An LLC is a business structure that protects your personal assets from lawsuits against the company. If someone sues your business and wins, they can take the company's money, but not your house or your personal bank account. That protection is the same everywhere—Delaware, Wyoming, California, and every other state give it to you.
What changes when you form one from abroad is not whether you get that protection, but how you pay tax on the money the company earns. The paperwork to create an LLC does not care where you live. The tax code does.
This page covers the formation first, where there is no split. Then it moves to the tax piece, where the split matters.
What an LLC actually is
An LLC is a legal "person" created by the state. It holds assets in its own name. It can enter contracts. It can sue and be sued. If it loses a lawsuit, the loss hits the company's money, not yours.
The law does this by declaring that the LLC is separate from its owners—the people or companies that created it. Those owners are called "members."
An LLC can have one member (a single-member LLC) or many. There is no law against a single founder owning the whole company. Some states' laws specifically say so. Delaware's statute, for example, defines an LLC as a company with "one or more members."
The catch is this: separateness cuts both ways. The company is separate from you, but you are also separate from it. You cannot tell your company to pay your personal bills. You have to follow the rules. Get that wrong—lend money to yourself and never pay it back, transfer your personal debt into the company's name, put the company's money in your personal account—and a judge may decide the separation never was real in the first place. That is called "piercing the veil," and when it happens, the company's creditors can come after your personal assets. Keeping the company's money, records, and contracts separate from your own is what the protection depends on.
How to set one up
The paperwork is simple. You choose a state (we will use Delaware as the example, since it is the most popular with founders). You fill out a form called a Certificate of Formation, which is one page. Delaware's law says you only have to include:
- The company's name.
- The address of its registered office in Delaware.
- The name of its registered agent—the person or company that will receive lawsuits in the state.
File it with the Delaware Secretary of State with the filing fee, and the state issues a certificate. Your company exists. You now own an LLC.
We do not print the fee here on purpose. Delaware's fees are set by administrative schedule and they change: a 2026 law (HB 400) raises many of them effective August 1, 2026. Check the Delaware Division of Corporations fee schedule for the current number before you file.
You do not have to say how many members the company has. You do not have to list the members' names. You do not have to say where the members live or what country they are from. Delaware's statute asks for none of that.
Wyoming and California have their own forms with their own required items. California's is longer: it also asks for the company's principal office and mailing address, an agent for service of process, and whether the company is manager-managed. Neither state asks about the members' citizenship or where they live.
Once the company exists, you get an Employer Identification Number (EIN) from the IRS by filing Form SS-4. Here the founder abroad hits the first real friction. The IRS online application is only open to applicants whose principal place of business is in the U.S. and whose responsible party has a Social Security number or ITIN. If you are outside the U.S., you cannot use it. You apply instead by phone (267-941-1099), by fax, or by mail to the IRS EIN International Operation. It works, but it is slower than the online route U.S. founders use, and you should plan for that. You do not need to be a U.S. resident to get the EIN.
That is the whole formation step. You can do this from Seoul, São Paulo, Berlin, or anywhere else. No residency requirement stands in your way at formation.
Where the split actually happens
After the company exists, you have to tell the U.S. tax system how it will pay tax. The IRS wants to know whether your LLC should be taxed like a corporation, or whether the LLC itself pays no tax and you pay tax on the company's profit as an individual.
This is where your country of residence matters.
🇺🇸 If the IRS counts you as a U.S. person
You have three choices about how your LLC pays tax.
Disregarded entity. The IRS pretends the LLC does not exist. You report the company's profit and loss on your personal tax return (Form 1040, Schedule C). The LLC is just a legal shield; the tax burden flows straight to you. This is the default. If you do nothing, this is what happens.
C-corporation. Your LLC elects to be taxed like a corporation. The company pays income tax on its profit (at a flat 21% federal rate). You pay individual tax again on money you take out as salary or dividends—the "double taxation" problem. Most small companies avoid this, but it works for some strategies.
S-corporation. Your LLC elects to be taxed as an S-corp. The company passes profit to you, like a disregarded entity, but with more flexibility on salary. You can choose how much to pay yourself as salary (taxed through payroll) and how much as profit distribution (not subject to self-employment tax). This can save money if you are already a U.S. person paying self-employment tax on disregarded entity income.
All three choices are open to you. You fill out the election (usually Form 8832 for C-corp, Form 2553 for S-corp) and you are done.
🌏 If it does not
You have two choices. The third is closed to you.
Disregarded entity. This is still the default. But the reporting works differently than it does for a U.S. person, and the difference catches people out.
A U.S.-formed LLC that is wholly owned by a foreign person is treated as a corporation for one narrow purpose: the reporting rules under IRC § 6038A. The LLC itself has no income tax return to file, but it must file a pro forma Form 1120 with Form 5472 attached, listing its reportable transactions with you and with other related parties. That filing belongs to the company, not to your personal return.
Whether you also owe a personal U.S. return is a separate question, and it turns on whether the business has income effectively connected with a U.S. trade or business or other U.S.-source income. Being a foreign owner of a disregarded LLC does not by itself put you on a U.S. personal return, and it does not by itself keep you off one. This is the point to ask a cross-border tax professional about your specific facts.
C-corporation. You can elect this, just like a U.S. person. The company pays 21% federal tax on profit.
S-corporation. This is where the door closes. U.S. tax law, IRC § 1361(b)(1)(C), says an S-corp shareholder must be a "United States person." The IRS defines that by two tests (the green card test and the substantial presence test). If you do not meet either test, you are not a U.S. person, and the law forbids you from being an S-corp shareholder.
This is not "you can be an S-corp, but it is complicated." It is "you cannot be an S-corp. Period." If you try to elect S-corp status when you are a non-resident alien, the election simply fails. The company falls back to disregarded entity status, and you are stuck there unless you change your tax residency.
Single-member vs. multi-member LLC
The legal protection is the same for both. The difference comes down to paperwork and complexity.
| What matters | Single-member | Multi-member |
|---|---|---|
| Setup complexity | Fill out one form, name yourself as member, done | Same (the LLC formation is the same), but you may want an operating agreement to spell out each member's rights |
| Tax reporting | U.S. owner: Schedule C on your own return. Foreign owner: the LLC files a pro forma Form 1120 with Form 5472 attached | Partnership by default. Everyone gets a K-1 showing their share. More forms. The members can instead elect corporate treatment |
| Self-employment tax | A U.S. person owes it on the profit of a disregarded entity. A nonresident alien does not: IRC § 1402(b) excludes nonresident aliens from self-employment income | Profits pass through. U.S. members with management rights generally owe self-employment tax on their share |
| Flexibility | Simple, but less room to adjust who pays what tax | More complex, but you can structure profit distribution |
Most founders use single-member LLCs when starting out, and add members later only if they take on a co-founder or investor. The legal and tax consequences of adding a member are significant enough that this should not be done casually. Talk to a tax professional before doing it.
Common mistakes
🇺🇸 If the IRS counts you as a U.S. person
- Assuming an S-corp always saves tax. It does not. The savings depend on how much profit you take as salary versus distribution. Calculate first, then elect.
- Setting up the LLC but never filing the election form (Form 2553 or 8832) to switch from disregarded to C-corp or S-corp. If you want one of those, you have to file. Doing nothing locks you into disregarded entity status.
- Forgetting that if you operate in multiple states, you have to register the LLC in each state. Delaware or Wyoming formation is your "home" state, but if you hire people in California, California will come after you if you did not register there.
🌏 If it does not
- Trying to elect S-corp status. It will fail. The IRS will reject it because you are not a U.S. person. You cannot force this one.
- Treating Form 5472 as optional, or as something you file with your personal return. It is the company's filing, it goes in with a pro forma Form 1120, and the penalty for missing it is not small: the IRS instructions set it at $25,000 for a reporting corporation that fails to file when due.
- Assuming the LLC has nothing to report because it made no profit. Form 5472 reports transactions with related parties, including the money you put in to capitalize the company. A first-year LLC with no revenue can still have a filing obligation.
- Assuming the LLC solves your visa or immigration status. It does not. You still need the right visa to work in the United States. Forming a company does not give you a visa, and it does not make you a U.S. resident for immigration purposes. These are completely separate.
FAQ
Can I form an LLC if I live outside the United States?
Yes. We checked the three states this page uses as examples. Delaware, Wyoming, and California all let you form an LLC without a residency or citizenship requirement for the members. The friction for a founder abroad shows up after formation, at the EIN step and in how the company is taxed and reported.
Does forming a U.S. LLC make me a U.S. resident for tax purposes?
No. Where your company is registered and whether you are a U.S. resident for tax are two completely separate questions. You can be a non-resident and own an American LLC. The company pays tax (or does not) based on how you elect to classify it. Your tax residency is determined by the green card test and substantial presence test, nothing to do with the company.
Can a single-member LLC be owned by a non-resident?
Yes. There is no residency requirement for ownership. The member can be anyone, anywhere. The tax and reporting get more complex, but the ownership is allowed.
If I form an LLC and do not make any election, how does the IRS treat it?
A single-owner LLC is disregarded by default. A two-or-more-member LLC is a partnership by default. That default is set by 26 CFR § 301.7701-3(b)(1). If you are the sole foreign owner of a disregarded LLC, the company has to file a pro forma Form 1120 with Form 5472 attached, whether or not you personally file a U.S. return.
Can I switch from disregarded entity to S-corp if I later become a U.S. resident?
Yes. Once you become a U.S. person (by getting a green card or meeting the substantial presence test), you can file Form 2553 and elect S-corp status. Any prior years remain disregarded entity. Only future years are treated as S-corp.
Can I use an LLC to hide my identity?
Not from the parties that matter. It is true that Delaware's certificate of formation does not ask for members' names, so your name is not in that filing. But the name surfaces elsewhere. The EIN application names a responsible party. A bank opening an account for the company has to identify and verify its beneficial owners under 31 CFR § 1010.230. Tax filings name the owner. If the company is sued, discovery reaches the membership. Keeping your name off one state form is not the same as being anonymous.
What happens if I file Form 2553 (S-corp election) as a non-resident?
The election is not valid, because a nonresident alien cannot be an S-corp shareholder. There is a second consequence people miss. An LLC that files Form 2553 is normally deemed to have also elected corporate classification, but 26 CFR § 301.7701-3(c)(1)(v)(C) grants that deemed election only if the entity actually qualifies as a small business corporation. You do not qualify, so you do not get the corporate classification either. The LLC stays a disregarded entity. If you want the company taxed as a corporation, file Form 8832 for a C-corp election instead.