The Benefits of US Taxes for Foreign-Owned LLCs

July 22, 2020

Starting a limited liability company (LLC) in the United States can come with some significant advantages compared to other types of businesses. U.S. taxes for foreign-owned LLCs are often more favorable than those in some other countries; entrepreneurs outside of the U.S. (and even those within the States) often find that becoming an LLC in the U.S. offers advantage not available elsewhere.

But what is an LLC, and why should you register your company as one? Here’s why.

Why Register as an LLC in the U.S.?

While there are other ways to register your business, an LLC comes with distinct benefits others do not offer. First, an LLC is a more affordable classification and method of structuring your business, whether you are the sole proprietor or have a small headcount. An LLC comes with similar protection that corporations may afford you. As an LLC, however, you are able to operate like the small business that you are.

Like a corporation, an LLC, of course, comes with an employer’s limited liability. This means that your private assets remain protected in the event that your company folds, meaning that it is often a much safer option than establishing your organization as a corporation. In short, if your business owes any debts, they are limited only to the business.

Similarly, any liens or lawsuits against the business will not impact your personal assets. Bear in mind, however, that these protections stop at protecting you from any illegal activity or proven cases of negligence. This applies to nearly all states. LLCs are dissimilar from corporations, though, in that the path to setting up as an LLC is much simpler in both upfront and maintenance efforts.

But what makes LLCs so attractive for foreign entrepreneurs is their pass-through treatment in regards to taxes. This is quite on par with how sole proprietorships or partnerships operate. When it comes to income taxes, single-member LLCs are not considered distinct entities and are known as disregarded entities. As an LLC owner, you report your profits or losses on your income taxes; your LLC does not require a specific return.

If you have a business partner who is included as another member of the LLC, you will likely pay income taxes as a partnership. You and your partner will pay individual taxes based on your portion of the partnerships.

Whether you file as a single-member LLC or have a partner, you save on tax contributions. In short, this means that you are not subject to double taxation. That is, you pay individual tax, and your business pays taxes as well.

This benefit applies to both U.S.-based and foreign-owned LLCs. Because of this advantage, taxes for foreign-owned LLCs can come in significantly more attractive than if they had registered as another type of business, giving them more financial flexibility to grow and scale their operations.

Rely on Accountants Without Borders

With years of experience helping business owners navigate the complexity of the U.S. tax system, we can help you understand your options. Whether you’re based in the U.S. or abroad, we can provide the guidance and knowledge you need to make confident decisions to grow your business. Reach out to us today to learn more about how we can help.

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