contributing to these enormous numbers. Foreigners also have quite a big share of the said market — in 2022, they invested over $59 billion in it.
The US market is the most popular destination for foreign investors, and it’s well within their reach. They just have to know how to access it.
The best way to enter it and become a player in the real estate game is to open a US LLC.
LLCs For Real Estate Investment
Investing in real estate through an LLC for Non-US Residents is somewhat different than running an LLC for other business purposes. For starters, if you’re investing in real estate in order to get a passive income from renting, you’re not exempt from income tax. This isn’t so surprising, considering that your income is US-sourced, as you’re acquiring it on US soil from US citizens.
However, don’t forget — the LLC is a pass-through entity. That means that, by law, all profits pass through the company and to you (the owner) and are taxed as personal income. This allows you to avoid double taxation (as the owner and an individual). Therefore, investing in real estate through an LLC for Non-US Residents allows you to enjoy plenty of tax benefits.
Related: What are the tax benefits of a foreign investor in US real estate?
As stated in the US tax law, you’re taxed in accordance with the business activity you do and the state where you do it. With businesses, this can pose a problem because they might open an LLC in New York while conducting business in California.
You can’t do that with real estate. Your real estate property is in the state that it’s in — you can’t move it or relocate it. That means that the passive income you make on a monthly and yearly basis will always be located in a specific state (the one you bought your property in).
That’s why it’s vital that you open your LLC in the state where you want to make your property investment. The state you pick (to invest in) will be the one where you’ll also file and pay your taxes. Furthermore, there’s another reason to have your LLC in the same state where the real estate property is — ownership. In order for the title of ownership to be transferred to your LLC, the LLC has to be in the same state as the property.
The process of investing in real estate through an LLC for Non-US Residents is complicated, but it allows you to avoid or lower the 30% withholding tax that all foreign real estate owners have to pay (if they rent out their properties). That’s why opening an LLC (and carefully researching where to make your investment) is a good idea.
Which State to Pick To Open Your LLC for Non-US Residents In?
Depending on what you’re opening your LLC for, you can either:
- Pick a state where you want to open it, or
- Open it in the state where you’re making your real estate investment.
The difference, of course, lies in your reason behind having an LLC (whether it’s for real estate purposes or not).
Picking a state where to open an LLC is a massive decision. For US citizens, it’s quite easy — they just open their company in their home state. However, foreigners don’t have a “home state” so they don’t really have that option.
Luckily, they have an even better one. They can pick a state based on the advantages it offers.
Why You Have to Pick Carefully
On a federal level, the requirements and obligations for all foreign investors are the same. We all pay the same federal tax, for example. However, on a state level, they differ quite a bit.
Every state has its own set of rules when it comes to LLCs. Some offer quite a few financial advantages — like no income taxes — which means that you should carefully research where you want to open your company.
This is something that US citizens often take advantage of. Business owners who don’t have a physical location of their business (for example, service providers who work online), often opt to open their LLCs in one of the “more favorable” states as opposed to their home state (especially if it’s a high tax state). So you’ll often meet Californians (a high-tax state) with a Nevada LLC (Nevada is a no-income-tax state).
However, US citizens who do this, have to worry about their LLCs being “foreign.” A foreign LLC is an entity that’s been formed in one state while conducting business in a different state. So if someone lives in California and opens an LLC in California, that LLC will be “domestic.”
But if they open an LLC in Nevada, they will have a foreign LLC. If they do business in Nevada (and not their home state of California), they won’t have any problems. However, if they do business in California as well, they’ll have to register their “foreign” LLC (even though they live in California), pay another set of filing fees, and have a registered agent in both states.
Best States to Open a US LLC as a Foreigner
Luckily, foreign online business owners who want to have a US LLC but do business from their home country don’t have to deal with that. They can open an LLC anywhere, but often pick several states to do so:
- Wyoming, and
These states usually have either:
- Low filling fees,
- Low or no income taxes, or
Delaware is perhaps the most friendly state when it comes to start-ups and businesses in general, which is probably why almost 69% of all Fortune 500 companies call Delaware their home. Foreigners and US citizens alike flock to this state in order to open their LLCs because Delaware is famous for its business-friendly laws that protect business owners.
Delaware is an excellent option because it has:
- Relatively low filing fees ($90 filing fee, $50 Certificate of Good Standing fee, $89 incorporation fee)
- Low franchise taxes,
- No taxes on out-of-state income,
- An online tax report filing system.
If you form your LLC in Delaware, you won’t need to file annual reports. Still, this perk costs some extra money, as you’ll have to pay an annual fee for taxes ($300).
Delaware also has another perk — it allows people to open a US LLC as a foreigner anonymously. That means that you don’t have to disclose your name on the filing paperwork, and have the LLC tied to you, This offers you an additional layer of protection and limits your liability.
Wyoming tries to be as business-friendly as possible which is why it has quite lax regulations. There are several benefits this state offers to aspiring LLC owners:
- It doesn’t have franchise taxes, personal income taxes, or corporate taxes,
- The sales tax is quite lower than in other states, and
- It provides an added layer of anonymity (you don’t have to disclose your name and you can appoint a proxy to represent your LLC).
The state filing fee is lower in Wyoming than it is in Delaware (just $60 compared to Delaware’s $300), and the filing fee is also quite affordable ($100).
Business owners looking to avoid high taxes often end up forming their LLCs in Nevada. The state doesn’t have franchise, corporate, or personal income taxes and it offers complete anonymity. And, most importantly to some, Nevada has a no information-sharing agreement with IRS.
However, Nevada does have some extra fees — there’s an annual license and an annual filing fee.
Open an LLC for Non-US Residents in 9 Steps
Opening an LLC for Non-US Residents isn’t a universal experience. As demonstrated, the benefits, perks, and fees can be vastly different depending on which state you’re in. However, the actual process to open a US LLC as a foreigner is the same no matter where you are.
As mentioned at the very beginning, nonresidents have a few extra steps than US citizens when it comes to opening an LLC for Non-US Residents. However, the entire process can still be broken down into 9 steps:
- Check the unique requirements and pick a state
- Get a visa (if necessary)
- Get a Registered Agent
- Pick a name for your LLC
- Form an LLC in your chosen state
- File the Articles of Incorporation form
- Get an EIN (or ITIN)
- Create an Operating Agreement
- Open a bank account
In the following few chapters, we’ll go over all nine steps and what each of them includes.
Step #1: Pick a State
As previously explained, it’s vital that you do the necessary research and figure out which state is the best for your business and open an LLC for Non-US Residents.
Of course, if you’re a real estate investor, this step will be determined based on where your property is. So, when planning where to invest your money and browsing real estate listings, pay attention to whether the property you’re interested in is located within a state that has favorable conditions to open an LLC for Non-US Residents.
Of course, this won’t be a deciding factor but it’s still something you need to take into consideration.
Step #2: Get a Visa
You can open an LLC for Non-US Residents as a foreigner online, be it for real estate or other business purposes. You can even find and buy a property online, without ever going to the US (although that has its pros and cons, of course). However, if you want to do it in person, you’ll have to obtain a visa in order to get into the States (unless, of course, you don’t need a visa to enter the US).
There are several different visas that you can apply for. Depending on your needs, you can go for:
- Tourist visa (B1 or B2),
- Treaty Trader or Treaty Investor visa (E1 and E2), or
- EB5 Immigrant Investor visa.
These visas all have specific requirements. For example, the E2 visa allows you to work in the US (provided you’re a member of a treaty country). EB5 visa, on the other hand, requires foreign investors to invest into and maintain a business that employs at least 10 US nationals.
Related: Does buying US real estate guarantee getting a visa?
Step #3: Get a Registered Agent
After doing your research and applying for a visa (if necessary), the next step is to appoint a Registered Agent.
A registered agent is a person (or a business or an entity) that you’ve chosen to handle your official documents. The agent does so on behalf of the LLC (not you personally).
The official documents include:
- All correspondence with the state (all mail, including that from the Secretary of State),
- Notifications about taxes (state and federal), and
- Service of Process (documents sent to your LLC in case someone decides to sue you).
Since you’re not a US resident, you don’t have a physical address. Therefore, handling your own documentation would be quite hard (although not impossible).
That’s one of the reasons you need a Registered Agent. The other is that it gives you a good standing with the state, which means you’re more likely to avoid fines, fees, loss of business license, etc.
Having a registered agent means having a physical address (and presence) in the state where your LLC is. This is a service that you can employ and pay annually.
Of course, in order to pick your Registered Agent, you have to already know which state you want to open an LLC for Non-US Residents in (that’s why picking a state is step #1). If you already have a Registered Agent in mind, then make sure they cover the state you’re interested in and have a physical address in that state.
Step #4: Choose a Name
The next step is to pick a name for your LLC. You can pick any name you want, as long as it:
- Isn’t taken in your state,
- Is allowed by your state, and
- Has an “LLC” suffix or a similar, approved, suffix.
The general rule of thumb is that the name you pick has to be distinguishable and has to have a designator (LLC, limited liability company, l.l.c., etc.)
It’s also a good idea to check whether your state has any specific requirements when it comes to the name (and everything else).
Step #5: Form the LLC
The next step is the most concrete one — you need to form an LLC for Non-US Residents. You can do that by going to the Secretary of State’s website (for the state you’ve chosen) and filling out the necessary forms.
Alternatively, you can also pay a bit extra to your Registered Agent, and they’ll do that for you.
Step #6: File the Articles of Incorporation Form
One of the forms will be the Articles of Incorporation. This document establishes your LLC as a legal entity and makes it visible on state level. Depending on the state you’ve chosen, you’ll have to get that state’s Article of Incorporation. You’ll find it on the Secretary of State’s website for the state in question.
You can expect the Articles of Incorporation to differ from state to state. However, all of them require basic information like:
- The name of your LLC,
- The address of your business,
- A statement about the purpose of your business,
- How the LLC will be managed (and by whom), and
- Information about your Registered Agent (like the address, contact information, and maybe even a signature).
After you’ve filled out the form, file it with the state. When you do that, you’ll also have to pay the filing fee, which varies from state to state.
After filing the form, the state will give you a certificate that proves your LLC for Non-US Residents has been registered. You can use that certificate for later steps (like getting an EIN and ITIN and opening a bank account).
Step #7: Acquire EIN (or ITIN)
Getting an EIN is vital no matter what type of business you want to do with your LLC for Non-US Residents. An EIN or an Employer Identification Number is a nine-digit number that identifies a specific business. It also separates you personally from your business.
This number is something that defines your business on a federal level (which is why it’s issued by the IRS, a federal body). Without an EIN, you won’t be able to do much because it allows you to:
- Open a bank account,
- Separate your personal and business finances,
- Build credit,
- Hire employees, and
- Use tax deductions.
To get an EIN, you need to either apply online on the IRS website or fill out the SS4 form and send it to the IRS. Getting EIN without SSN for your LLC is possible and we can guide you through the process.
If for whatever reason you can’t get an EIN, you’ll need to get an ITIN (Individual Tax Identification Number).
Step #8: Create an Operating Agreement
An Operating Agreement lays out the structure of your LLC for Non-US Residents. It shows the state who’s involved, who’s in charge, and who will be making money from the LLC.
Some states don’t require an Operating Agreement, but we strongly advise you to make one anyway. An Operating Agreement is especially important for real estate investors since it defines the rights and obligations of each member.
When you make an Operating Agreement, make sure it includes information on:
- All the co-owners and members,
- The distribution of legal, financial, and managerial rights, and
- The distribution of profits.
Step #9: Open a Bank Account
The final step on your journey to open an LLC for Non-US Residents as a foreigner is to open an LLC bank account. Without a bank account, your business won’t be functional. You won’t be able to make any transactions and thus do any business in the US.
There are two different ways to open a bank account — in person or online.
Ready to Open an LLC for Non-US Residents?
If these 9 steps seem daunting and complicated, don’t worry — we can handle all 9 of them for you. We know better than anyone that opening an LLC for Non-US Residents only seems like an easy task. It comes with a lot of research, paperwork, and (if you don’t pick the right state) headaches.
Since there’s so much paperwork, mistakes are easy to make, and filing incomplete or wrong paperwork will cost you not only time but also money.
But that’s precisely why the Nonresident Investor team is here. We are a one-stop shop for all foreign citizens (aspiring real estate investors and online business owners) who are interested in owning an LLC for Non-US Residents. What’s more, we specialize in working with foreigners who want to open an LLC for Non-US Residents, so you’ll be in the right hands.
We’ve gone through the process of opening an LLC dozens of times. Our specialized team members have intricate knowledge of all the minute details that distinguish various states’ requirements and will gladly lead you through the entire process.
Whether you want to open an LLC for Non-US Residents as a tax haven or in order to invest in US real estate, the Nonresident Investor team is here to help.
Let us know if you need a helping hand to open an LLC for Non-US Residents.
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