Owning a US Company as a Nonresident: Types and Tax Effects

Can a non-US citizen or nonresident own a US LLC or corporation?

Yes, a person living outside the US can generally own a US LLC or C corporation. The filing comparison below assumes an owner who is neither a US citizen nor a US tax resident. A citizen or tax resident living abroad generally reports worldwide income; see filing while living abroad (IRS). Ownership permission and US tax treatment are separate questions: the entity's classification, activity, and location determine its returns and tax. The IRS says most states permit foreign LLC members, but state rules can differ (IRS: LLC). It also provides filing rules for foreign-owned US corporations (Form 5472 instructions).

This page compares US rules. Identify each owner's country of tax residence before choosing a structure; Canadian residents should also see US business for a Canadian resident.

Owning the company alone does not show that the owner has taxable US business income. Working in the US, holding inventory or property there, or operating through a US partnership can change the result. See when foreign owners owe US tax for the income tests (IRS: Publication 519).

Can a nonresident own an S corporation?

A person who is neither a US citizen nor a US tax resident cannot be an S corporation shareholder. Living abroad alone does not disqualify a US citizen. The rule also applies when an LLC elects S status (IRS: S corporations).

A non-US citizen who becomes a US tax resident may qualify if the company meets the other S corporation conditions. A green card or enough qualifying days in the US can change tax residency; treaty positions can complicate it (IRS: Publication 519).

What does each company type file each year?

For federal income tax, a one-owner LLC is usually treated as part of its owner; a multi-owner LLC is usually taxed as a partnership. An LLC can elect corporate tax treatment (26 CFR 301.7701-3). A pro forma Form 1120 is a cover return for Form 5472, not a corporate income tax return for the disregarded LLC. Money the owner puts into or takes out of the LLC can trigger that reporting (IRS: Form 5472). The table assumes direct ownership by nonresident individuals; ownership through a foreign company needs separate review.

Adding a second owner changes a disregarded LLC to partnership status; reducing a partnership LLC to one owner reverses it. An LLC taxed as a corporation keeps that classification when its owner count changes (26 CFR 301.7701-3).

Form 5472 is a separate risk from income tax. A required Form 5472 filed late, filed substantially incomplete, or unsupported by required records can bring an initial $25,000 penalty (IRS: Form 5472 instructions). The detailed filing tests belong in foreign-owned single-member LLC filing and foreign-owned C corporation filing. For a foreign partner's withholding, see foreign partners withholding.

Does a corporate tax election for an LLC change my personal filing?

A C corporation tax election changes where the LLC's operating income is reported: the company files Form 1120, and the owner does not report that income directly merely because they own it. The owner may still need Form 1040-NR for other US income or payments from the company (26 CFR 301.7701-3; IRS: Form 1120 instructions).

For an existing LLC, the election is treated as a transfer of assets and liabilities to a corporation. That deemed transfer may affect the owner's return in the election year (26 CFR 301.7701-3).

Form 8832 changes tax classification, not the LLC's state-law form. Its effective date can be up to 75 days before filing or 12 months after. All current owners or an authorized officer, manager, or member sign. If retroactive, any former owner during that period also signs. A change to an existing classification generally blocks another elective change for 60 months, with limited exceptions (IRS: Form 8832; 26 CFR 301.7701-3). For the broader choice, see LLC or C corporation.

Does the state where I form change my taxes?

The formation state does not change the federal LLC classification or, by itself, decide where the business owes state tax. States can tax or require returns where the company operates. California, for example, treats a business as doing business there based on activity, organization, or sales, property, and payroll tests (California FTB).

Forming in Wyoming, New Mexico, or Florida does not change the federal filing path above. Check the formation state's ongoing duties and each state where the company does business. A Delaware corporation's annual report and franchise tax are generally due March 1. A Delaware LLC has an annual $400 tax due June 1 (Delaware Division of Corporations).

A company formed in any of these states can also owe California tax. An LLC taxed as a disregarded entity or partnership generally owes California's $800 annual LLC tax if organized, registered, or doing business there, even if inactive; exceptions apply (California FTB: LLC filing). An LLC taxed as a corporation follows California corporate filing and tax rules (California FTB: corporate LLC). For details, see Delaware franchise tax and California minimum tax and LLC fee.

How do I get an EIN without an SSN or ITIN?

An entity can apply for an EIN without its responsible party first obtaining an SSN or ITIN if that person is ineligible for both. The responsible party is generally an individual with ultimate ownership or control. In that case, Form SS-4 says to enter “foreign” or “N/A” on line 7b (IRS: Form SS-4 instructions).

The current IRS online tool requires a US-formed entity, a principal place of business in the US or a US territory, and the responsible party's SSN or ITIN. If you have no US legal residence, principal business, or principal office, complete Form SS-4, then call the IRS international EIN line at 267-941-1099, Monday through Friday, 6 a.m. to 11 p.m. Eastern time. Fax and mail are also available; use one route per entity (IRS: Form SS-4 instructions). For the single-owner LLC's exact entries, see foreign-owned single-member LLC filing.

Do I need an ITIN?

An owner does not need an ITIN merely to own a US company. For its EIN application, a responsible party without an SSN or ITIN can enter “foreign” or “N/A” only if ineligible for both numbers. An individual who must file Form 1040-NR and cannot get an SSN generally needs an ITIN. It is an individual federal tax number, separate from the company's EIN (IRS: ITIN; IRS: Form SS-4).

Apply on Form W-7, generally with the tax return that creates the federal tax purpose, unless an exception permits applying without a return. Do not apply only because a company has a Form 5472 filing: the form allows a reference ID when a foreign owner has no US identifying number (IRS: Form W-7 instructions; IRS: Form 5472 instructions).

What changes if I later become a US tax resident?

The company's legal form and EIN do not automatically change when an owner becomes a US tax resident. The owner's US income tax scope and the foreign-owner reporting tests can change. A resident individual generally reports worldwide income on a resident return; a disregarded LLC's income follows that owner (IRS: Publication 519; 26 CFR 301.7701-3).

Recheck Form 5472 when the owner's US tax status changes, even if ownership stays the same. A corporation may meet the foreign-owned test if it had a qualifying foreign shareholder at any time during the year; the disregarded LLC's status also needs review for the move year. A partial-year move and treaty claim may need separate analysis (IRS: Form 5472 instructions; IRS: Publication 519). See first year as a US tax resident for the personal return.

Example

Illustrative only; all amounts are US dollars. In Year 1, a nonresident who is not a US citizen owns a single-member New Mexico LLC, puts $10,000 into it, has the LLC receive $100,000 for services the owner performs abroad, and takes a $20,000 distribution. Assume no other US activity or income.

In Year 1, the LLC is disregarded for income tax. Its $10,000 contribution and $20,000 distribution go in Form 5472 Part V with an attached statement and a pro forma Form 1120 (IRS: Form 5472). Neither owner transaction reduces the $100,000 of service income attributed to the owner. Under these assumptions, that income does not by itself require Form 1040-NR; see when foreign owners owe US tax (IRS: Publication 519). If the owner elects corporate tax treatment effective in Year 2, the LLC files a full Form 1120 and includes any Year 2 service receipts, but not Year 1's $100,000, in its income. Tax depends on deductions and credits (26 CFR 301.7701-3; Form 1120 instructions).

Different for you?

• Your US activity or income source is uncertain: gather where work happened, where people and property are located, contracts, and payment records; use when foreign owners owe US tax.
• Your company has foreign partners: gather each owner's residence and ownership history; see foreign partners withholding.
• You are choosing between LLC and C corporation: compare the tax treatment in LLC or C corporation before an election that may be hard to reverse.
• You live in Canada: a US LLC can receive different treatment in each country; see US business for a Canadian resident.
• You plan to pay yourself: the payment type changes tax and withholding; see paying yourself as a foreign owner.
• You sell into US states: company formation does not settle sales tax; see foreign sellers and sales tax.
• You have two countries' filings, an entity election, or missed Form 5472 years: gather formation documents, elections, owner transactions, past returns, and residence dates for cross-border tax review.