LLC services performed outside the United States: income source

The customer, invoice and bank do not determine source on their own. Reconstruct where the work is performed and allocate each cross-border service on the facts.

A U.S. client can sign a U.S.-law contract, pay a Wyoming LLC in dollars and send the funds to an American bank account without deciding where the service income is sourced. For personal-service income, the first question is more practical: where was the work that earned the fee actually performed?

That distinction is one reason an LLC works well for international professional activity. The company can own the contract, banking relationship and payment stack while its team delivers from Europe, Latin America or another market. The structure does not erase tax facts; it gives those facts a coherent business framework.

Start with the work, not the payment route

The IRS source rule for personal service income generally follows the place where services are performed. The agency states that the residence of the payer, the place of payment and the place where the contract was made do not replace that location test.

For an international LLC, this means that none of the following settles the source question on its own:

• a customer address in the United States;
• a dollar-denominated invoice;
• ACH settlement into Relay or Slash;
• a Stripe account connected to a U.S. routing number;
• formation in New Mexico, Wyoming, Florida or Delaware;
• a U.S. registered-agent address;
• cash retained in the company account.

Those facts matter to commerce, KYC, reporting and treasury. Service sourcing asks where the fee-producing activity occurred. If people performed the service outside the United States, that is the starting point. If some of the work occurred in the United States, the project may need a defensible allocation.

This is not the final tax answer. Source, U.S. trade or business, effectively connected income, entity classification and owner residence are separate analytical layers. Treating them as one slogan is where otherwise sound LLC structures become hard to explain.

A contract counterparty is not a work location

Consider a product strategist based in Lisbon. Her LLC contracts with a software company in Boston for a six-month engagement. Discovery calls, research, workshops, analysis and the final roadmap are all produced in Portugal. The customer pays USD 48,000 to the LLC's U.S. account.

The customer is American. The company receiving the payment is American. The currency and bank rails are American. Yet none of those facts physically performs the research or writes the roadmap.

The LLC remains commercially important. It is the legal counterparty, issues the invoice, owns the receivable, receives the funds and engages any subcontractors. The source analysis simply refuses to use the LLC's banking coordinates as a substitute for the activity that created the fee.

Map the functions inside the word “services”

Digital contracts often use a broad label such as professional services, consulting or implementation. A useful source analysis opens that label and identifies the work inside it.

For a consulting mandate, the value may come from:

• fact gathering and diagnosis;
• interviews and working sessions;
• technical or commercial analysis;
• project direction;
• written recommendations;
• implementation support.

For a development engagement, the relevant functions may include architecture, coding, testing, deployment and contracted maintenance. An agency may combine strategy, design, production, media buying and performance management. A finance function may include modelling, review, reporting and management meetings.

Each function has a person and a place. A video meeting with a U.S. client does not occur in the United States merely because the other participant is there. Conversely, work performed during a business trip does not become foreign because the laptop and LLC bank account normally sit elsewhere.

The analysis follows what happened, not the most convenient label.

The LLC acts through people

An LLC is a legal company under state law. It can contract, employ, own assets and establish financial relationships. Services are nevertheless carried out by owners, employees, managers and independent contractors.

A compact operating map can make the facts legible:

The map does not automatically apportion revenue between every participant. It identifies where economically relevant work exists and where a deeper analysis is required.

Classification also matters. A foreign-owned single-member LLC may be disregarded for U.S. federal tax purposes while remaining a real company under state law. A multi-member LLC generally begins from partnership classification, and an eligible LLC can elect corporate treatment. The same invoice should not be analysed as though those classifications were interchangeable.

Projects split between the United States and other countries

Many founders deliver remotely for most of the year and spend limited periods on U.S. projects. Distributed teams can also place separate functions on both sides of the border.

The IRS requires an accurate allocation when compensation covers services performed partly inside and partly outside the United States. Publication 519 says a self-employed person should use the basis that most correctly reflects the source under the facts and circumstances; a time basis is appropriate in many cases. Treasury Regulation §1.861-4 contains the underlying allocation rules for compensation.

Suppose an adviser earns USD 36,000 for a defined implementation project and works 60 project days:

If each day contributes reasonably comparable work, time offers a clear allocation basis. If the twelve U.S. days contain the entire high-value implementation while the remaining period covers lower-value preparation, facts and circumstances may support a different method. Contracts, milestones, hours and deliverables should explain the chosen basis.

The method should describe the engagement before it becomes a tax outcome. A company should not switch between days, hours and milestones solely to obtain the most attractive percentage.

Design my international tax strategy

Four business models, four different fact patterns

Independent adviser serving U.S. companies from abroad

An adviser lives and works in Mexico. The LLC serves three customers in the United States, holds all meetings online and produces every deliverable from Mexico.

Customer location and U.S. collection rails do not by themselves make the service U.S.-source. The file should establish what was delivered, who delivered it and where the activity took place. Owner residence and the LLC's annual filing position remain separate questions.

Founder who performs part of the engagement in New York

A founder normally works from France but spends fifteen of a ninety-day project in New York conducting paid workshops and configuring the client's operation.

The project now contains work in both locations. A blanket “all offshore” description would be inaccurate. The workshop scope, project calendar, travel record and pricing provide a basis for allocating the compensation.

International agency with a U.S. contractor

The owner directs the agency from Argentina. Creative production is completed in Argentina and Uruguay, while a contractor in Florida handles recurring customer implementation.

The owner's location does not remove the Florida function. The contractor agreement, role and relationship require review. Source and possible U.S. business connection should be assessed from the actual responsibilities, not from the agency's headline address.

Company selling support and software rights together

An LLC charges one annual price for software access, implementation and ongoing support. Calling the entire receipt “consulting” may be wrong. Licensing, access and human services can follow different source rules.

The right approach is to characterise the components and test whether the contract and pricing reflect them. Only the genuine service portion begins with the place-of-performance rule discussed here.

Digital revenue is not automatically service revenue

The payment descriptor rarely tells the complete legal story. A digital company may earn several types of income through the same checkout:

Characterisation comes before sourcing. A contract that distinguishes setup, managed service, licence and support can be analysed with far greater authority than one vague annual line item.

This is also commercially useful. Banks and processors understand a company more easily when its website, agreements, invoices and money flows describe the same product.

What the customer agreement should establish

A professional services agreement should be commercially true before it is tax-efficient. It normally clarifies:

1. the parties and authorised signers;
2. the exact scope;
3. functions, milestones and deliverables;
4. who may perform the work;
5. the expected delivery locations;
6. project dates and service periods;
7. separate pricing for materially different components;
8. ownership and use of intellectual property;
9. travel and reimbursable costs;
10. currency, invoice terms and payment route.

The agreement should not contain a ceremonial statement that all work occurs abroad when the delivery model says otherwise. If the service is genuinely remote, a clear scope and delivery record make that fact easy to show. If delivery changes, the project file should change with it.

Evidence should feel like normal business administration

Strong support does not require surveillance of the team. It requires records that a well-run professional firm already creates:

• signed agreements and statements of work;
• project calendars and milestone dates;
• dated deliverables;
• invoices tied to service periods;
• travel records for on-site work;
• contractor and employment agreements;
• provider invoices;
• a short function-and-location summary at year-end;
• allocation notes for cross-border projects.

The best evidence is contemporaneous. A monthly project review is more reliable than asking a founder to reconstruct an entire year from bank statements. Bank statements prove receipt and use of money; they do not prove where the underlying service was performed.

U.S. banking does not have to be abandoned

A foreign-source service analysis is fully compatible with an LLC using U.S. accounts, ACH, wires, cards and processors. These tools support the company's treasury and customer experience.

Each layer has a distinct role:

• the LLC provides the legal and operational vehicle;
• the contract defines what is sold;
• people and functions show where it is delivered;
• the invoice records the claim against the customer;
• the payment stack collects and settles it;
• the books preserve the complete economic record.

Keeping those roles separate lets a business use the best features of U.S. infrastructure without turning a routing number into a tax theory.

Exentax connects the layers around the real activity. We structure the LLC, contracts, banking, payments and annual evidence so that the company can explain how it operates with confidence. The objective is not a generic promise; it is a position built from facts that remain true when the business grows.

Questions that deserve a precise answer

Does a U.S. customer create U.S.-source service income?

Not by customer residence alone. For personal-service income, the place where the work is performed generally leads the source analysis. Other facts may still matter to USTB, ECI, withholding or treaty treatment.

Is remote work performed “on the internet”?

The internet is the delivery channel, not a separate jurisdiction. Identify where each person carried out the revenue-producing functions.

Does one meeting in the United States taint the whole engagement?

Not automatically. Distinguish incidental commercial contact from paid work performed on the project. If services were performed, allocate the corresponding portion using a supportable method.

Does a registered agent count as a U.S. office?

A registered agent receives statutory communications. That role does not itself perform the LLC's consulting, design or engineering and should not be presented as the place of service delivery.

Does payment to a U.S. Stripe or bank account determine source?

No. The processor and account document collection and settlement. They remain essential financial evidence but do not relocate the work.

The strongest international structure tells one true story

An LLC does not need to hide where its people work. Its strength is that it gives international activity a durable company, clear contracts, dedicated financial infrastructure and an organised record.

Once a business can state what it sells, who performs it and where each material function happens, service sourcing becomes a fact-based explanation rather than a guess. That clarity supports tax analysis, improves financial onboarding and lets the LLC operate as a complete international structure rather than a bank account with a company name.