How non-resident LLCs are taxed in the US
by Team Devanta Authority
- December 31, 2025
- Bookkeeping & Tax
A non-resident LLC does not have a single, fixed tax rate in the United States. How it is taxed depends on several factors, including who owns the LLC, how the LLC is classified for tax purposes, and whether the income is considered connected to US business activity.
For non-residents, the key distinction is not the LLC itself, but how US tax law treats the income flowing through it. In many cases, an LLC is treated as a pass-through entity, meaning the tax obligation falls on the owner rather than on the company as a separate taxpayer.
This is where much of the confusion comes from. Non-resident owners often expect the LLC to be taxed like a US corporation, while in reality the tax outcome depends on income source, ownership structure, and the LLC’s connection to the US. The sections below break this down step by step, using the most common questions people ask when trying to understand how non-resident LLC taxation actually works.
What “non-resident LLC” means for US taxes
The term “non-resident LLC” is not an official category in US tax law. It is a practical expression used to describe an LLC that is owned by one or more non-US persons who are not US tax residents.
From a tax perspective, what matters is the tax status of the owner, not the LLC itself. An LLC formed in the US can be fully compliant at the state level, yet still be treated very differently for federal tax purposes depending on whether its owners are US residents or non-residents.
This distinction is critical because non-resident owners are taxed under a separate set of US rules. These rules focus on where the income comes from, whether it is connected to a US trade or business, and how the LLC is classified for tax purposes.
Non-resident owner vs “foreign LLC”: what’s the difference?
A non-resident owner refers to the person who owns the LLC. It means the owner is not a US tax resident, regardless of where the LLC itself is formed. This is the most common situation people mean when they talk about a “non-resident LLC.”
A foreign LLC, on the other hand, is a legal term that usually describes an LLC formed outside the United States that is doing business in the US. In some state-level contexts, it can also mean an out-of-state US LLC registering to operate in another state, which adds to the confusion.
For US tax purposes, these two concepts are treated very differently. The IRS focuses on whether the owner is a US person or a non-resident, and whether the income is US-sourced or effectively connected to a US business. Simply being called a “foreign LLC” does not determine how the income is taxed.
Do non-residents have to pay taxes?
Yes, non-residents may have to pay US taxes, but only on certain types of income. The United States does not tax non-residents on their worldwide income, only on income that is sourced in the US or connected to US business activity.
If a non-resident owns an LLC that earns US-sourced income, that income can be taxable in the US even if the owner lives abroad. In contrast, income that is clearly foreign-sourced and not connected to a US trade or business is generally not subject to US federal income tax.
This is why understanding where the income comes from and how the LLC operates is so important. Two non-resident LLC owners can have very different tax outcomes depending on the nature of their income and their level of connection to the US.
How are LLCs taxed in the USA?
In the United States, an LLC is not taxed based on its legal form, but on how it is classified for tax purposes. By default, an LLC is treated as a pass-through entity, meaning the business itself does not pay federal income tax.
Instead, the LLC’s income is reported at the owner level. A single-member LLC is generally treated as a disregarded entity, while a multi-member LLC is treated as a partnership. In both cases, profits and losses flow through to the owners’ personal tax returns.
An LLC can also choose to be taxed as a corporation by making an election with the IRS. This changes how and when tax is paid, but it is optional and not the default treatment. Because of these classification rules, two LLCs with the same income can face very different tax outcomes depending on how they are taxed and who owns them.
Pass-through vs corporate taxation (what “default” means)
By default, an LLC is taxed as a pass-through entity. This means the IRS ignores the LLC as a separate taxpayer and looks directly at the owners instead. The LLC itself does not pay federal income tax on its profits.
Under pass-through taxation, income is reported by the owners based on their share of the LLC, even if the money is not physically distributed. For non-residents, this is where US tax exposure often arises, because the tax obligation follows the income to the owner.
Corporate taxation is not the default. An LLC must actively elect to be taxed as a corporation. When it does, the company becomes a separate taxpayer, and profits are taxed at the corporate level before any distributions to owners. This choice can significantly change how and when taxes are paid, especially for non-resident owners.
What is the tax rate for a US LLC company?
A US LLC does not have a single, standard tax rate. The tax rate depends on how the LLC is classified for tax purposes and who owns it. In most cases, the LLC itself does not pay federal income tax at all.
If the LLC is taxed as a pass-through entity, there is no company-level tax rate. Instead, the income is taxed at the owner level, using the tax rules that apply to that owner. For non-residents, this often leads to confusion because the tax rate is determined by the type of income and its connection to the US, not by the LLC structure.
Only if an LLC elects to be taxed as a corporation does a fixed company tax rate apply. In that case, the LLC is subject to the US federal corporate income tax rate, and any distributions to owners may be taxed separately.
What is the tax rate for a US LLC for non-residents?
There is no single tax rate that applies to a US LLC owned by non-residents. The tax outcome depends on how the LLC is taxed and whether the income is considered US-sourced or connected to a US trade or business.
In many cases, non-resident owners are taxed directly on their share of the LLC’s income rather than at the company level. Certain types of US-sourced income may be subject to a flat withholding tax, while other income is taxed based on net profit after allowable expenses.
Because of this, two non-resident LLC owners with the same revenue can face very different effective tax rates. The key drivers are the nature of the income, the level of US activity, and how the LLC is structured for tax purposes.
Who pays 30% tax in the USA?
The 30% tax rate in the US generally applies to non-residents who receive certain types of US-sourced passive income. This includes income such as interest, dividends, royalties, and some service payments when they are not connected to an active US business.
This tax is usually collected through withholding at the source, meaning the payer withholds the tax before the money is paid out. It applies on a gross basis, without deductions, which is why it often causes confusion and concern among non-resident LLC owners.
Importantly, this 30% rate does not apply to all income earned through a US LLC. Income that is effectively connected to a US trade or business is taxed under a different set of rules, often based on net profit rather than gross receipts, and may also be affected by tax treaties.
What is the tax rate for a non-resident?
There is no single tax rate that applies to all non-residents in the United States. The rate depends on the type of income earned and whether that income is connected to US business activity.
Some US-sourced income received by non-residents is subject to a flat withholding tax, while other income is taxed on a net basis using graduated tax rates. In practice, this means the effective tax rate can vary widely from one non-resident to another.
For non-resident LLC owners, the key factor is not residency alone, but how the income is classified under US tax rules. This is why understanding income source and business activity is more important than focusing on one specific percentage.
How much tax will I pay on $50,000? (How to estimate it)
There is no fixed answer to how much tax a non-resident will pay on $50,000 earned through a US LLC. The final amount depends on whether the income is considered US-sourced, whether it is connected to a US trade or business, and how the LLC is taxed.
If the income is subject to withholding tax, the tax may be calculated on the gross amount, without deductions. If the income is effectively connected to a US business, tax is generally calculated on net profit, after allowable expenses, using the applicable tax rules for non-residents.
A practical way to estimate tax is to start by identifying the type of income, then determine whether it is taxed on a gross or net basis, and finally consider whether any tax treaty provisions apply. Without these inputs, a dollar figure alone is not enough to produce a meaningful estimate.
How is a foreign-owned LLC taxed in the US?
A foreign-owned LLC is taxed in the US based on how the LLC is classified and how its income is treated under US tax rules. The fact that the owner lives outside the US does not automatically exempt the LLC’s income from US taxation.
If the LLC is treated as a pass-through entity, the income is generally taxed at the owner level. For non-resident owners, this means US tax may apply if the income is US-sourced or considered effectively connected to a US trade or business. In these cases, tax is typically calculated on net income rather than gross revenue.
In addition to income tax, foreign-owned LLCs often have extra reporting and withholding obligations. These compliance requirements exist even when little or no tax is ultimately due, which is why understanding the rules early is especially important for non-resident owners.
Single-member vs multi-member: what changes in practice
The main difference between a single-member and a multi-member LLC is how the IRS treats the entity for tax purposes by default. A single-member LLC is usually treated as a disregarded entity, meaning the IRS looks directly at the owner rather than the company itself.
A multi-member LLC is typically treated as a partnership. In this case, each owner is taxed on their share of the LLC’s income, and the LLC must file an informational partnership return to report how profits and losses are allocated.
In practice, this affects both taxation and compliance. Multi-member LLCs generally involve more complex reporting and coordination between owners, while single-member LLCs are simpler in structure but still subject to US tax rules when owned by non-residents.
How do I know if I have a single member LLC?
You have a single-member LLC if the company has only one owner. This is determined by ownership, not by how the business operates or how many managers it has.
If the LLC was formed with one owner and no additional members were added later, it is considered a single-member LLC by default. This remains true even if the owner is a non-resident or if the LLC has employees or contractors.
From a tax perspective, the IRS looks at how many owners the LLC has, not at internal titles or day-to-day operations. Unless the LLC has more than one owner or has elected a different tax classification, it is treated as a single-member LLC.
What’s better, single member or multi member LLC? (Tax and filing impact)
There is no universally better option between a single-member and a multi-member LLC. The better choice depends on the ownership structure, business goals, and compliance preferences of the owners.
A single-member LLC is generally simpler from a filing and reporting standpoint. It usually involves fewer tax forms and less coordination, which can be attractive for solo non-resident founders. However, all income and tax exposure flow directly to the single owner.
A multi-member LLC can make sense when there are multiple owners or partners involved. While it comes with additional filing requirements and more complex reporting, it allows income and responsibilities to be shared among members. From a tax perspective, neither structure automatically results in lower taxes; the impact comes from how the income is earned and reported, not from the number of members alone.
What is the 90% rule for non-residents?
The “90% rule” is not an official rule in US tax law for non-residents. It is a phrase that often appears in online searches, but it usually reflects confusion with tax concepts from other countries or with unrelated US tax provisions.
In the US system, non-resident taxation does not depend on earning 90% of income from a specific source or location. Instead, the IRS focuses on whether income is US-sourced and whether it is connected to a US trade or business.
Because of this, relying on a so-called “90% rule” can lead to incorrect assumptions about tax obligations. Non-resident LLC owners should base their understanding on income classification and business activity, not on percentage-based shortcuts that do not exist in US tax rules.
“90% rule” vs common US residency/tax tests (why people mix these up)
People often mix up the so-called “90% rule” with actual US residency and tax tests because many countries use percentage-based thresholds to determine tax residency. The US tax system works differently and does not rely on a single income percentage to define non-resident or resident status.
In the US, residency for tax purposes is determined by formal tests such as the green card test and the substantial presence test. These tests focus on legal status and physical presence in the country, not on how much of someone’s income comes from the US.
For non-resident LLC owners, this confusion is common because online sources often blend US rules with foreign tax concepts. As a result, people search for simple percentage rules that do not actually exist in US tax law, even though the real analysis is based on residency status and income classification.
What is the 5 year non-resident rule? (When this phrase shows up, what it usually refers to)
The “5 year non-resident rule” is not a general rule that applies to non-resident LLC owners under US tax law. When this phrase appears, it is usually a reference to very specific situations that are being taken out of context.
Most often, it relates to rules affecting certain visa holders, students, or expatriates, where a five-year period is used to determine how residency or tax status is evaluated. These rules do not apply broadly to all non-residents and are not tied to LLC ownership itself.
For non-resident LLC owners, US tax obligations are not determined by a fixed five-year timeline. Instead, they depend on residency status under US tests and on whether income is US-sourced or connected to US business activity. The “5 year rule” tends to surface in searches because people are looking for a simple cutoff that, in practice, does not exist for this context.
Which state is best for non-resident LLC?
There is no single best state for a non-resident LLC in all situations. The right state depends on where the business actually operates, where its customers are located, and whether the LLC has a real connection to a particular state.
Many non-residents focus on formation states such as Delaware or Wyoming because of their business-friendly rules. However, forming an LLC in one state does not automatically eliminate taxes or filing obligations in another state where the business is actively operating.
From a tax perspective, the most important factor is not the state of formation, but where the LLC has economic activity or a taxable presence. Choosing a state should be based on compliance and long-term practicality, not on the expectation of avoiding taxes altogether.
Which state is best for foreigners to open LLC?
There is no universally best state for foreigners to open an LLC. The optimal choice depends on where the business will actually operate and whether it creates a taxable or legal presence in a specific state.
States like Delaware, Wyoming, New Mexico and Florida are often mentioned because of their straightforward formation process and predictable business laws. However, choosing one of these states does not remove the obligation to register or pay taxes in another state if the LLC conducts business there.
For foreign owners, the best state is usually the one that aligns with the LLC’s real activities and compliance needs. The decision should be based on operational reality and regulatory clarity rather than the assumption that a particular state automatically offers tax advantages.
Why is Wyoming the best state to form an LLC? (What people mean by this)
When people say Wyoming is the best state to form an LLC, they are usually referring to its low administrative costs and simple compliance requirements. Wyoming does not have a state income tax, and annual state fees are relatively low compared to many other states.
Wyoming is also known for strong privacy protections, as it does not require public disclosure of LLC owners in the same way some other states do. This is often appealing to foreign owners who value administrative simplicity and discretion.
However, this reputation is sometimes misunderstood. Forming an LLC in Wyoming does not eliminate federal tax obligations or taxes in other states where the business actually operates. The perceived advantage comes from ease of formation and maintenance, not from automatic tax savings.
Where is 0% tax in the USA? (Myths vs reality)
There is no place in the United States where a business can legally pay zero tax in all circumstances. The idea of “0% tax” usually comes from misunderstanding how state and federal taxes work together.
Some states do not charge state income tax, which leads people to assume that income earned there is tax-free. In reality, federal taxes still apply, and state taxes may still be owed if the business operates or has a taxable presence in another state.
For non-resident LLC owners, “0% tax” is a myth rather than a rule. Tax outcomes depend on income source, business activity, and federal tax classification, not on choosing a state that promises complete tax exemption.
Which state has the lowest LLC tax rate? (State fees vs state income tax vs nexus)
There is no single state with the “lowest” LLC tax rate in a way that applies to every business. This is because LLC taxation at the state level is a mix of state income taxes, annual fees, and whether the LLC has a taxable presence, known as nexus, in that state.
Some states have low or no state income tax, but they may charge annual franchise taxes or fixed fees instead. Other states have higher income taxes but lower ongoing administrative costs. Looking at only one of these factors can give a misleading picture of the real cost of operating an LLC.
For non-resident LLC owners, nexus is often the deciding factor. Even if an LLC is formed in a low-tax state, state taxes and filings may still apply in any state where the business actually operates or generates income. The effective state tax burden depends more on where the business has activity than on where the LLC is formed.
Is there a way to reduce my taxable income?
Yes, there are legal ways to reduce taxable income, but they depend on how the LLC earns income and how that income is classified under US tax rules. For non-resident owners, the focus is on lawful tax planning rather than avoiding tax altogether.
In many cases, taxable income can be reduced by properly accounting for allowable business expenses and ensuring income is correctly classified. How the LLC is structured for tax purposes and how its activities are conducted can also affect how much income is subject to US tax.
It is important to distinguish between legitimate tax planning and impermissible tax avoidance. Non-resident LLC owners should rely on compliant structures and accurate reporting, rather than assumptions about shortcuts or universal strategies that do not apply under US law.
Legal tax planning vs tax evasion: What’s acceptable
Legal tax planning means using the rules as they are written to determine how much tax is actually owed. This includes choosing an appropriate tax classification, properly deducting eligible business expenses, and applying relevant tax treaty provisions when they are available. These actions are allowed because they follow established laws and reporting requirements.
Tax evasion, on the other hand, involves hiding income, misrepresenting facts, or deliberately ignoring filing and withholding obligations. This can include failing to report US-sourced income, using artificial arrangements with no real business purpose, or assuming that being a non-resident removes all US tax responsibility.
For non-resident LLC owners, the line between the two is defined by transparency and compliance. Acceptable tax planning is based on accurate reporting and lawful structure, while anything that relies on concealment or false assumptions falls outside what US tax law permits.
How can high earners save taxes? (Non-resident-safe levers: structure, treaties, deductions where allowed)
High-earning non-residents can reduce their US tax exposure through lawful planning, but the options are more limited than for US residents. The most effective levers usually involve how income is structured, how the business operates, and whether international tax treaties apply.
In some cases, choosing an appropriate tax classification for the LLC or adjusting how income is earned can change how that income is taxed. Tax treaties may also reduce or eliminate certain withholding taxes, but only when the owner qualifies and follows the required procedures.
Deductions can further reduce taxable income when the income is taxed on a net basis, provided the expenses are ordinary, necessary, and properly documented. For non-residents, meaningful tax savings come from aligning structure and reporting with the rules, not from aggressive strategies that fall outside what US tax law allows.
Turn knowledge into a compliant US LLC setup
Legal setup
Appoint a US registered agent
Meet state requirements by assigning a registered agent with a valid US address.
Tax ID
Obtain your EIN as a non-resident
Request an EIN for your LLC even if you don’t have a Social Security Number.
Payments
Enable US banking access
Prepare your LLC to receive client payments through US-compatible banking options.
Compliance
Stay compliant as your LLC operates
Keep up with required filings and avoid penalties as a non-resident LLC owner.
Frequently Asked Questions about US LLCs for nonresidents
Starting and running a US LLC as a non-resident often raises practical and legal questions. Below you’ll find clear answers to the most common concerns around ownership, taxes, residency, and compliance, so you can move forward with confidence and avoid costly mistakes.
There is no single tax rate for a US LLC owned by non-residents. The tax outcome depends on how the LLC is taxed, the type of income it earns, and whether that income is connected to US business activity. In many cases, tax is applied at the owner level rather than at the company level.
The 30% tax generally applies to non-residents who receive certain types of US-sourced passive income. This tax is usually withheld at the source and applies to gross income when it is not connected to an active US trade or business. It does not apply to all income earned through a US LLC.
Non-residents may have to pay US taxes, but only on income that is US-sourced or connected to US business activity. The US does not tax non-residents on their worldwide income. Whether tax is owed depends on the nature and source of the income, not simply on LLC ownership.
LLCs are taxed based on their tax classification rather than their legal form. By default, most LLCs are treated as pass-through entities, meaning income is taxed at the owner level. An LLC can also elect to be taxed as a corporation, which changes how tax is calculated and paid.
A foreign-owned or foreign-formed LLC is taxed based on whether its income is US-sourced or connected to a US trade or business. Ownership by a non-resident does not automatically remove US tax obligations. In many cases, income is taxed at the owner level and subject to additional reporting requirements.
There is no single best state for a non-resident LLC. The right state depends on where the business operates and where it has a taxable presence. Forming an LLC in a business-friendly state does not eliminate tax or filing obligations in other states where the business has real activity.
Yes, foreigners can legally start an LLC in the United States without being US residents or citizens. However, owning an LLC does not remove US tax or reporting obligations. Tax treatment depends on income source, business activity, and how the LLC is structured.
There are legal ways to reduce taxable income through proper tax planning. This can include correctly classifying income, deducting allowable business expenses, and applying tax treaty benefits when available. For non-residents, tax reduction must be based on compliance and accurate reporting, not on avoiding tax rules.