LLC Taxes for Non-Residents: Where You Actually Pay, and What You File

A US LLC is not a tax structure. It is operating infrastructure that has tax consequences on two sides.

The founders reading this are usually not naive. You have read the forum threads, you know what a pass-through entity is, and you are suspicious of anyone promising zero. Good. This page is the version without the promises.

The rule to internalise: you are taxed where you are tax resident, not where your company is registered. A Wyoming LLC does not change your residency, and it does not move your tax bill.

The rule that governs everything

There are two independent circuits and they never merge. One is the United States: what your LLC owes the IRS and its formation state. The other is wherever you are tax resident: what you personally owe there.

Satisfying one does not release you from the other. Failing one is not offset by the other. Most expensive mistakes in this space come from treating them as a single question.

The summary sits in the table above. What follows is each side in detail.

Do you owe US federal income tax?

For a single-member LLC owned by a non-resident, the IRS treats the entity as disregarded: it looks through the company to you. The entity pays no corporate income tax of its own. So the whole US question reduces to one: does your activity generate US tax?

That is decided by ETBUS: Engaged in a Trade or Business in the United States. Cross it and your income becomes effectively connected income (ECI), which is federally taxable. Stay below it and there is no federal income tax on that income, though the filing obligation remains. The test itself, factor by factor, is set out in the ETBUS test; this guide covers what follows from the answer.

Typically no ETBUS when:

• You have no physical presence, office or employees in the United States.
• No dependent agent concludes business on your behalf inside the country.
• Your income is not US-source in the ECI or FDAP sense (US dividends, interest, royalties).
• You sell services, software, consulting or run dropshipping without touching US soil.

The factors that decide which side you are on

ETBUS is a facts-and-circumstances determination, not a bright line with a number attached, and that is why generic advice gets it wrong so often. The factors that move the needle are a fixed place of business inside the United States, employees or a dependent agent concluding contracts on your behalf there, the continuity of the activity, where the services are actually performed, and inventory held in the US under your operational control. No single factor is decisive on its own: what matters is the combined pattern.

Two points worth flagging here because they surprise people. Services genuinely performed from outside the US, for clients located anywhere, generally do not create ETBUS even when every client is American. And a non-resident trading securities for their own account through a US broker is protected by a statutory safe harbor (IRC §864(b)(2)(A)) regardless of volume; the exposure there comes from a US office or a dependent agent, not from trading itself.

The full test, factor by factor, with the e-commerce, FBA and dependent-agent cases worked through, is in the ETBUS test. The rest of this guide covers what follows from the answer.

ECI vs FDAP: two different taxes

Once ETBUS is established, income effectively connected with that US trade or business becomes ECI, effectively connected income, and it is taxed on a net basis, at graduated rates, the same structural logic as a US business paying tax on its profits after expenses.

That is a separate track from FDAP, Fixed, Determinable, Annual or Periodical income, which covers US-source passive income: dividends, interest, royalties, certain rents. FDAP is taxed on a gross basis, generally at a flat 30% withheld at the source, with no deductions against it, regardless of whether the recipient has any other ETBUS presence at all.

The distinction matters concretely: a non-resident founder who runs an entirely remote services business with no ETBUS pays no US federal income tax on that operating income. If that same founder’s LLC also holds a US brokerage account and earns dividends from US stocks, those dividends are FDAP, and the 30% withholding applies at the point the dividend is paid, independent of the ETBUS question entirely. The two tracks run in parallel and get confused constantly, and getting them confused is how a founder ends up surprised by a K-1 or a 1099-DIV showing tax already withheld on income they assumed was untaxed.

The 30% withholding and the W-8BEN-E

US-source FDAP paid to a foreign person is subject to a statutory 30% withholding at source under IRC §1441: the payer withholds before you ever see the money. That rate is a ceiling, not a fixed number: a bilateral tax treaty between the United States and your country of tax residence can reduce it, commonly down to 15% or lower depending on the specific treaty article and the type of income, though the exact figure depends on the treaty in force and needs checking against that treaty’s text rather than assumed.

The mechanism for claiming that reduced rate is the Form W-8BEN-E, filed by the entity, your LLC, with the payer (a broker, a platform, a counterparty) before payment, certifying foreign status and claiming any applicable treaty benefit. Without a W-8BEN-E on file, the payer defaults to withholding the full 30%, and reclaiming an over-withheld amount after the fact is considerably more friction than filing the form correctly up front. This matters more for the EN audience of this guide than it might first appear: the US has bilateral tax treaties with the United Kingdom, the Netherlands, Australia and Canada, so a founder tax resident in any of those countries, or moving toward residency somewhere with its own treaty, has a real, checkable treaty position worth confirming rather than a hypothetical one.

The four situations that change the answer

The exceptions matter more than the rule, because this is where founders get caught:

• Your own inventory stored in the United States, combined with operational presence: the classic Amazon FBA surprise.
• Employees or a dependent agent acting for you on US territory.
• A fixed place of business (an office, a facility) in the country.

If any of those describe you, the analysis is genuinely different and generic advice will cost you money. And regardless of which side of the line you land on: “no tax owed” never means “no filing”. Form 5472 with a pro-forma 1120 is due annually, with a $25,000 automatic penalty attached. That is covered in US LLC compliance, and every deadline (federal, state and your home country’s) sits with its penalty and source in the US LLC tax calendar.

Which returns you actually file

“No tax owed” and “no return to file” are different statements, and the gap between them is where the expensive mistakes live. There are two filings, and most owners are surprised by which one applies to them.

Form 5472 applies to essentially everyone reading this. A foreign-owned single-member LLC files it annually with a pro-forma 1120 whether it invoiced a million dollars or nothing at all. It reports no income and calculates no tax. See the Form 5472 guide.

Form 1040-NR applies to almost nobody reading this. It is your personal US return, and it is required only when you have US-source income to report: effectively connected income, or US-source passive income that withholding did not settle. If your activity stays below the ETBUS line, there is no 1040-NR. If it crosses, there is, and you will also need an ITIN to file it, which takes 7 to 11 weeks and longer in filing season. Form 1040-NR for LLC owners covers which deadline applies and the rule that makes late filing disproportionately expensive.

Filing one has no bearing on the other. We regularly meet founders who filed neither, on the reasoning that a structure with no US tax has nothing to file. That is wrong in the most costly available direction.

A complete numerical example

Abstract rules read differently once they run through actual numbers. Take a founder (call her Anna) tax resident in a worldwide-taxation country, running a single-member LLC formed in New Mexico. In the tax year, her LLC invoices $120,000 to clients across the US and Europe for design services delivered entirely remotely, with $15,000 of expenses, leaving $105,000 of profit. She has no office, no employees, no inventory and no physical presence in the United States; she works from home.

The US side: Anna sells services from outside the country with no physical presence. There is no ETBUS, therefore no ECI, therefore her US federal income tax on that profit is $0. She is nonetheless required to file Form 5472 with a pro-forma Form 1120 by 15 April, mailed to Ogden. Skipping that filing carries the automatic $25,000 penalty regardless of the $0 tax owed.

Her home-country side: as a tax resident in a worldwide-taxation jurisdiction, that $105,000 of profit is hers the moment the LLC earns it: the LLC is transparent, so there is no “leave it in the US account and defer” move. She owes tax on it at home under her own country’s rules, calculated in her local currency, regardless of whether she ever transfers a dollar of it out of the US account.

The honest summary: Anna pays $0 of US federal income tax, but she does not pay 0% overall: her home country taxes the full profit. And paying $0 in the US does not excuse her from filing there; the two obligations run independently, exactly as the rule at the top of this page describes.

State tax: why Wyoming and New Mexico charge nothing

A disregarded single-member LLC generally owes no state income tax in Wyoming or New Mexico, which is the reason those two states dominate formation choices for non-resident founders with no in-state activity. That is not a loophole; it follows directly from the disregarded-entity treatment: if the state has no LLC-level income tax and the owner has no state-level nexus, there is nothing to tax at the state level beyond the fixed maintenance charges.

What non-resident owners still owe at the state level is maintenance, not income tax: an annual report in Wyoming (a modest flat fee) and, in states that charge one, a franchise tax: Delaware’s flat $400 (raised from $300 for the 2026 tax year) being the best-known example, payable regardless of revenue. New Mexico currently requires neither an annual report nor a franchise tax, which is why it shows up so often alongside Wyoming in formation comparisons. None of this is income tax; it is the cost of keeping the entity in good standing, and it is covered in full, state by state, in US LLC compliance.

Multi-member LLCs: a different regime

Everything above assumes a single-member LLC, which is the default for the large majority of founders this guide addresses. Add a second owner and the tax treatment changes structurally: a foreign-owned multi-member LLC is, by default, taxed as a partnership, not a disregarded entity.

That shifts the filing obligation from Form 5472 to Form 1065, the partnership’s annual information return, with each member receiving a Schedule K-1 reporting their share of income, deductions and credits to carry into their own personal filing. If the partnership has income effectively connected with a US trade or business allocable to a foreign partner, it must withhold under IRC §1446: a materially heavier compliance load than the single-member case, involving quarterly deposits (Form 8813) and an annual partnership withholding return (Form 8804) with a per-partner statement (Form 8805) that the foreign partner then uses to claim credit for tax already withheld. This is not a checkbox difference from the single-member structure; a multi-member LLC with any US-connected income is a materially heavier filing obligation, and it changes which state and which entity structure makes sense from the outset. If you are forming with a co-founder or investor, this needs deciding before formation, not discovered afterward.

Estate tax: the risk almost nobody mentions

This is the exposure that essentially no formation platform surfaces, because it only matters at the worst possible moment: a non-resident, non-citizen individual who dies owning US-situs assets is subject to US estate tax on those assets, and the exemption available is dramatically smaller than the one available to US citizens and residents. Where a US person’s estate currently shields many millions of dollars, a non-resident alien’s estate gets an exemption of just $60,000 against the value of US-situated assets: a threshold that has not been adjusted for inflation and catches people who would never think of themselves as having a taxable estate.

What counts as US-situs for this purpose includes US real estate, tangible personal property physically located in the US, and (this is the detail that touches this exact audience) US-based financial assets, including stock in US corporations and, depending on structure, certain US brokerage holdings. A non-resident founder who has built up a meaningful balance in a US bank or brokerage account tied to their LLC, or who holds US securities directly, can have a US estate tax exposure they never considered.

Where the threshold is crossed, the estate’s representative must file Form 706-NA within nine months of death, and the filing requirement is triggered by the combined total of US-situs assets, prior taxable gifts and the gift tax exemption used, not simply the date-of-death asset value in isolation. This is squarely estate-planning territory rather than day-to-day LLC compliance, and it is exactly the kind of issue worth raising with a cross-border estate specialist before it becomes urgent, not after.Confirm current treaty relief available under any applicable US estate tax treaty for the founder’s specific country of residence, since several US estate tax treaties modify the $60,000 threshold.

Your side of the border

This is the side platforms never address, because it varies per founder and cannot be automated.

If you are tax resident in a worldwide taxation country, the profits of your LLC are attributed to you and taxed there: whether you withdrew them or left them in the account. Transparency cuts both ways: there is no “leave it in the company and defer” move, because to your tax authority the profit was yours the day the LLC earned it.

If you are tax resident in a territorial jurisdiction (and genuinely resident, not merely holding a card), foreign-source income may fall outside local tax altogether; which ones, and with which exceptions, is in the territorial tax countries table. That is the combination where a US LLC shines: clean operating infrastructure in dollars, no additional layer of tax reintroduced at home.

If you are mid-move (the case for a large share of this audience), the sequencing matters enormously. Forming the entity before resolving residency is how people end up with a structure that reports beautifully into a jurisdiction they were trying to leave.

Honest boundary: our depth on origin-country taxation is Spain and Latin America. For Dutch, Australian or UK-specific analysis we work with local partners rather than improvising. If your case needs that, we will say so instead of guessing.

Where the LLC genuinely helps

Strip out the mythology and the value is real but specific:

• Invoicing and getting paid in USD, with US banking rails your clients recognise.
• Access to the US market and to payment processing that works.
• Liability separation between the business and you personally.
• A clean, bankable, inexpensive entity (roughly $60 a year in Wyoming) that does not raise eyebrows anywhere.

What it does not do is lower your personal tax bill on its own. Anyone selling it as a tax play is selling you a future five-figure problem.

In short

For a non-resident owner, the US side usually means no federal income tax but always means filing. ETBUS is the threshold that decides, and inventory or people on the ground are what typically crosses it. Your own side is decided by where you are genuinely tax resident, not by where you incorporated. Get that order right (residency first, structure second) and a US LLC is excellent infrastructure. Get it backwards and it is an expensive way to complicate your life.