The United States is one of the largest economies in the world, and companies based in the US are usually trusted worldwide. This makes it is easier for the business to collect payments from customers.
Hence many people who are not residing in the United States would like to set up a business in the U.S, since it will have a good reputation. It is possible for a person who is not residing in the US to set up a Limited Liability Company (LLC) and also avoid paying taxes in the country. Information on forming a US LLC for non-residents is provided below.
There are many advantages of forming a US LLC compared to a business in other countries. In addition to the excellent reputation which a US LLC will have worldwide, the setup and maintenance costs of a business established in the United States are far lower than in other countries. It is usually possible to set up a business in the US in one week, spending approximately $500, while in other countries like Canada, business owners will have to spend $2000 for business formation. The business owner will not have to provide much business information for Know Your Customer (KYC) purposes. A US-based business will also have access to excellent banking and payment processing facilities.
One of the major advantages of opening a US LLC for a non-resident or non-citizen is that the business will not have to pay any tax in the US if it meets some criteria. These criteria are that the business should be 100% owned by a non-US resident, does not have any local presence in the US and income is not effectively connected. This makes it ideal for a variety of online business and service providers. Companies offering consulting, dropshipping services, selling digital products, selling through Amazon (FBA) and freelancing are often organizing their business as a US LLC and do not pay any taxes in the country.
A business can open its LLC in any of the 50 states in the United States. Some of the factors which should be considered for choosing a state, are the cost of formation, annual fees, anonymity and other laws. Only four states Delaware, New Mexico, Nevada and Wyoming allow the business owner to keep their information anonymous. Additionally Wyoming makes it difficult to sue the LLC owner. After deciding the state, the business owner should choose a name for the business after ensuring that the name is not already registered in the database of the state. The business owner should then choose a service provider who will be the registered Agent and open the LLC on his behalf. On this specific point the best information are found on this website.
Employer Identification Number (EIN)
For opening a US LLC, the business owner will have to apply for an EIN with the Internal Revenue Service (IRS). The EIN is a tax identification number. To get a nine-digit EIN, the business owner, will have to fill the application form SS-4, with a business name, US business address, and a brief description of the activities of the business. This EIN is required for opening a bank account or applying for accounts with payment processors like Paypal.
A US LLC owned by a non-resident will require a bank account to receive payments, pay their vendors and for reporting purposes. The bank account can be opened with traditional banks like Chase, Bank of America. However, to open a bank account in these banks, the business owner should be physically present in the United States. The alternate option is opening an account with neobanks which allow the bank account to be opened remotely. Some of the neobank options for US LLC owners are Transferwise, Payoneer, and Mercury.io
All US LLCs have to submit the form 5472 with form 1120 annually by April 15. In this form, the business owner will have to provide some financial information of the business, like the LLC value on 31st December of the tax year, the amount of money moved from the non-US owner to the LLC, and the money moved from the LLC to the owner in the tax year. This form has to be mailed or faxed to the IRS, Ogden, Utah, Failure to file this form can result in a penalty. The owner is also expected to compile a profit and loss statement, based on the payment received, and expenses of the business.