The US LLC is the Swiss army knife of online business: remote formation, low fees, a US bank account and a company name that Stripe, Amazon and US clients recognize instantly. It’s also one of the most misunderstood structures we see.
The short version: the US mostly doesn’t tax a foreign-owned single-member LLC. That doesn’t mean nobody taxes it. Where you live decides that – and your home tax office has its own opinion about what an LLC even is.
What a single-member LLC is (for US tax purposes)
A limited liability company is a state-law entity. It has legal personality and limited liability, like a GmbH. For US federal tax, though, the IRS applies the “check-the-box” rules (Treas. Reg. § 301.7701-3):
- One owner, no election: the LLC is a disregarded entity. The IRS looks straight through it to the owner.
- Two or more owners, no election: it’s taxed as a partnership.
- Election on Form 8832: the LLC can choose to be taxed as a corporation instead (21% federal corporate tax).
So a German freelancer who owns 100% of a Wyoming LLC is, from the IRS’s point of view, a non-resident individual running a business. The LLC itself files no income tax return and pays no federal income tax.
When the US taxes you anyway
Non-resident aliens pay US income tax on income that is effectively connected with a US trade or business (ECI), plus withholding tax on certain US-source passive income such as US dividends.
Your LLC owning a US bank account and a US address doesn’t create ECI. What can:
- You (or employees, or a dependent agent) physically perform the work in the US.
- You keep an office, warehouse or inventory in the US.
- You own US real estate or a stake in a US operating partnership.
If you live in a treaty country, the treaty usually adds a second shield: business profits are only taxable in the US if you have a permanent establishment there.
State taxes are a separate layer. Delaware, Wyoming and New Mexico don’t levy state income tax on a foreign-owned LLC that has no activity in the state, but sales tax can apply if you sell goods or certain digital products to US customers above a state’s threshold. Check each state where your customers are.
The filing you must not forget: Form 5472
Since tax years beginning in 2017, a foreign-owned US disregarded entity is treated as a corporation for one purpose: reporting under IRC § 6038A. In practice that means:
- Form 5472 (information return) listing “reportable transactions” between the LLC and its foreign owner – capital contributions, distributions, loans, payments for services.
- Pro-forma Form 1120 as a cover sheet (only name, address, EIN and a note that it’s filed to transmit Form 5472).
- Deadline: the regular corporate due date, 15 April for calendar-year LLCs, extendable with Form 7004.
- Penalty: $25,000 per failure to file, per the IRS instructions, plus more if the failure continues after IRS notice.
That penalty is not a typo. It’s the most expensive paperwork mistake in the whole LLC universe, and it hits dormant LLCs too if there were any transactions with the owner (setting up and funding the LLC counts).
The LLC also needs to keep records that support the form. A clean separate bank account and a simple bookkeeping spreadsheet go a long way.
Choosing the state: Delaware vs Wyoming vs New Mexico
For a non-resident with no US operations, the state mostly determines fees, privacy and paperwork. Tax at federal level is the same.
| Delaware | Wyoming | New Mexico | |
|---|---|---|---|
| Annual state charge (as of 2026) | $300 annual LLC tax, due 1 June | Annual report with license tax: $60 minimum (or 0.0002 × Wyoming assets, if higher) | No annual report and no annual fee for LLCs |
| Reputation | Best known, courts specialized in company law | Popular with small online businesses, low cost | Cheapest to maintain, less known |
| Good for | Investor-facing businesses, later conversion to a corporation | Solo founders who want low fees and simple rules | Minimal-maintenance holding or side projects |
| Registered agent | Required | Required | Required |
On top come the registered agent fee (a commercial agent typically charges an annual fee) and your accountant for Form 5472. For an overview of Delaware in our comparison, see Delaware (USA).
