LLC taxation by activity: services, e-commerce, SaaS, royalties, trading

Advisory, ecommerce, SaaS, royalties and trading do not create the same LLC tax file. The right answer depends on revenue source, VAT, treaties, banking and documentation.

The activity matters less than the design: services, SaaS, ecommerce or trading all require coherent residence, income source, contracts, banking and reporting.

Talking about "LLC taxation" in the abstract leads to serious mistakes: real taxation depends closely on the type of economic activity the LLC carries out, because each activity triggers different rules of VAT, income classification, source of income, applicable DTT and, above all, exposure to controlled foreign company (CFC) or anti-avoidance rules. Let's break down the five major families we see at Exentax.

Five activities that require different tax analysis

1. Professional services (advisory, development, design, marketing)

Most common case and the simplest. Your LLC invoices services to international B2B clients (US, EU, LATAM). Characteristics:

• Income nature: economic activity.
• Spanish classification (resident): economic-activity income imputed to the partner via income-attribution (see <a href="/en/blog/dgt-teac-and-feb-2020-boe-doctrine-on-the-us-llc">DGT/TEAC doctrine</a>).
• VAT: B2B billing outside Spain to an EU customer triggers reverse charge (the customer self-assesses VAT in their country); to a US or non-EU customer, VAT not subject (B2B services place-of-supply rule). More in <a href="/en/blog/vat-on-digital-services-b2b-b2c-and-proof">VAT on international digital services</a>.
• Spanish IRPF: net result in general base (24-47%).
• Main risk: simulation if operational substance is exclusively provided by the Spanish-resident partner without real US substance.

Legitimate optimization: maximize correct deductible expenses in the LLC (software, tools, subcontracting, training, marketing). The net imputed to the partner reduces and the effective average rate falls substantially compared to a pure Spanish self-employed.

2. Physical e-commerce (Amazon, Shopify, dropshipping)

You sell physical goods to international end consumers. Characteristics:

• Income nature: economic activity from sales.
• VAT and customs: complex. If you sell to European consumers, the LLC may have VAT registration obligations in EU countries individually or use the OSS / IOSS regime. Crossing thresholds per country requires local registration. Marketplaces like Amazon act as deemed supplier in many cases and withhold VAT, but not always.
• DAC7: as a seller on European Amazon, Etsy, eBay, your income is reported. See <a href="/en/blog/dac7-reporting-for-digital-platforms-and-llc">DAC7</a>.
• Customs: importing stock to the EU for distribution (FBA) requires EU EORI, importer of record, possibly IOR.
• US sales tax: selling to US consumers in nexus states may trigger sales-tax registration. More in <a href="/en/blog/llc-for-amazon-tap-a-600b-usd-us-ecommerce-market">Amazon with US LLC</a>.

Main risk: ignoring EU VAT or US sales tax can generate large retroactive bills.

3. SaaS and digital subscriptions

You sell software/content access, B2C or B2B, subscription or one-time. Characteristics:

• Income nature: economic activity + software-use license (royalty borderline).
• TBE services: B2C to European consumers triggers VAT in consumer's country. Non-EU OSS scheme (LLC registers in an EU Member State of identification) or use Merchant of Record platforms (Paddle, FastSpring, DoDo Payments, Lemon Squeezy) handling VAT for you.
• B2B: general reverse-charge rule.
• Spanish income classification: economic-activity income with active development; for passive licensing of pre-existing code without significant activity, debate on CFC rules (LIS art. 100, via LIRPF art. 91).
• CFC risk: if the LLC mostly generates passive income (licensing) and lacks material/human means in the US, the AEAT can apply CFC.

More in <a href="/en/blog/llc-for-devs-and-saas-stripe-us-banking-structure">LLC for software developers and SaaS</a>.

4. Royalties and intellectual property

Your LLC owns rights (trademark, software, content) and licenses them to third parties or related entities. Characteristics:

• Income nature: passive (royalties).
• DTT classification: art. 12 Spain-US DTT (royalties). Source state may tax (with DTT cap), residence state taxes with deduction.
• CFC risk: high. Passive income is the typical CFC trigger. If your LLC mostly has passive income and you control it from Spain, art. 91 LIRPF (referring to art. 100 LIS) can activate.
• Effective taxation: under CFC, you tax in Spain as if income were directly yours, with credit for any LLC-paid tax (often none on the US federal side when the disregarded-entity facts fit).
• DTT 2019 LOB clause: hampers DTT benefits for hybrid or no-substance structures.

Conclusion: a pure royalty LLC with Spanish-resident partner must be designed with real US substance or accept it falls under CFC.

5. Trading (stocks, futures, crypto)

Your LLC trades financial markets via Interactive Brokers, Tradovate or Kraken. Characteristics:

• Income nature: depends on asset and regime. FX/futures: capital gains/losses in many countries; in Spain, frequent professional trading can be reclassified as economic activity.
• Stocks: dividends (savings-base income 19-28% if opaque; if transparent, direct attribution) and gains from sale (savings base).
• Crypto: capital gains/losses (savings base) or economic activity if frequent professional trading.
• DAC8: applies from today with European exchanges. See <a href="/en/blog/dac8-crypto-and-llc-eu-reporting-under-control">DAC8 and crypto</a>.
• CFC risk: very high. Portfolio income is the paradigm of passive CFC income.
• DTT: art. 10 (dividends), 11 (interest), 13 (capital gains). 2019 LOB clauses are particularly restrictive.

More in <a href="/en/blog/crypto-and-trading-with-an-llc-tax-structure">crypto and trading with LLC</a>.

Activity summary table

How to choose your optimal structure

Choosing an LLC alone is not always the right answer. For low-CFC activities (services, e-commerce, SaaS B2B), a single-member LLC with Spanish-resident partner declaring well and with reasonable substance is efficient and defensible. For high-CFC activities (royalties, trading), either it gets real US substance or a different structure should be considered (Spanish operating company + LLC with limited activity, residency planning, etc.). Full framework in <a href="/en/blog/international-tax-design-3-jurisdictions-max-no-cfc">designing a solid international structure</a>.

Common mistakes by activity

• Services: forgetting EU intra-community VAT and ROI/VIES registration.
• E-commerce: ignoring OSS/IOSS and US sales tax until the bill arrives.
• SaaS: not using a Merchant of Record and ending up with VAT-registration obligations in each EU country.
• Royalties: not documenting creation, ownership and maintenance of intangible assets.
• Trading: confusing personal and LLC trading and mixing accounts.

More on avoiding typical mistakes in <a href="/en/blog/international-tax-risks-cfc-banking-and-ownership">tax risks</a>.

What this means for the structure

An LLC doesn't tax "in one way": it taxes by what it does, where it does it, and from where it is controlled. Serious tax planning starts by understanding your real activity, not picking a country on a map.

Want to analyze how your activity is taxed exactly and design the most efficient and defensible structure? book your strategic review.

To keep going on this thread, <a href="/en/blog/leave-spanish-autonomo-with-a-properly-structured-llc">Why Spanish freelancers are leaving self-employment for a US LLC</a> fills in a nuance this guide only touched on.

Classify the income before modelling tax

The link between economic activity and LLC taxation reads more usefully when it's treated as a stable mapping rather than as an open question revisited each year. The activity dictates which categories of expenses are recurring, which sources of income require specific treatment, and which reporting obligations apply on a recurring basis — and once that mapping is built, the annual filing collapses into looking up the case rather than re-deriving it.

How to capture the activity-to-treatment mapping in a short written note

The mapping captures more durably in a short, dated note that lists the activity, its recurring expense categories, its income sources and the reporting obligations that follow. This note becomes the reference whenever the activity expands, contracts or shifts focus.

Operating checkpoint: LLC taxation by activity

LLC taxation by economic activity reads more usefully as a stable mapping between the activity type — services, digital products, dropshipping, intellectual property — and the treatment expected in the United States and in the residence country, than as a single global rule.

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Classify the LLC by activity and income source

The LLC’s tax treatment changes with the activity, source of income, owner residency and money flow. Exentax reviews the business model first, then builds the entity, banking and filing calendar around the facts.

How Exentax maps LLC taxation by activity

Exentax classifies an LLC by what it actually does. Consulting, ecommerce, investment, agency work, content, crypto and software sales produce different payment flows, expense profiles and reporting risks. The tax answer starts with the activity, not with the entity name.

### LLC taxation by activity: UK and Irish residents perspective

For UK resident members of a US LLC, HMRC's longstanding position (Statement of Practice SP 1/09 and confirmed in the Anson v HMRC [2015] UKSC 44 ruling) treats the LLC as fiscally opaque by default unless specific facts demonstrate transparency. This means LLC profits are typically taxed in the UK only when distributed as dividend-equivalent, reportable on SA106 (Foreign pages) of the Self Assessment with credit for US tax under the UK/US Double Taxation Convention 2001 (SI 2002/2848), Article 24. Activity-driven nexus rules apply for US sales tax under South Dakota v. Wayfair, 138 S.Ct. 2080 (2018) with a typical economic threshold of USD 100.000 or 200 transactions per state. For trade or business classification under IRC §864(b) and ECI under IRC §864(c), the activity matters for whether US-source income triggers Form 1040-NR filing.