Do You Pay US Taxes on an LLC Owned from Outside the US?

"Do I pay US tax on my LLC if I live outside the US?" is the most common question we hear from international founders, and the honest answer is "it depends on where the work is done and what kind of income it is". This guide explains the main pieces in plain language. It is general information, not tax advice, so confirm your own situation with a tax professional who knows both the US and your home country.

Start with how the LLC is taxed

A single-member LLC is normally ignored for US income tax, which means the owner, not the company, is the taxpayer. A multi-member LLC is taxed as a partnership by default. Our guide on which tax form your LLC files shows the form for each setup.

The idea that decides most cases: where the income comes from

The US taxes a foreign owner on two broad kinds of income:

• Income connected with a US trade or business. If the LLC runs a business in the US, with staff, an office or services performed in the US, that income is generally taxed in the US.
• Certain US-source passive income, such as some dividends, interest and royalties. This is usually subject to withholding, at 30% by default, which a tax treaty can reduce.

Income earned from work you perform outside the US, for example a freelancer working from their own country for clients who happen to be American, is generally treated as foreign-source. That is why many non-resident LLCs owe no US income tax. The rules have exceptions, and the facts matter, so get advice before you rely on this.

A US tax bill is not the same as a US filing

Even when no tax is owed, a foreign-owned single-member LLC has a yearly reporting duty: Form 5472 with a pro forma Form 1120. Missing it carries a $25,000 penalty. Read our Form 5472 guide, and see LLC with no income: do you still file?

State taxes

States are separate from the IRS. Some charge an annual fee or a franchise tax on every LLC, and a few tax income earned in the state. Compare the yearly cost in our LLC filing fees by state table.

Your home country still has a say

Most countries tax residents on worldwide income, and some treat a US LLC as a company rather than as a transparent entity. A US tax treaty with your country may reduce withholding or avoid double tax. Ask an adviser at home how your LLC is treated before you start.

Checklist for an international owner

1. Is the LLC single-member or multi-member?
2. Where is the work performed, and where are the customers?
3. Does the LLC have a US office, staff or inventory?
4. Does it receive passive income from US sources?
5. What does my home country say about a foreign LLC?
6. Is the yearly Form 5472 filing in my calendar?

How we help

We prepare the yearly filing in our US LLC tax filing service. New to all of this? Start with open a US LLC from any country or the guide to registering an LLC in the USA online.

Related guides

• Missed the Form 5472 deadline
• Is a US LLC worth it for freelancers abroad?