The single-member LLC is the most popular form of business for U.S. non-residents.
This form of business is extremely simple, but because of a unique concept in U.S. tax law, single-member LLCs can also be confusing.
A single-member LLC in the United States is what is known as a “disregarded entity.” This is like a pass-through entity that is similar to what may exist in other countries, but it goes one step further. For tax purposes, it is as if the LLC does not even exist. This is why single-member LLCs have many favorable tax advantages, but many non-residents become confused when asked to list their name, and not the name of the LLC, for tax purposes.
For many types of businesses, a foreign-owned, single-member LLC allows you many of the advantages of a U.S. entity without paying U.S. income taxes.
We provide many of the services needed to operate a single-member LLC legally in the United States:
Formation – We can form your LLC in any state. New Mexico, Wyoming, and Delaware are the most popular states for non-residents.
Form 1120 & Form 5472 – Form 1120 and Form 5472 are required for all foreign-owned, single-member LLCs. There can be some exceptions, but in general, Form 1120 and Form 5472 will be needed each year, including the year of formation and the year of dissolution, even if you did not transact business in those years. Form 1120 and Form 5472 are due by April 15th of each year.
Form 1040-NR – Form 1040-NR is the US personal tax return for a non-resident. This form may be needed in other situations, but for our clients, it is required when their U.S. based LLC is “engaged in trade or business within the United States” (ETBUS). It is also possible to file Form 1040-NR as a “protective return”. A protective return preserves your right to claim deductions if the IRS ever decides you were ETBUS when you believed you were not. If required, it is due by April 15th of each year.
ITIN Applications – Individual Taxpayer Identification Numbers, or ITINs, are generally unnecessary for a single-member LLC owner if the LLC is not engaged in trade or business within the United States.
FBAR/Form 114 – The FBAR, or Form 114, is a form required when a U.S. person has a financial interest, signatory authority, or other authority over an account outside of the United States and the aggregate value of all foreign financial accounts exceeded $10,000 USD at any time during the calendar year. If required, the FBAR is due by April 15th of each year.
CTA/BOI Changes – The Corporate Transparency Act requires Beneficial Ownership Information reporting as of January 1st, 2024. These reports are due within 30 days of forming an LLC and then within 30 days of any change to the information. For LLCs formed before 2024, the initial filing is due by the end of 2024.
State Annual Reports – Of the states popular with non-residents, only New Mexico does not require some type of annual report, annual fee, or franchise tax.
Amendments/Address Changes – Changing certain information about your LLC after filing Articles of Organization will require filing an amendment. What changes require an amendment varies by state.
Form W-8-BEN – The non-resident owners of U.S. based, single-member LLCs are frequently asked to provide a Form W8-BEN to payors. This form is used to certify their foreign status. It can also be used to claim tax treaty benefits when applicable.
Form 1099 – A foreign-owned, single-member LLC may be required to issue a Form 1099 to any U.S. person it pays.
Sales Tax – Sales tax is a complicated topic as each state has its own laws. It is important to know that the rules for sales tax are different from income tax and an LLC with no income tax obligations can still have sales tax obligations.
Dissolution – The process for dissolution varies by state. It is important to know that any IRS requirements must still be met in the year of dissolution.
The forms mentioned here cover what is needed by most clients and more. However there may be situations that require other types of forms.