LLC in USA for non-US residents
This article discusses the opening of an LLC in USA for non-US residents. Many foreigners who are not residents or citizens of the United States wonder if they can open an LLC in USA. The short answer is yes, it is possible to open an LLC in USA for non-US residents. In fact, foreign entrepreneurs, investors or business owners who are not US citizens or green card holders prefer the structure of an LLC for their US-based company because of its flexibility when it comes to ownership and management and its tax advantages. Moreover, there is no US citizenship or residence requirement to own an LLC in USA. Practically, you can be a citizen or resident of nearly any country in the world, live outside of the United States and still be able to open an LLC in USA as a non-US resident. However, keep in mind that once formed, residents and non-US residents alike should make the required filings to keep the LLC active and in good standing each year otherwise the LLC can be administratively dissolved.
As a non-US resident not only you can open and own an LLC in the USA but you can also operate and manage the LLC from outside the United States, open US business bank accounts, hire U.S. workers and other employees, own intellectual property and engage in business transactions. However, in order to have an LLC that is operational and ready to do business, you have to open the LLC and understand the requirements and advantages of having an LLC in USA for non-US residents.
Advantages of LLC for non-US residents
An LLC in USA for non-US resident entrepreneurs, investors or business owners carries many advantages such as being able to open US business bank accounts and payment processing accounts including for online businesses, having access to the US legal system and the US market, enhancing the reputation of the company both among the customers, business partners and providers in the United States and those abroad and enjoying a relatively low tax rate and minimal compliance and maintenance requirements.
Aside from these advantages, from a legal standpoint an LLC provides many other benefits for non-US residents including:
- No double taxation. Unlike a corporation, the LLC is not taxed both at the entity level and the individual level, but instead, with an LLC distributions are only taxed at the individual level. In practical terms, the business income and tax obligations of the business passes through the LLC entity to the owners for tax purposes. This is called pass-through taxation and an LLC with a single owner is considered a pass-through entity. LLC are in many ways similar to US corporations but are not subject to double taxation.
- Personal liability protection. LLC is a legal entity separate from its owners and as a result the personal assets of the owners are protected from liability and collection by creditors of the LLC. Personal assets that an owner may have that is protected with an LLC includes among others, personal bank accounts and savings, personal car and residences and other personal investments and income.
- Flexible management structure. The LLC can be managed directly by the owners or the owners can choose to delegate the management of the LLC to a manager who in not an owner, including to another legal entity to serve as the manager. Moreover, the LLC can set up the management structure to consist of a board of directors or board of managers and create executive positions such as CEO, CFO and others. While the LLC is not required by law to have a board of directors or corporate officers, it certainly can choose to do so and, in this case, it must provide for the structure of the management in the operating agreement of the LLC.
- Simple formation and maintenance. Registering and maintaining the LLC in good standing is not a complex process but it can take longer for non-US residents. Details about the process and requirements to open an LLC for non-US residents can be found below. In terms of maintaining the LLC active and in good standing each year, the LLC is typically required to pay a small annual fee to the state government and meet its filings obligations with the state. However, aside from these maintenance procedures, the LLC is generally not required to hold a mandatory organizational meeting or annual shareholders meetings, send notices for regular and special meetings, pass formal resolutions and others.
Open an LLC in USA for non-US residents
Determine the state for the LLC. First, in order to open an LLC in USA for non-residents it is important to determine the state in which you want to open the LLC. There are 51 states in the United States including District of Colombia (DC) and each state has its own laws that regulate the LLC including formation, maintenance, taxation, ownership and management of the LLC. More importantly, the LLC laws vary from state to state and there is no uniform set of laws that apply to the LLC across the United States. Generally, as a non-US resident you should open the LLC in the state where you want to conduct business activities. If the LLC conducts business in any other state than the state where you initially opened the LLC, then you may need to register this LLC in each state where you conduct business. For example, if you are non-US resident that opened an LLC in Florida called Happy Joe’s LLC to operate a restaurant and now you want to expand and open additional restaurants in Texas and California, then you may need to register Happy Joe’s LLC separately in Texas and California.
Choose a business name. Second, you should choose a business name for the LLC and verify if the business name is available in the state you want to open the LLC. Especially, you need to make sure that the name is not used by another active business, is complaint with the laws of the state for naming the LLC.
Obtain the Tax ID. Third, before you can register the LLC, you must obtain a tax ID which is formally known as a Federal Employer Identification Number (EIN). You can apply for an EIN online and via mail or fax with the U.S. Internal Revenue Service. Alternatively, if you cannot apply for an EIN, as a non-US resident you can apply for a US Taxpayer Identification Number (ITIN) with the IRS.
Register the LLC with the state. Finally, once you obtained a Tax ID, you can formally open the LLC with the state by filing the Articles of Organization and paying the filing fee. In addition, you will generally be required to have a registered agent in the state you are forming the LLC and a physical business address, but this varies from state to state. Some states also require to name an incorporator or the managers of the LLC at the time you file your registration application. After the state processes your filing, you are ready to open a business bank account, payment processing accounts and obtain any local licenses and permits required to operate the business.
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