LLC for Non-US residents: The Ultimate Guide to Opening an LLC as an International Founder

As an international founder, the thought of starting an LLC in the United States might initially feel like setting sail into uncharted waters. If you’re not well informed, the idea may appear as an impossible feat, an elusive prospect, and a daunting task to attempt.

On the other, if everything goes according to plan, you will be embarking on a thrilling journey towards a beautiful horizon, marked with growth and triumph. So are you stuck in this loop on what to do? Well, you need not, thanks to innovative business models like Foundeck, Doola, Zen Business, Tailor Brands, Inc. File, and Northwest LLC, among others, the doors to LLC ownership for non-US residents stand wide open.

In this article, we unravel in detail, the steps involved in establishing an LLC for non-US residents in the United States. Also, you will discover what an LLC is, the types of LLCs to open, the procedures to follow in opening one, and the legal and tax implications involved with an LLC.

Who is a Non-US Resident?

To grasp the discussion on LLCs tailored for non-US residents, it’s important to define who a US non-resident or non-resident alien is. According to the US government, an individual qualifies as a US non-resident if they meet the following criteria:

• They lack US citizenship.
• They are not a US permanent resident, (not a green card holder).
• They haven't resided in the US long enough to satisfy the substantial presence test.

If you fall into this category of persons, you need not to worry, because you can still establish an LLC in the United States. This guide will furnish you with the comprehensive insights necessary to help you leverage the enormous benefits available with opening an LLC as an international founder.

LLC for Non-US residents: What exactly is it?

When considering the establishment of a business in the United States as a non-US resident, one buzzword you may have come across is LLC (in full, Limited Liability Company). But we don’t want to assume you know exactly what it is, hence, in this section of the ultimate guide on LLC for non-US residents, we'll dive deep into the topic, starting with what LLC is.

What is a Limited Liability Company (LLC)?

 A Limited Liability Company (LLC) stands as a legal fortress, which safeguards the personal assets of business proprietors against potential creditors and legal adversaries in case of bankruptcy or legal disputes.

It’s a hybrid business structure that seamlessly combines the personal liability protection common with a corporation with the streamlined formation aspects of a sole proprietorship.

Notably, an LLC operates as a pass-through entity, indicating that the business's generated income flows directly to the owner without the burden of double taxation, i.e., no income tax is paid. The compelling factor of forming an LLC extends significantly to non-US residents, because of the flexibility to establish one in any US state.

An added advantage exists in four states – Wyoming, Delaware, Nevada, and New Mexico – where the formation of anonymous LLCs is permitted. In this intriguing model, critical information about LLC owners, members, or shareholders remains confidential. 

Overall, LLC provides a perfect blend of simplicity and flexibility found in partnerships while also offering the robust liability protection typically reserved for corporations. This strategic structure becomes a shield, guarding your personal assets from potential business debts and legal entanglements within the US terrain.

Types of LLCs You Can Open

For non-US resident founders seeking to establish an LLC in the US, a comprehensive understanding of the various LLC structures available is vital. This segment of the ultimate guide on LLCs for non-US residents elaborates on the different types of LLCs that can be established and operated within the United States.

• Single-Member and the Multi-Member LLCs: The Single-Member LCC is the most common LLC type. It is designed exclusively for individuals or corporations. Taxed as a pass-through entity, this type of LLC links financial outcomes to the owner's personal tax return. On the other hand, the Multi-Member LLC is owned by two or more individuals or entities and follows the tax structure of a pass-through entity.
• The Series LLCs: This type presents a unique concept, allowing the establishment of independent "series" within the LLC. Each series operates independently with different assets, liabilities, and members, operating as separate entities for accountability and tax considerations.
• Manager-Managed and the Member-Managed LLCs: In Manager-Managed LLCs, decision-making authority is entrusted to appointed managers, leaving LLC members in a passive investor role without involvement in daily management. On the other hand, the Member-Managed LLC empowers all members with equal participation in decision-making and active engagement in business management.
• Low-Profit LLC: The Low-Profit LLC is dedicated to supporting social enterprises that aim to achieve philanthropic and educational goals. Private foundations can invest in Low-Profit LLCs strategically to advance their philanthropic objectives through program-related investments.
• Series of LLCs: This LLC involves the creation of distinct LLCs, each functioning as an independent entity. Generally, these LLCs are crafted to hold different assets or engage in different business activities.

For non-US resident founders, understanding these diverse LLC structures is crucial in deciding which LLC type aligns with specific business objectives while ensuring financial interests remain protected.

The Step-by-Step Guide to Open an LLC for Non-US Resident Founders

Here are the steps to take for opening an LLC for non-US residents.

Step 1: Choose a state to form your LLC as a Non-US resident 

As a non-U.S. resident looking to establish an LLC in the U.S., selecting the ideal state for LLC formation is a crucial initial step that will need you to carefully consider some factors. Some of these factors include compliance regulations, filing fees, tax considerations, etc.

Unlike their U.S. counterparts, non-U.S. residents face unique challenges when selecting a state for LLC formation. Ideally, there are three states frequently recommended for non-U.S. resident LLC formation (Delaware, Nevada, and Wyoming).

Delaware; recognized for its business-friendly climate, features relatively low initial and annual filing fees when compared to other states. Significantly, Delaware refrains from taxing out-of-state income, a significant advantage for LLCs conducting substantial business in other states. Furthermore, investors frequently require LLCs to be formed in Delaware due to its standing as a desirable corporate business haven.

Both Nevada and Wyoming are emerging as popular choices celebrated for their pro-business environments featuring affordable LLC formation costs and annual filing fees without business income or franchise taxes. The filing process for LLCs in Wyoming is especially fast, occasionally providing same-day processing.

Generally, choosing the right state for non-U.S. resident LLC formation requires careful research and consideration of each state's individual regulations and fee structures to ensure the LLC is created in a state aligned with the unique objectives and requirements of the international founder's business.

Step 2: Decide a business name for your LLC

The process of establishing an LLC as an international founder in the U.S. requires a well-informed approach which requires attention to detail in determining the business name. Crucial to note, is that choosing a business name goes beyond mere branding and marketing. It involves legal compliance.

The legal framework prohibits the use of a business name already in use by another entity within the state. Certain words implying a specific industry may also face restrictions. It is essential to append "LLC" or "limited liability company" to the end of the business name, which is often obligatory.

Checking the business name's availability entails a visit to the state agency responsible for overseeing business filings, typically the Secretary of State. A thorough name search on the agency's website is essential to ensuring that the chosen name complies with legal requirements and avoids infringement on existing business identities.

Step 3: Designate a registered agent

 Another crucial step is nominating a Guardian of Official Proceedings, which involves enlisting a registered agent, an individual or entity responsible for receiving official and legal documents on the LLC's behalf.

For non-US resident LLC owners, the choice of a registered agent involves designating oneself, an employee, or engaging a specialized service provider, which typically comes at a fee.

Given that registered agents play a critical role in legal compliance, they should meet certain eligibility criteria and remain available at an in-state address during standard business hours.

Failing to nominate a registered agent or providing inaccurate details may result in serious consequences such as legal repercussions or default judgments.

Therefore, carefully selecting a dependable and appropriate registered agent is a pivotal stride in steering your LLC through the intricate seas of legal compliance.

Looking for a registered agent that you can depend on? Look no further than Foundeck. Foundeck offers a range of fast and efficient online company formation services, allowing you to register a business structure of your choice quickly. To get started, kindly contact us here.

Step 4: Prepare an LLC operating agreement

As a non-U.S. resident establishing an LLC in the United States, the preparation of an LLC operating agreement stands as a pivotal step. This essential document serves as the blueprint, outlining the financial, legal, and managerial prerogatives of every member within the LLC.

The operating agreement acts as a repository, involving profit distribution mechanisms, guidelines to follow when members exit the LLC, and the delineation of capital contributions. It serves as the cornerstone of the day-to-day operations of the LLC, and its meticulous preparation is imperative.

Ultimately, a meticulously prepared operating agreement is a must-have stride to ensure the seamless administration and functioning of your LLC. It acts as a shield against conflicts and a guarantor for the smooth operations of your business, cementing the foundation for your LLC as an international founder in the U.S.

Step 5: Get a Copy of Your State’s LLC Articles of Organization Form

Another crucial step in establishing an LLC in the United States as a non-U.S. resident is acquiring the LLC Articles of Organization form in the registration process. This necessitates visiting the state agency responsible for overseeing business filings to obtain a copy of the form. Some states might recognize it as a certificate of formation.

Completing the Articles of Organization form entails providing essential details such as your business name, the primary business address, the business's purpose, and the managerial structure you've chosen for the LLC, i.e., that is the type of LLC you have resolved to open.

Additionally, you must furnish contact particulars for the registered agent, responsible for receiving official documents on behalf of the LLC. In some states, the registered agent may be required to sign the form.  It is also essential to specify the intended duration of your LLC.

After completing the form, certain states, like Nebraska and New York, might require LLC founders to publish a newspaper notice regarding their intent to register the LLC before submitting the Articles of Organization form. Therefore, it is vital to complete this step first.

Before submitting the filled form, practitioners must review it meticulously, paying the requisite filing fee that varies depending on the state where you're establishing the LLC. Once the LLC formation documents are approved, the state issues the founders a certificate indicating their LLC is legally established.

This certificate becomes an essential document while completing subsequent tasks such as opening a business bank account, securing a tax ID number, and cementing the LLC's legal standing in the United States.

Other Important Documents and Steps to Open Your LLC

Establishing an LLC as a non-U.S. resident demands meticulous attention to both legal prerequisites and the conventional protocols involved in launching a business establishment. A crucial aspect is procuring the necessary business licenses and permits required for conducting operations within your chosen state.

As an international founder, you'll need to navigate the submission of different forms and accompanying fees tied to licenses and permits relevant to your business domain.

You can find comprehensive details on business forms, fee structures, and mandatory licenses and permits on official websites or government offices. Additionally, it's crucial to remain mindful of renewal application deadlines for licenses and permits. Non-compliance with these stipulations could lead to the loss of the business's status as a legally recognized entity.

1. Get an Employer Identification Number (EIN)

Securing an Employer Identification Number (EIN) is a crucial aspect of initiating the formation of a Limited Liability Company (LLC) as a non-U.S. resident founder.

The EIN determines the separation of the company's financial boundaries and assets from the founder's personal finances. It's essential to acquire an EIN as promptly as possible after the LLC setup as certain financial institutions mandate it when opening a business account. Moreover, for certain business structures, getting an EIN is not just advisable but obligatory.

To secure an EIN, it's imperative to have a profound understanding of the requisites. The process can be initiated and concluded efficiently through the Internal Revenue Service (IRS) website.

It's essential to have all the necessary documentation readily available during the EIN application process. This typically involves personal identification details, business entity identification particulars, and an operating agreement explicitly outlining the roles and responsibilities of the LLC's members.

2. Open a Business Bank Account for your LLC

Opening a business bank account in the US is important for non-US resident entrepreneurs looking to establish an LLC. The step among other benefits will help you get a clear distinction between your LLC's finances and your personal assets.

But as a non-US resident entrepreneur, you may encounter challenges in creating a US business bank account, due to some strict requirements from conventional banks, like Bank of America, Wells Fargo, First Republic, etc. However, fintech platforms like Stripe, PayPal, Paddle, Mercury, Relay, etc., offer accessible and convenient alternatives for creating a business bank account. 

Now, you may ask; should I Use Stripe or PayPal? Well, Stripe does not require a US Social Security Number (SSN) and only requires an EIN and formation documents. PayPal though, requires a US SSN or an Individual Tax Payer Identification Number (ITIN) in addition to an EIN and formation document. Looking at the mentioned requirements, we have seen from thousands of founders globally that the more convenient option is Stripe!

How to Set Up a US Stripe Account

To open a US Stripe account is pretty simple. Access the official website; sign up and create a business account. But while the process is straightforward, you’ll need:

• An LLC
• An EIN Number
• A Government ID from any country
• A physical location in the country of your EIN
• A phone number in that country

Lastly, ensure you are not on Stripe’s list of restricted businesses. If you aren’t, there is little reason to believe you won’t be able to work with Stripe.

How Do I Set Up a US PayPal Account?

Setting up your US PayPal is also a straightforward process as we explained for Stripe. But ensure you specify that you’re opening a business account and not a personal account in your setup, and again, you will need:

• An LLC
• A Social Security number or an Individual Taxpayer Identification Number
• A Company Phone Number
• A Company Address
• An EIN Number

To give you a heads up, these are the exact requirements as directly stated by PayPal, so providing them is non-negotiable.

Tax Considerations for Non-US Resident Founders Establishing an LLC

As a founder venturing into the establishment of an LLC in the United States as a non-resident, reviewing tax implications is a pivotal aspect to not overlook. Here's an in-depth exploration of the tax considerations tailored for non-US resident LLCs:

1. Pass-Through Taxation: Distributing Profits and Losses as an LLC, the mechanism of pass-through taxation points to the fact that profits and losses seamlessly flow through to individual owners' personal tax returns. Each member reports their allocated portion of the LLC's financial dynamics on their tax filings. This structure not only exempts the LLC from federal income taxes but also streamlines the tax process. The implication? Allocation of optimal resources for the growth of the LLC.
2. Unveiling the Idea of Withholding Taxes: Your journey as a non-US resident founder running an LLC may encounter withholding taxes on specific income streams. If this happens, taxes are deducted at the source of payment, i.e., before the earnings reach your coffers. You can often reclaim these taxes as credits on your home country's tax return but hinged on the terms stipulated in the applicable tax condition.
3. Navigating Global Tax Treaties: The matter of cross-border taxation adds complexity to the discussion on tax. Global tax treaties between countries come into play to ensure equitable taxation of the LLC's income. Hence, depending on your home country as an international founder, certain agreements between some countries, including the United States, prevent income from being subject to unnecessary double taxation. This intricate tax network empowers non-US resident entrepreneurs to prepare their LLC's tax strategies for optimal outcomes.

Conclusion

As you may have heard, establishing an LLC for non-US residents is not impossible to achieve, and in fact holds a world of promise. But it's non-negotiable that you get the process right as a non-US resident founder. It's crucial to have a comprehensive grasp of the steps involved, tax implications, the types of LLCs available, and all necessary documents required. This article has been thoughtfully crafted to arm you with the knowledge relevant to help you thrive. Go on to implement and get on with your aspirations of establishing an LLC in the US. Need help forming an LLC today? if yes, kindly contact Foundeck to help you smash this goal today.