US LLC taxes for foreign owners

Step 1: how the IRS classifies the LLC

• A single-member LLC is, by default, disregarded as separate from its owner for federal income tax. It is still a separate entity for employment tax.
• A domestic LLC with two or more members is classified as a partnership by default.
• An LLC can elect corporate treatment with Form 8832. A corporation pays tax at 21% according to IRS Publication 542. Nonresident alien individuals cannot own S corporation stock, so an S election is not available to them. Read LLC, C-Corp or S-Corp.

Step 2: what the IRS says about nonresident owners

Publication 519 says nonresident aliens are taxed only on income from sources within the United States. The IRS splits US-source income into two main kinds:

• Effectively connected income (ECI). Income tied to a US trade or business, taxed after allowable deductions at the graduated rates that apply to US citizens and residents and reported on Form 1040-NR. The IRS says that selling products or services in the US generally counts as a US trade or business. Personal services performed in the US usually do too, if "considerable, continuous and regular".
• FDAP income that is not effectively connected. The IRS says this income is generally taxed at a flat 30%, or at a lower treaty rate if you qualify, with no deductions.

Which kind, if any, applies to your income is a facts question. For example, where the work is performed and where the customers are can matter. We do not decide it.

Step 3: do you count as a resident?

The IRS substantial presence test counts days of physical presence in the US. For 2025 Publication 519 requires presence on 31 days in the year and 183 days over the three-year period that includes the current and two prior years, with weighting of prior-year days. Residents are taxed differently from nonresidents.

Step 4: tax treaties

Your country may have an income tax treaty with the United States that changes the rates or rules. The IRS publishes the list. Treaty benefits usually require you to claim them and may require an ITIN. See the IRS treaty list and ITIN, EIN and SSN.

Step 5: federal information returns

A foreign-owned single-member LLC may have to file Form 5472 with a pro forma Form 1120 when it has a reportable transaction, with a $25,000 penalty for missing it. That form reports transactions, it is not an income tax payment.

Step 6: state and other taxes

State taxes are separate. A state may charge a yearly report, a franchise or annual tax, or sales tax depending on what the LLC does. See annual report and franchise tax and state fees. Your home country may also tax the income. We cover US rules only.

A common mistake

Believing that a foreign-owned LLC owes "zero tax" or that filing forms is optional. Neither is a safe assumption. The result depends on the income and the forms due, so get professional advice before you act.

What we do and do not do

We form the LLC, act as your registered agent and request your EIN. We do not prepare tax returns, give tax advice or file the forms on this page.

Next step

Ready to form yours? Start your LLC with Coral Filings and we handle the state filing, the registered agent and the EIN request. Want to compare filing fees first? Open the state fees hub for all 50 states and D.C.

This page is general information, not legal or tax advice. For your specific situation, talk to a licensed attorney or CPA.