Advantages of creating an LLC in the United States
22 December, 2022
When an entrepreneur wants to start a business in the United States, he needs to find a way to do it as quickly and simply as possible. The ideal corporate form for that is the Limited Liability Company. That is why in this article we will tell you about the advantages of creating an LLC in the USA.
I will also explain how we can help you from Ltd24ore to have your LLC registered easily and without wasting time.
Let’s see what are the main benefits of opening a US LLC for foreigners.
The process is done online and the only requirements are that you must be over 18 years old and have a valid passport. It does not matter what your nationality or country of residence is.
It can be constituted by only one person, that is to say, you do not need to have partners. In addition, you are not required to make an initial capital contribution.
You are not required to register a U.S. mailing address or a U.S. telephone number.
If the LLC in the United States is formed by a single foreign owner, you will not be required to have a tax ID, such as SSN or ITIN. If there are more than one partner, you will be required to file an ITIN for each partner.
As if all this were not enough, an LLC is not required to hire employees, so the owner can take care of everything.
Undoubtedly, one of the most important advantages for a startup that starts its activities as an LLC in the USA is that the companies created under this legal figure have legal personality, therefore, it is the company who responds for any type of lawsuit and for the economic and financial problems that may arise.
This means that in the event of a lawsuit against the company, the owner’s assets are protected and that litigation only takes into account the company’s assets.
Creating an LLC in the USA as a foreigner allows you to access certain tax savings for which the number of owners and the nationality of each one will be taken into account. Other factors that are evaluated are whether or not they have a physical presence in the USA and if they have dependent agents (employees or companies that work almost exclusively for your company).
Dependent agents have a permanent presence on U.S. soil. This can include employees, offices, service providers, etc.
LLCs are considered Pass Through Taxation entities, so the foreign owners are the ones who have to file the tax return individually.
We will explain below what taxes a non-resident alien LLC has to pay in the United States.
If you open a startup in the foreign LLC format, you can apply for an E-2 Visa, which is the investor visa.
With this visa you can live and work in the country for a period of up to 5 years, which can be renewed if you still have the venture.
In this case there is a minimum investment requirement of $900,000 in order to be part of the Immigrant Investor program, also known as EB-5.
Registering your business as an LLC for foreigners in the United States will allow you to work in different platforms, such as Amazon or Stripe, which have restrictions for residents of certain countries.
This will open new doors and allow you to expand your business.
As a general rule, it is best to register your LLC in the state where your most important operations will be located. And if you plan to hire employees or open branches of your startup in the United States, you should register your venture in the state where those employees or your branches will be located.
The requirements for opening an LLC in the USA do not vary much from state to state, although there may be some small differences in the costs of the process.
Some people prefer to create an Anonymous LLC, in that case the states that allow it are New Mexico, Delaware, Wyoming and Nevada.
In any case, when you want to obtain your EIN you will have to disclose your information to the IRS, however the IRS cannot make this information public. In other words, they are never 100% anonymous.
Registration fees in these four states range from $50 in New Mexico to $100 in Wyoming. New Mexico does not charge an annual fee to renew the registration, while the other states do charge an annual fee.
The requirements are very simple, which is one of the reasons why many non-resident investors choose to open LLCs in the United States.
First you have to decide in which state you will register your new company. Then you must choose a name and check that it is available.
Then you must find and hire a registered agent, who will be the person in charge of receiving all the official documentation for the registration process. He/she will also help you with all the paperwork, such as obtaining the EIN, which is the employer identification number.
Once you have the EIN you can apply to open a bank account.
To know the complete process of how to open a company in the USA, I recommend you to read this article in which we explain it with all the details.
Every business needs to have a bank account, and non-resident LLCs are no exception. You will use it to pay your bills and to receive wire transfers. You also need the account to be able to get paid through ecommerce platforms.
To have a bank account in the US you have two ways: the first one is through a traditional bank and the second one is through a fintech.
Traditional banks have stricter requirements and it is necessary to have the owner or manager of the company do the paperwork in person. While fintechs are more flexible and the account can be opened remotely.
The requirements to open an account are:
Present proof of identity.
To have the Certificate of Incorporation.
To have Tax ID.
One of the features that most attract non-residents who want to open an LLC in the USA is that these companies do not pay taxes. Although it is true, it must be clarified that certain requirements must be met.
First of all, we must understand that we are talking about foreign-owned LLCs, that is, LLCs owned by non-U.S. nationals. If there are many partners and only one of them is American, it would no longer belong to this category of LLC and, therefore, it would be subject to a different tax regime.
As explained before, Limited Liability Companies are Pass Through Taxation entities, so if there is an obligation to pay taxes, it is not the legal entity but the individual owners of the company who are obligated to pay taxes.
That is why they are qualified as Pass Through, because the taxes “pass through” from the company to the owners.
This is the reason why the tax treatment is that of individual taxpayers, and in this particular case it would be that of non-resident aliens, which is very different from that of U.S. citizens.
Only those who have a commercial activity classified as “engaged in trade or business in the US”, better known as ETBUS and whose translation would be engaged in business in the United States, pay taxes.
There are 2 conditions to be qualified as ETBUS:
● The LLC must have at least one dependent agent in the US.
● The LLC must engage in transactions of amounts that are substantial, continuous and regular with other US entities.
The amount to be paid will depend on your country of residence, as rate reductions may be available if your country has some type of tax treaty with the United States.
To see which countries have a Tax Treaty with the USA, you can go to this link.
Some of the most common activities that are performed with an LLC and are exempt from paying taxes:
- Sale of digital products and services.
- Amazon FBA (Fulfillment by Amazon)
- Freelance work
- Personal consulting and advisory services
These businesses are exempt because they do not need any dependent agents in the US, so they do not qualify as ETBUS. In the case of Amazon, no matter how much of the merchandise you sell goes through their warehouses, it is considered an independent agent.
If you have an advertising agency, or one that provides any type of services, based in another country and you sell your services to US citizens, you could create an LLC of non-resident owners to be able to invoice your clients and they could transfer the payments to an account opened in the US and you would not have to pay any taxes.
Even though a foreign owner’s LLC does not have to pay taxes, it must still comply with state and federal obligations.
Among the obligations you must continue to meet are the annual renewal of the Registered Agent and the filing of the annual income and expense report. And remember that depending on the state in which you opened the LLC, you may have to pay an annual fee.
his is where many worry, but the truth is that it is not so complex if you have the right advice. Tax consulting is one of our specialties, so you can get in touch with some of Ltd24ore’s representatives .
There are three mandatory formalities that all Limited Liability Companies must comply with:
- Form 5472
This form is submitted along with Form 1120. On the 1120 only the identification data must be filled in, without completing the income and deduction dat.
And on the 5472 you have to report 3 important pieces of information:
- The value that the LLC had as of December 31 of the tax year.
- How much money the foreign owner of the LLC moved into the company during the tax year.
- How much money moved in the opposite direction, i.e. from the company to the non-U.S. owner.
LLCs are not required to file bookkeeping, so you do not need to keep purchase receipts or complete monthly VAT reports.
It is sufficient to file a profit and loss statement showing what went in and what came out of the company. To prove this, it is enough with the account statements of the platforms you use to make collections and payments, such as Paypal, Payoneer, Stripe, etc.
In Ltd24ore we are in charge of guiding and advising our clients in the opening of international companies.
For 9 years we have been helping entrepreneurs who want to create their startup in the UK, Portugal, Spain, Italy, Canada and the United States.
In the USA we specialize in the states of Delaware and Wyoming, which as we explained are two of the states with lower tax costs and easier to open companies in the USA.
If you are looking for help or information to create an LLC for non-resident owners in the USA you can contact our advisors, who speak your language and know perfectly the US legislation.
With our Borderless Company service, we not only provide you with advice on opening new businesses, but we also help you with the following tasks:
● Ongoing tax and fiscal consulting.
● Advice to avoid double taxation.
● Access to our exclusive Compañías Sin Fronteras community and its Facebook group.
● Participation in the annual meeting of Companies Without Borders.
We know U.S. federal law and are experts in the corporate and tax laws of the states of Delaware and Wyoming.
These are the advantages you will have if you decide to create a company in the United States with ltd24ore:
● Online incorporation with no need to hire a notary.
● Reduced costs of opening a business.
● Online tax management, bookkeeping and accounting management service.
● Preparation and follow-up of the company’s accounts and filing of tax returns with the various U.S. agencies.
● Free access to our artificial intelligence-based accounting software.
● Personal assistance and advice via chat, email and phone.
● Assistance from our tax advisors who are experts in US law.
Our mission is to create and maintain long-term relationships with our clients. Therefore, we believe it is essential that you can trust us and that you receive an excellent quality service, that means that we will try to give you the best advice on a day-to-day basis from the very first moment.
If you have any questions, you can write to our advisors or call us, and we will know how to help you.