There are many reasons you might want to start a limited liability company (LLC) in the United States. It helps you tap into the US market, gives your business added credibility, and allows you to access the benefits of LLCs, including liability protection and a flexible tax structure. This option isn’t limited to US citizens or residents; nonresidents can start a US LLC too. The process to form the business is fairly straightforward, although nonresidents should learn about requirements such as registered agents, Employer Identification Numbers (EINs), and certain tax obligations before they register their company in the US.

This guide will explain each step nonresidents need to follow to start their LLC, from selecting a state to form in to filing taxes.

What’s in this article?

• Can nonresidents legally form an LLC in the US?
  
• How to choose the best state for forming an LLC as a nonresident
  
• Step-by-step guide for nonresidents to open an LLC in the US
  
• What tax obligations do nonresident LLC owners have?
  

Can nonresidents legally form an LLC in the US?

Yes, nonresidents can legally form an LLC in the US. The process is straightforward and generally the same as it is for US residents.

How to choose the best state for forming an LLC as a nonresident

To choose the best state for forming an LLC as a nonresident, consider your business needs and budget. Each state has different associated fees, laws, and tax obligations. Some popular states for nonresident LLCs include:

• Wyoming, which has low fees, no state income tax, and strong privacy protections

• Delaware, which has strong legal benefits and favorable corporate laws—a good choice for businesses that aim to attract investors

• Nevada, which has no income tax, strong privacy protections, and business-friendly laws

• New Mexico, which has low fees and strong privacy protections

If your LLC is mainly online or doesn’t operate in a specific state, Wyoming and New Mexico are often good choices due to their tax benefits, privacy protections, and low ongoing fees. If you’re looking for investor-friendly laws and legal protections, Delaware might be the better option.

Here are some factors to consider when deciding where to register.

State filing fees and ongoing costs

Some states have lower initial filing fees and ongoing fees (such as annual franchise taxes). For example, Wyoming and New Mexico generally have lower fees and annual costs compared to other states. California and New York tend to have higher fees and taxes, which make them less attractive unless you’re planning to operate in those states.

Tax advantages

Some states don’t have an income tax or franchise tax, which can save you money in the long run. Wyoming and Nevada are two examples of tax-friendly states; they have no personal income tax, which makes them appealing for nonresidents who want to minimize their tax burden.

Privacy

Some states, including New Mexico and Wyoming, offer more privacy for LLC owners by not requiring members’ names to be disclosed in public records.

Legal protection

Legal protections for LLCs vary by state. Companies often choose Delaware for its well-developed legal framework and strong liability protections, as it has an extensive body of business laws and a specialized Court of Chancery that efficiently handles business disputes.

Operating location

If your LLC will have a physical presence, employees, or customers in a specific state, it’s often best to register in that state. Operating outside the state where the LLC is registered might require “foreign qualification,” which involves additional fees and paperwork. For an online or consulting business with no fixed base in the US, Wyoming and Nevada often provide flexibility and minimal state-specific obligations.

Step-by-step guide for nonresidents to open an LLC in the US

Here’s a step-by-step guide for nonresidents that want to open an LLC in the US.

Choose a state

Select the state where you want to form the LLC. Wyoming, Delaware, and Nevada are popular for their favorable tax policies, privacy protections, and minimal ongoing requirements. If your business will have a physical location in a specific state, it’s typically best to form the LLC there to avoid additional “foreign qualification” requirements.

Pick a business name

Your LLC’s name must be unique in the state where you’re forming it. Check name availability on the website of the relevant secretary of state’s office. Most states require the LLC’s name to include “LLC” or “Limited Liability Company.”

Hire a registered agent

LLCs are required to have a registered agent with a physical address (not a PO Box) in the state of formation. The agent must be available during regular business hours to receive legal and tax documents on behalf of your LLC. Business owners can hire an individual or use a registered agent service.

File articles of organization

Submit the articles of organization (sometimes called a certificate of formation) to the secretary of state’s office. This document includes basic information about the LLC such as the LLC’s name and address, the registered agent’s name and address, and the purpose of the LLC. The purpose can be as broad as “to engage in lawful business activities.” Each state charges a filing fee, which usually ranges from $50–$500. You can file online, by mail, or sometimes even in person.

Create an operating agreement

An operating agreement is a document that outlines how the LLC will be run. It defines ownership percentages, member roles, and profit distribution. Although an operating agreement isn’t required in all states, it’s highly recommended, as it can help resolve disputes and define the rights and responsibilities of each member.

Apply for an EIN

An EIN is a number issued by the US Internal Revenue Service (IRS) that functions like a Social Security number for your business. This number is required to open a US bank account and hire employees. Nonresidents can obtain an EIN by filling out Form SS-4 and applying by fax, mail, or phone.

Open a US business bank account

Opening a US bank account for your LLC helps keep your business and personal finances separate and protects your limited liability status. Some banks require in-person visits to open a business account, but international clients can typically find ways around this. For instance, they can work with online banks that serve nonresidents.

Maintain compliance

Once the business is operating, you’ll need to pay taxes and follow regulations. Compliance involves paying state and federal taxes, filing tax forms, submitting annual reports, and paying additional filing fees as required by law. Business owners must also keep records of their LLC’s financial transactions, member contributions, and meeting minutes (if applicable), as well as important documents such as the operating agreement, articles of organization, and annual reports.

Hiring an accountant or legal professional familiar with US tax laws for nonresidents can help with compliance.

What tax obligations do nonresident LLC owners have?

Nonresident LLC owners have specific tax obligations related to income earned in the US. Here’s a closer look.

Federal income tax

Nonresidents with US-sourced income via an LLC are taxed only on that income: the IRS will tax US-based profits and not global earnings for noncitizens. LLCs are “pass-through” entities so income flows directly to the owners, who then report it on their individual tax returns. If you’re receiving income from an LLC and need to file a US tax return but don’t have a Social Security number, you’ll need an Individual Taxpayer Identification Number (ITIN).

State and local taxes

Different states have different business taxes and tax rates. For example, Wyoming and Nevada have no income tax, while California does and imposes an $800 annual tax on all LLCs that do business in the state. If you’re selling products in the US, you might need to collect and remit sales tax in any state where you have a “sales tax nexus” (generally a physical presence or certain sales volume in the state, but this definition varies by state). LLCs must carefully review the tax laws of any state where they do business, even remotely, to ensure they’re fulfilling all tax obligations. If your LLC will handle employment, sales, or other specific taxes, register with the state’s department of revenue or relevant agencies.

Tax forms

Nonresident owners must file Form 1040-NR to report and pay taxes on their US-based income. If you’re part of a multimember LLC, the LLC must also file Form 1065. While the LLC itself isn’t paying taxes, this form discloses income, expenses, and earnings allocated to members.

Nonresident LLC owners must also submit Form 5472 and Form 1120 if the LLC is 25% or more foreign owned or if it transacts with a foreign party. These forms disclose the foreign ownership details and any related transactions.