If you are choosing between a US LLC and a Panamanian company, the right question is not which one “pays less”: it is where you live and who you invoice. The LLC is transparent (its profit is taxed wherever the owner is resident) and wins on operations: banking, Stripe, dollars, with no requirement to live in the US. The Panamanian company is territorial (only Panamanian-source income is taxed) and wins when there is real life behind it: you live in Panama, or run real operations in the region. They cost differently (the LLC is cheaper to incorporate and maintain) and carry different frictions: the Panamanian company drags the EU non-cooperative jurisdiction listing and the absence of Stripe; the LLC carries no such stigma but does not give you the territorial exemption if you genuinely operate inside Panama. This comparison walks the criteria and the verdict for your case.
The underlying difference: transparent vs territorial
Before comparing figures, one concept decides almost everything else: how each structure treats the profit it generates.
A single-member US LLC is, for US federal tax purposes, a disregarded entity: it does not exist as a separate tax subject. The IRS looks straight through it, and its profit is treated as directly yours. That means it owes no federal tax if you have no effectively connected income (ECI) and no US physical presence, but it also means that, in your country of residence, you are taxed on that profit exactly as if you had invoiced it personally. The LLC hides nothing: it is transparent by design.
A Panamanian company (S.A. or S.R.L.) is not transparent. It is its own tax subject, which is precisely why the territorial rule under Article 694 of the Código Fiscal applies to it: only income the company generates inside Panama is taxed there. Foreign-source income sits, in principle, outside its scope in Panama. But that opacity carries a cost that often goes unexplained: if you remain tax resident in a worldwide-income country, your home tax authority can apply controlled foreign company (CFC) rules and attribute the company’s profit to you even if it was never distributed as a dividend. For someone who has not genuinely changed residency, the outcome can be the worst of both worlds: an opaque layer that draws attention, without the saving it promised.
If you want the same comparison run across twenty jurisdictions rather than two, the Global Incorporation Index scores both of these on tax, bureaucracy, remote operation, treaties and list exposure, with the methodology and its limitations published alongside.
US LLC vs Panamanian company, criterion by criterion
The table above summarises the nine criteria that actually separate the two structures. We walk through them below.
Cost: incorporation and upkeep
The LLC clearly wins on direct cost. Incorporation runs $500-800 in most states (Wyoming, New Mexico), and upkeep runs $200-500 a year depending on the state and whether you need a local registered agent. The Panamanian S.A. runs $1,400-1,500 to incorporate (legal fees, notary, Public Registry) and around $600 a year at minimum: a $300 annual franchise tax plus the legally mandatory resident agent.
The gap is not enormous in absolute terms, but it is systematic: year after year, the Panamanian company costs more to maintain than the LLC.
Stripe and payment processors
Here the difference stops being gradual. Stripe does not operate with Panamanian entities. If your business collects card payments online (SaaS, courses, e-commerce, digital services to international clients), the Panamanian company solves nothing on this point. The US LLC has standard onboarding with Stripe and with nearly every payment processor on the market.
Banking
With a US LLC, opening an account at an institution like Mercury or Relay is typically resolved within weeks, without travel and without US residency. With a Panamanian company, international banking access is consistently slower and carries more scrutiny of the owner: a direct legacy of the correspondent-banking contraction the Panamanian financial system suffered between 2014 and 2016, which still weighs on how foreign banks review it today.
International perception and reputation
No way around this one: Panama remains on the EU list of non-cooperative jurisdictions for tax purposes, which hardens banking and compliance due diligence with European counterparties. It did exit the FATF grey list on money-laundering grounds in 2023 (that front improved) but the tax-transparency front with EU institutions remains open, and it is the one that carries the most practical weight. The US LLC carries no equivalent stigma.
Tax treatment: who is taxed, and where
Covered above, but worth summarising here: the LLC is taxed where the owner is resident, without exception, because it is transparent. The Panamanian company only owes Panamanian tax on Panamanian-source income, but it is not transparent: so if you remain resident in a worldwide-income country, your country can attribute its profit to you regardless. Neither structure on its own changes where you personally are taxed; that is decided by your tax residency, not by the company. Every structure gets checked against a licensed tax advisor in your own country before you decide.
Substance and genuine residency
The LLC does not require you to live in the US, or hold substance there, to avoid federal tax: that is literally the logic of the system for non-residents with no ETBUS. The Panamanian company’s territorial advantage, by contrast, genuinely pays off when there is real life behind it in Panama: residency, operations, clients in the region. Without that, you remain territorial only on paper, while your country of residence taxes you exactly as it always did.
The verdict, by case
Choose the LLC if:
- You invoice in dollars to US or European clients and need Stripe, Mercury or a real US bank account.
- You do not live in Panama and have no operations there: the territorial advantage does not reach you without genuine substance behind it.
- You prioritise low upkeep cost and banking speed above other considerations.
Choose the Panamanian company if:
- You genuinely live in Panama, or run real operations, staff or an office in the country or region.
- You need a vehicle for real estate, local assets or inheritance planning inside Panama.
- Your clients are mostly Panamanian or Central American and do not depend on Stripe.
Consider holding both if:
- You live in Panama and genuinely invoice international clients: keep your S.A. or Aviso de Operación for whatever operates inside the country, and set up a US LLC to collect from US and European clients. This is exactly the case covered in full in a US LLC when you live in Panama, note that this is the scenario for someone who already lives in Panama and needs the US piece, distinct from this comparison, which starts from choosing where to incorporate without assuming where you live.
What neither structure solves on its own
Neither the LLC nor the Panamanian company changes your tax residency. That is the variable that actually decides how much you pay as an individual, and it comes before any corporate structure. If your real question is “how do I personally pay less, not my company”, the starting point is your tax residency, not the jurisdiction where you register the company.
If you want the full framework with all six real structures on the table today, not just these two, it is in where to set up your company. And if your underlying question is about the LLC formation process itself, the full step-by-step, without travel, is in US LLC formation for non-residents.
Run your case
Everything above is the general framework. Your specific case depends on your residency, your clients, your revenue and whether you already live in Panama: variables that do not fit in a table. Run it through our assessment: eleven specific questions, the verdict on screen and the full report on your case in your inbox. If your case does not need any structure yet, that is exactly what it tells you too.
Explore the full guide
Frequently asked questions
Which is cheaper: a US LLC or a Panamanian company?
The LLC, in most states: incorporation runs $500-800 against $1,400-1,500 for a Panamanian S.A., and upkeep runs from $200-500 a year against roughly $600 a year for the Panamanian company between the franchise tax and the mandatory resident agent. Cost should not be the deciding criterion on its own, but it is worth having straight before weighing the rest.
Which one pays less tax, the LLC or the Panamanian company?
Neither one automatically "pays less": they are different mechanisms, not a ranking. The LLC is transparent, and its profit is taxed wherever the owner is resident, whatever country that is. The Panamanian company is territorial and only owes Panamanian tax on Panamanian-source income, but it is not transparent: if you remain resident in a country that taxes worldwide income, your home authority can still attribute its profit to you under controlled foreign company rules. The question that actually decides your tax bill is where you are tax resident, not which of the two structures you pick.
Can I have both a US LLC and a Panamanian company?
Yes, and it is common among founders based in Panama who invoice internationally: the S.A. or Aviso de Operación for whatever operates inside the country, and the LLC for collecting from US or European clients via Stripe and US banking. The two are not mutually exclusive: they solve different problems.
I need Stripe. Which one should I pick?
If your business collects card payments online (SaaS, courses, e-commerce, digital services), the Panamanian company does not solve that: Stripe does not operate with Panamanian entities. A US LLC gives you standard onboarding. In practice, this is the variable that decides fastest between the two for digital businesses.
I live in Panama and invoice US clients. What's right for me?
Almost always both, for different jobs: keep your Panamanian structure (S.A. or Aviso de Operación) for whatever genuinely operates inside the country, and set up a US LLC to collect from US or European clients via Stripe and a real dollar bank account. That is exactly the case covered in a US LLC when you live in Panama.