Paying Yourself From a US Company as a Non-Resident

What are my options for taking money out of a US LLC or corporation?

Your options depend first on how the US company is taxed. A single-member LLC that has not elected corporate treatment is generally part of its owner's return for federal income tax. A C corporation is a separate taxpayer, even if you own every share (IRS: single-member LLCs; IRS: paying yourself).

Check the LLC's federal tax classification before choosing a method. An LLC that elected corporate treatment follows the corporation rules for its payments. An LLC makes that election on Form 8832, signed by its owner or an authorized officer or manager; the effective date is normally no more than 75 days before filing or 12 months after it (IRS: Form 8832). A multi-owner LLC usually follows partnership rules, which are covered under foreign partner withholding.

Is a distribution from my single-member LLC taxed or withheld?

A draw from a disregarded single-member LLC to its foreign owner is generally not a separate taxable dividend and does not itself trigger dividend withholding. The owner reports any taxable US business income whether the cash stays in the LLC or moves to a personal account (IRS: single-member LLCs; IRS: Publication 519).

That distinction matters when cash and profit differ. Taking less than the LLC earned does not defer tax on income that is effectively connected with a US trade or business; taking more than current profit does not by itself create a second income item. Keep a ledger of your contributions, draws, loans, business income and personal spending. A foreign-owned disregarded LLC may still report owner contributions and distributions on Form 5472 even when the draw itself has no income-tax withholding (IRS: Form 5472 instructions). Whether the LLC's income is taxable to you in the US is a separate question covered in when foreign owners owe US tax.

How much US tax is withheld on dividends from my C corporation?

A US C corporation generally withholds 30% of a US-source dividend paid to a non-resident individual unless a treaty provides a lower rate and the corporation has valid documentation before payment (IRS: Publication 515). Withholding is on the gross dividend, and the corporation can be liable if it fails to withhold.

For an individual who is the dividend's beneficial owner, IRS Treaty Table 1 shows these general dividend rates. Residence and the treaty's own conditions control; citizenship alone does not.

These are rates for an individual receiving a general dividend. The lower direct-dividend column in the table has separate ownership conditions and generally concerns a corporate shareholder. The US-China treaty does not apply to Hong Kong, Macau or Taiwan (IRS: Publication 5876). A dividend is generally not deductible by the corporation, so corporate income tax and dividend withholding are separate layers (IRS: Publication 542).

How do I claim a lower treaty rate with Form W-8BEN?

If you qualify as an individual resident of a treaty country, give a completed Form W-8BEN to the US corporation before it pays your dividend. Do not send the form to the IRS. The corporation must have reliable documentation to use the lower rate (IRS: W-8BEN instructions; IRS: Publication 515).

First, confirm treaty residence under the relevant treaty and the rate for dividends. Then give the corporation your permanent residence address, treaty country on line 9, and a US or foreign tax identification number when required. The W-8BEN instructions say a foreign tax number usually avoids the need for a US individual taxpayer identification number for treaty benefits on a private-company dividend. Keep the signed form and evidence of residence with the dividend records. A W-8BEN generally expires on the last day of the third succeeding calendar year; renew it before a later dividend if needed. If you move outside the treaty country or become a US tax resident, notify the corporation within 30 days and provide a new W-8BEN or the appropriate replacement form. If you are a foreign entity rather than an individual, the relevant form is generally W-8BEN-E; W-8BEN is not the form for a US citizen or US tax resident (IRS: W-8BEN form; instructions).

Form W-8BEN does not turn a company payment into a dividend or cover pay for work done in the US. Check the payment's actual character first. If you are related to the paying corporation, receive more than $500,000 from it in a calendar year and the treaty has a limitation-on-benefits article, you generally file Form 8833 with your tax return (IRS: Form 8833 instructions).

Can my corporation pay me a salary or fee for work I do abroad?

Yes, a US corporation can pay for real work performed abroad. Pay for services actually performed outside the US by a non-resident is generally foreign-source and is not subject to US federal income-tax wage withholding solely because the payer is a US corporation. If the company pays in advance and cannot determine where the work will occur, the payment is treated as US-source when paid (IRS: Publication 515).

The company must classify the relationship correctly. A corporate officer who performs substantial services is generally an employee, and labeling the payment a contractor fee does not decide its tax treatment. Officer pay should match actual duties: excessive pay may be treated as a distribution, and the IRS may adjust returns for underpayment (IRS: paying yourself; IRS: Publication 542). Record where each workday occurred and what services were performed.

Foreign-source pay can still raise payroll questions. US Social Security and Medicare taxes may apply to employees of an American employer working abroad, while a social security agreement may assign coverage to one country (IRS: working abroad). The country where you work may also impose payroll or employer obligations. That country's tax treatment is outside this US guide.

What changes if I do the work while I am in the US?

Work physically performed in the US generally produces US-source compensation, even when you live abroad, sign a contract abroad or receive the money in a foreign account. Split compensation between US and foreign work using supportable workday records when services span both places (IRS: Publication 515).

US employee wages generally follow payroll withholding rules. US-source independent service fees to a non-resident generally face withholding unless an exception or treaty claim is properly documented; Form W-8BEN is not the form for claiming an exemption on US personal-service compensation. Use Form 8233 to claim a treaty withholding exemption for US personal-service pay; employee wages otherwise use Form W-4 for graduated withholding (IRS: Publication 515; IRS: W-8BEN instructions). A treaty exemption is fact-specific, especially when the payer is your own US corporation. Track US workdays before payment and review payroll and treaty treatment then. Your days may also affect your US tax residency.

Can I borrow from my company, or lend it money and charge interest?

A C corporation can make or receive a genuine loan, but the loan must look and operate like debt: record principal, interest, repayment dates and actual repayments. An advance without a real expectation of repayment can be treated as a distribution or compensation; interest below the applicable federal rate may also create a deemed payment (IRS: paying yourself; IRS: Publication 542).

If you lend to your US corporation, repayment of principal is distinct from the interest it pays you. US-source interest paid to a foreign owner generally requires withholding unless an exemption or treaty rate applies. The portfolio-interest exemption is unavailable when the foreign lender owns at least 10% of the corporation's voting power, so a sole owner should not assume the interest is exempt (IRS: Publication 515). Interest payments and loan balances with a foreign related owner may also be Form 5472 transactions (IRS: Form 5472 instructions). For a disregarded single-member LLC, moving money between the owner and LLC normally does not create a separate income-tax loan between two taxpayers; keep records to distinguish owner funding from outside debt.

What if the company pays my personal expenses or I take out more than its profits?

Personal costs paid through a disregarded LLC are generally owner draws, not business deductions. The business income remains the owner's income when earned (IRS: personal expenses).

For a C corporation, paying a shareholder's personal bill can be a constructive distribution or compensation even if no dividend was formally declared. Taking out more than this year's profit does not automatically make the payment tax-free: a dividend can come from current or earlier earnings and profits, a tax measure the corporation must calculate. Only after those amounts are used up does an ordinary distribution reduce your investment cost in the shares (stock basis); any excess can be gain (IRS: Topic 404; 26 USC 301). The corporation should not call a payment a tax-free return of capital based only on its bank balance or current-year loss. Federal rules generally require withholding on the entire corporate distribution unless the payer properly applies an exception based on a reasonable earnings-and-profits estimate. If the corporation is or recently was a US real property holding corporation, separate real-property withholding rules may also cover a return of capital (26 CFR 1.1441-3). Reconcile corporate earnings and profits, stock basis, loans and personal charges before classifying the payment.

What does the company file when it pays me?

The filing follows the payment's character. Form 1042-S reports many US-source payments to a foreign person even when a treaty reduces withholding to zero; Form 5472 reports certain transactions between a foreign owner and a reporting US company (IRS: Form 1042-S instructions; IRS: Form 5472 instructions).

Form 1042-S and Form 5472 can both apply to the same payment; one does not replace the other. For the LLC's contribution and distribution details, see foreign-owned single-member LLC filing. For the corporation's other annual filings, see foreign-owned C corporation filing.

Example

Illustrative US dollars. A non-resident owns all of a US C corporation and lives in China for tax treaty purposes. The corporation declares a US$20,000 dividend. If the owner qualifies for the China treaty rate and gives the corporation a valid W-8BEN before payment, the general dividend rate in IRS Table 1 is 10%: the company withholds US$2,000 and pays US$18,000. Without a valid treaty claim, withholding at the ordinary 30% rate would be US$6,000 and the cash payment US$14,000. The corporation files Forms 1042-S and 1042 for the dividend: Form 1042-S shows US$20,000 gross in box 2 and US$2,000 withheld in box 7a (IRS: Form 1042-S). It checks whether Form 5472 applies to its owner transactions. The dividend does not reduce the corporation's own taxable income.

Different for you?

• Your LLC has multiple owners: partnership allocations and withholding follow different rules. See foreign partner withholding.
• You need to know whether your LLC's income is taxable in the US: that depends on its activities and income source. See when foreign owners owe US tax.
• You live in Canada: Canadian tax treatment of salary, dividends and owner loans needs a separate analysis. See paying yourself from a US company as a Canadian resident and Canadian owner of a US LLC filing.
• You are considering an S corporation: non-resident ownership changes the available structures. See forming and running a company from abroad.
• You worked in the US, missed withholding, or have undocumented owner loans: gather your workday calendar, treaty residence proof, W-8BEN, pay records, dividend resolutions, earnings-and-profits schedule, stock basis, loan agreements and bank statements for a cross-border tax review.