US LLC for Stripe or Amazon From Abroad: Needed? What It Files

Do you need a US LLC to sell to US buyers or take US card payments?

No US tax rule requires a US company to sell to US buyers, take US card payments, use Stripe or sell on Amazon US. US tax rules expect foreign sellers: a foreign individual documents foreign status on Form W-8BEN and a foreign company on Form W-8BEN-E, and the instructions for both cover payments from card processors and online marketplaces.

When a platform or bank asks for a US entity or a US bank account, that is its own account policy, not a tax rule. No tax authority publishes those policies, and they change. Read the current terms of the service you plan to use before forming anything.

A US LLC also does not decide who owes US income tax. A one-owner LLC is ignored for income tax, so its profit stays yours, and US tax on business profit turns on whether you are engaged in a US trade or business. What the LLC adds is a federal filing of its own for each year with reportable transactions, such as money moving between you and it. The state that formed it may also charge a yearly tax or fee or want a yearly report; see which state to form in as a non-resident.

Your case needs a closer look if:

• goods sit in US warehouses or fulfillment centers, or people work for the business in the US;
• a second owner joins, which turns a one-owner LLC into a partnership by default (Publication 3402);
• the LLC already missed a Form 5472 year, which carries a $25,000 penalty per return;
• you are weighing a corporation or a corporate tax election, which changes who is taxed.

Gather: where your goods are stored and who ships them; who does the work and from which country; whose name each platform account and payout bank account is in; the LLC's formation date and EIN letter; and every transfer between you and the LLC.

Selling without a US company: which W-8 form, and when does US tax apply?

A foreign seller gives US payers a W-8 form, and US tax reaches its business profit when it is engaged in a US trade or business. Some US-source income, such as royalties, is taxed another way: when it is not effectively connected, tax at 30% or a lower treaty rate applies to the gross amount (IRS FDAP). A nonresident individual uses W-8BEN; a foreign company uses W-8BEN-E. If the payments are income effectively connected with a US trade or business, either one gives Form W-8ECI instead (W-8BEN instructions; W-8BEN-E instructions). Form W-8ECI asks for a US business address, not a post office box, and is valid only with a US taxpayer identification number (an SSN, EIN or ITIN); for a one-owner LLC it is the owner's own number, not the LLC's EIN (W-8ECI instructions); see an ITIN for a foreign owner.

The IRS test for effectively connected income works like this:

• A foreign person who owns and operates a business in the US selling services, products or merchandise is, with certain exceptions, engaged in a US trade or business.
• The US activity has to be considerable, continuous and regular.
• Performing personal services in the US usually counts.
• For a seller engaged in a US trade or business, profit from selling inventory in the US is effectively connected, whether the goods were bought in the US or abroad. Bought inventory is generally sold where title passes to the buyer; inventory you produce is generally sourced where it is produced (Publication 519).

Effectively connected profit is taxed after deductions at the rates US taxpayers pay: graduated rates for individuals, the corporate rate for companies (Form 1120-F responsibilities). A foreign company also owes a branch profits tax of 30% on after-tax US earnings it does not reinvest in the US business, unless a treaty lowers it (Form 1120-F instructions). Deductions count only on a return filed on time, which for this rule generally means within 16 months of the due date for an individual, or sooner, once the IRS sends a notice, if the year before was also unfiled (Publication 519), and 18 months for a foreign company (Form 1120-F responsibilities). If you are unsure whether you have a US trade or business, a protective return filed by then keeps them. If your country has an income tax treaty with the US, its business profits article generally exempts a resident's business profits, a person's or a company's, unless they are attributable to a US permanent establishment; the exemption is claimed on a filed return, with Form 8833 when required (Publication 519; Form 1120-F responsibilities). The full rules are in when foreign owners owe US tax.

Can a foreign person own a US LLC, and does it change the tax?

Yes. The Form 5472 instructions describe a foreign-owned US disregarded entity: a US entity wholly owned by a foreign person. By default a one-owner LLC is disregarded, and its income and expenses go on the owner's return (Publication 3402). For a non-US owner, the LLC's profit is tested exactly as if the owner earned it directly.

Two common beliefs do not follow from the LLC alone:

• "A US LLC makes my income US-taxable." Forming an LLC does not create a US trade or business. Activities do.
• "A US LLC makes my income foreign or tax-free." If the activities amount to a US trade or business, the effectively connected profit is taxable whether or not an LLC holds it.

The LLC is a separate entity for employment taxes: if it hires US employees, it runs payroll under its own name and EIN (Publication 3402). Your country of residence may also tax the same profit under its own rules, which needs advice there; founders living in China can start with a US company for a China-resident founder.

What does a foreign-owned LLC file with the IRS in year one and every year?

A foreign-owned single-member LLC files a pro forma Form 1120 with Form 5472 attached for each tax year in which it has a reportable transaction. Its own formation counts: amounts paid or received to form the LLC, and money the owner puts in or takes out, are reportable in Part V (Form 5472 instructions).

A year with no reportable transactions needs no Form 5472, but money you put in or take out counts, and so do formation costs you pay. The pro forma return reports no income and pays no tax; the owner's own US tax is a separate question. For detail, see what a foreign-owned single-member LLC files and filing for the year you formed. Whether marketplace payouts go on Form 5472, and whose name the seller account should be in, is covered in marketplace payouts in a foreign-owned LLC.

LLC for a non-resident with US warehouse stock or staff: what does the owner file?

If the business is a US trade or business, the owner files a US income tax return on top of the LLC's pro forma Form 1120: Form 1040-NR for an individual owner, Form 1120-F for a foreign company owner.

• Individual owner: a nonresident engaged in a US trade or business during the year must file Form 1040-NR, even with no income from that business or income a treaty exempts (Form 1040-NR instructions). See the nonresident return for business income.
• Company owner: a foreign corporation engaged in a US trade or business during the tax year must file Form 1120-F, whether or not it had US-source income from that business and even if a treaty exempts that income (Form 1120-F instructions). The IRS notes that employees working in the US for a foreign corporation can create a US trade or business (Form 1120-F responsibilities). See US tax returns for foreign companies.

The IRS calls this test not straightforward and dependent on the specific facts (Form 1120-F responsibilities). Stock held in US fulfillment warehouses, sold to US buyers, with people in the US handling parts of the work, raises the question; how much happens in the US, who does it, where title passes and any treaty decide it. Settle it before the first year closes, because the owner's return and the W-8 form given to platforms both follow from the answer.

Which tax forms do platforms ask for or send?

The owner of a foreign-owned single-member LLC gives payers a W-8 in the owner's own name, not a Form W-9, even when the LLC has an EIN (Form W-9; requester instructions). Which W-8, and where the LLC's name goes, is covered in the tax form a foreign-owned LLC gives payers. With no valid form on file, a platform backup withholds 24% of the payments it must report on Form 1099-K (Form 1099-K instructions); an individual owner claims it back on Form 1040-NR (Form 1040-NR instructions).

Form 1099-K reports payments a seller received (IRS). A platform is not required to report payments to a payee documented as foreign with an applicable Form W-8 (W-8BEN-E instructions); the Form 1099-K instructions set conditions on when it can rely on that form, so an account with a US address or payouts to a US bank account may still get one. Where a platform does report, the thresholds are:

A 1099-K, or the lack of one, does not decide whether US tax is owed. For the books, see recording payment processor payouts and bookkeeping for marketplace sellers.

Would a US corporation work better than an LLC?

A US corporation is a US taxpayer in its own right. It files Form 1120 every year whether or not it has taxable income and pays federal tax at 21% of taxable income (Form 1120 instructions). Dividends it pays a foreign owner are US-source income subject to 30% withholding unless a treaty lowers the rate (IRS FDAP); the corporation withholds it, and if it does not and the owner does not pay, both are liable (Publication 515). An LLC can also elect corporate tax treatment on Form 8832, signed by the owner, with an effective date up to 75 days before or 12 months after the filing date (Form 8832; Publication 3402). Compare the two in forming and running a company from abroad and a foreign-owned LLC taxed as a corporation.

Does a foreign seller collect US sales tax?

Sales tax is set state by state, and a seller outside the US can have duties too. Many states require a marketplace facilitator to collect and remit tax on sales it handles for its sellers, but a seller may still have to register and file in some of those states. A seller that also sells directly into a state must register once its sales there meet that state's remote seller threshold, and a seller with a physical presence in a state generally must register whatever its sales (Streamlined Sales Tax guidance).

Stock kept in a marketplace's fulfillment center can be physical presence. Several states require a seller with physical presence to register even if it sells only through a marketplace; Texas excuses a remote seller whose only presence is that stock (Streamlined Sales Tax guidance). State rules differ: see foreign sellers and US sales tax.

Checklist before you form a US LLC from abroad

1. Confirm the need: read the current account terms of the platform or bank you plan to use.
2. Choose the state and a registered agent, then form the LLC; the formation filing names the agent (Delaware, for example). See which state to form in as a non-resident.
3. Get the EIN after the state has formed the LLC. With a principal place of business outside the US, apply by phone, fax or mail; the IRS charges no fee (IRS EIN page).
4. Arrange the address and bank account: see US business address and bank account.
5. Keep separate books from day one and record every transfer between you and the LLC, including formation costs you pay; see bookkeeping for a foreign-owned US company.
6. Put the first Form 5472 date in your calendar. It is the 15th day of the fourth month after year-end, counted from the end of the LLC's first tax year, even if the LLC was formed late in that year.
7. Before the first year ends, write down where goods are stored and who works where, and settle the US trade or business question.
8. Give each platform the right W-8 in your own name before the first payout.

The full sequence is in forming a US LLC as a non-resident, step by step.

Example

These examples are illustrative and use US dollars.

A designer in Poland selling templates

She earns US$40,000 a year from US buyers through a payment processor, works only in Poland, and has no US staff, office or stock. Without a US company, she gives the processor Form W-8BEN. If she forms a single-member LLC because the processor asks for a US entity, the profit is still hers for US tax, and the LLC files a pro forma Form 1120 with Form 5472 by April 15 for each year with reportable transactions, such as the US$500 she paid to form it and the US$30,000 she moved home. Her US income tax position is the same with or without the LLC. She does no work in the US and has no US staff, office or stock, the activities the trade or business test looks at.

A seller in Pakistan using US fulfillment warehouses

He buys finished goods from suppliers, sells US$300,000 a year of them to US buyers through a marketplace, keeps stock in US warehouses run by others and pays a US contractor to handle returns. Bought goods sold in the US produce US-source income, and the US stock and US help raise the trade or business question. If the answer is yes, he files Form 1040-NR on the effectively connected profit after deductions and gives platforms Form W-8ECI with his own US tax number, not the LLC's EIN; the LLC files its pro forma Form 1120 with Form 5472 either way. He needs the answer before the first year closes.

A founder in Mexico who never filed

• Year 1: she forms an LLC only to open a payment processor account, pays US$600 of formation costs herself and moves US$5,000 of payouts home. The pro forma Form 1120 with Form 5472 is due April 15 of year 2. She does not file.
• Year 2: she moves US$7,000 home. The year 2 return is due April 15 of year 3. She does not file.
• Now: two missed Form 5472 returns, each exposed to a $25,000 penalty, with another $25,000 for each 30-day period the returns are still not filed beginning 90 days after an IRS notice. She reads missed foreign-owner filings and penalties before filing.

Different for you?

• Your goods sit in US warehouses, or people work for you in the US: see the nonresident return for business income and get cross-border tax help before the first year closes.
• A US partner or second owner joins: the LLC becomes a partnership by default; see a company with a foreign co-owner or an LLC owned by two non-residents, and get business formation help.
• Your first Form 5472 is coming due: see what a foreign-owned single-member LLC files and get business tax return help.
• You missed Form 5472 years or got a penalty notice: see missed foreign-owner filings and penalties and get business tax return help before you file.
• Payouts, fees and transfers to you don't reconcile, or no books were kept: see bookkeeping for a foreign-owned US company and get bookkeeping help.
• You formed the LLC through an online formation service: see taxes after an online formation service.
• A company outside the US owns the LLC or sells to US buyers itself: see US tax returns for foreign companies.
• You live in China: see a US company for a China-resident founder.
• You live in Canada: see a US business for a Canadian resident before forming, or what a Canadian owner of a US LLC files if you already have one, and get cross-border tax help.
• You live in the US: see an LLC for an online store.