LLC Taxes for Non-Residents [Free Guide]

If you’re considering registering a US LLC, it’s important to understand the requirements you need to meet when filing LLC taxes for non-residents.

A US LLC can be one of the best tax reduction strategies for non-US residents. But, only if done the right way.

Just setting up a US LLC is not enough. There are steps you have to take in your actual business operations to make sure that you don’t accidentally incur a US tax liability.

And most importantly of all, you must file your LLC taxes annually.

Even if you don’t have a US tax liability, you are required to file your tax forms with the government each year. If you don’t, you can face huge fines… which at the end of the day is the same as having to pay taxes, right? If not worse…

In this article, we share with you the specific requirements you’ll need to meet to ensure you qualify for zero US taxes and the tax forms you need to file each year to avoid penalties. Of course, we’ll also share the banking options available to you if you decide to set up an LLC.

Disclaimer: Nothing in this article is intended as personal or business tax advice. Always consult a qualified tax advisor or accountant before making any decisions.

Is It Possible to Pay Zero Taxes as a Non-Resident US LLC Owner?

Yes, it is possible to pay zero taxes as a non-resident US LLC owner. To do so, you need to meet specific requirements and ensure your US LLC is truly non-resident. Read on to learn more about LLC taxes for non-residents and how you can benefit from a US LLC.

But, if this is your first time visiting GlobalBanks, don’t forget to download your FREE USA Banking Starter Guide. It will help you open accounts in the US for your foreign-owned non-resident US LLC.

Here’s a look at everything we’ll cover in this article…

Why Set Up a US LLC as a Non-Resident?

Setting up a US LLC as a non-resident can be a very advantageous financial move. That’s because it’s possible for foreign non-residents to structure a US LLC to have zero tax liability in the US.

To understand how this works, it’s important to note that US LLCs are considered “pass-through” entities. This means that the tax obligations of the business automatically “pass through” to the owner (or “member”) of the LLC.

For example, if the owner a) doesn’t have any personal US tax obligations and b) the LLC doesn’t have any US operations, US employees, or agents; is not “engaged in a trade or business in the United States” (ETBUS), and doesn’t have “effectively connected income” (ECI) in the US, then there are no US tax obligations. Again, it’s important to speak with a qualified tax advisor or accountant to make sure your LLC does not meet any of the criteria mentioned.

In other words, foreign non-residents with single-member LLCs can operate free of US tax obligations. And, if the owner lives in a zero-tax (or territorial tax) country, they’ll likely have no tax obligation at all.

To top it all off, if done properly, with a US LLC not only can you benefit from a zero tax structure, but you can also unlock the following benefits.

Benefits of a Foreign-Owned Non-Resident US LLC

Access to the US banking system
Access to US payment processing systems
Liability protection
The ability to build US credit history
Access to US financing
Lucrative rewards with US credit cards
Zero tax liabilities in the US
Low LLC setup costs
Low LLC maintenance fees compared to other countries
And more…

As you can see, setting up a US LLC as a non-resident can be a very strategic move.

However, to unlock these benefits and ensure you’re not liable for US taxes, you need to understand the requirements you need to meet when filing LLC taxes for non-residents.

How to Set up a US LLC to Have Zero Tax Liability

If you have a registered US LLC with zero employees working in the US and aren’t collecting income in the US, do you have to file LLC taxes for non-residents?

Yes. Even if you do not have a tax liability, with a US LLC you will always have a reporting requirement. If you forget or fail to file your taxes, you can face heavy penalties.

This is why it’s important to understand both how to make your foreign-owned US LLC tax-free and what is required when filing LLC taxes for non-residents. So, with this in mind, let’s look at the requirements you need to meet. And, which forms you’ll need to file for LLC taxes for non-residents.

First, how to make your foreign-owned US LLC tax-free…

To ensure your US LLC remains tax-free, you will need to follow the following guidelines:

You don’t employ US residents
You personally don’t reside in the US
You have no US economic activity
You have zero “effectively connected” income

Understanding what exactly is “effectively connected” income can be tricky. But, generally speaking, this means that the LLC’s income should not be generated by work conducted in the US. With that said, you can have US customers. But you, your offices, your team, and your suppliers should not be based in the US.

To be absolutely sure that you meet these requirements, speak with a tax advisor about your particular situation.

Requirements for Filing LLC Taxes for Non-Residents

As mentioned above, even though you’re able to meet these specific guidelines and aren’t required to pay US taxes, you’re still required to file LLC taxes for non-residents with the IRS. Here’s how…

For a foreign-owned US LLC, you’ll be required to file IRS Form 5472 and Form 1120.

Form 5472 is specifically used to capture and report transactions of foreign-owned US LLCs. Whereas Form 1120 collects information regarding the US LLC’s income, gains, losses, deductions, credits, and more.

You’ll need to complete and submit these two forms to the IRS each year. If not, you could receive a fine of as much as $25,000.

In addition to following the guidelines mentioned above and filing the proper forms, a foreign-owned US LLC will also be required to open a US bank account.

Unfortunately, opening a US bank account for a foreign-owned US LLC can be a difficult process to navigate. But, with the right information and some guidance, you can open a US business bank account for your foreign-owned US LLC 100% remotely and unlock the benefits we mentioned above. Here’s how…

How to Set Up a Bank Account for Your US LLC

The next and final step to start benefiting from your foreign-owned non-resident US LLC is to open a US bank account.

As mentioned, this can be an extremely challenging process. Mainly because not all US banks accept foreign-owned non-resident US LLCs.

The best approach to successfully open a US bank account is to know which branch, bank, and even banker will accept your client profile. But, more specifically, your type of business.

Of course, this can be challenging to navigate, especially on your own.

Fortunately, we can help – more specifically, GlobalBanks USA.