US LLC: residents vs non-residents (0% vs 50%+ effective)

183 days in the US during the tax year. Same LLC: 0% federal for non-residents without ECI vs 50%+ effective (37% income tax + 15.3% Self-Employment Tax) for US persons. The key difference.

Whether you're a US resident or non-resident significantly impacts how your LLC is taxed and what forms you need to file. The legal structure is the same, but the taxation and obligations change radically.

Who is a US tax resident?

For the IRS, you're a tax resident if you meet any of these conditions:

  • You're a US citizen (including those living abroad)
  • You have a Green Card (permanent residency card)
  • You pass the substantial presence test (more than 183 days in the US over certain periods)

If you don't meet any of these, you're a non-resident for the IRS, and that changes everything.

Key tax differences

Single-Member LLC of a resident

  • The LLC is a Disregarded Entity: income is reported on your personal return
  • You pay US income tax on LLC profits (10-37% federal rates)
  • You pay Self-Employment Tax (15.3%). Social Security and Medicare
  • You file Schedule C with your Form 1040
  • Total effective rate: can exceed 30-50% depending on income

Single-Member LLC of a non-resident

  • The LLC is a Disregarded Entity: but the IRS treats it differently for non-residents
  • You pay no US federal tax if income comes from outside the country
  • You pay no Self-Employment Tax
  • You file Form 5472 + Form 1120 pro-forma (informational)
  • Effective US rate: 0% (you pay taxes in your country of tax residence)

Obligations compared

Practical examples: the difference in numbers

María. Web developer in Spain (non-US resident)

  • Bills €80,000/year to US and European clients
  • Without LLC: IRPF progressive ~33% + autónomo social security = ~€30,000 in taxes
  • With LLC: $0 federal in US + optimized taxation in country of residence = ~€10,000-14,000
  • Annual savings: ~€16,000-20,000

Carlos. Marketing advisor in Mexico (non-US resident)

  • Bills $60,000/year to US startups
  • Without LLC: ISR Mexico (1.92-35%) ~30% = ~$18,000
  • With LLC: $0 federal + optimized structure in Mexico = ~$5,000-7,000
  • Annual savings: ~$11,000-13,000

Andrea. UX designer in Colombia (non-US resident)

  • Bills $45,000/year to international agencies
  • Without LLC: Colombia income tax (0-39%) ~25% = ~$11,250
  • With LLC: $0 federal + optimization in Colombia = ~$3,500-5,000
  • Annual savings: ~$6,000-8,000

Jorge. Developer in Argentina (non-US resident)

  • Bills $50,000/year to international startups
  • Without LLC: Impuesto a las Ganancias (5-35%) + BCRA restrictions
  • With LLC: $0 federal + USD banking via Mercury (no BCRA exchange controls) = massive operational advantage
  • Savings on exchange rate alone: 30-40% vs. official BCRA rate

The key in all these cases: none has US-source income. They work from their countries for global clients. The LLC pays $0 in the US and the profits are declared with an already optimized taxable base.

What if I change residency?

If you're a non-resident and move to the US (obtain Green Card or meet the substantial presence test), your tax status changes. You start paying taxes as a resident, with all the implications:

  • You begin paying US federal and state income taxes
  • Self-Employment Tax applies (15.3%)
  • You switch from Form 5472 to Schedule C

The reverse also applies: if you're a resident and leave the US (surrender Green Card and stop meeting presence test), you become a non-resident.

Can I have an LLC without living in the US?

Absolutely. That's what they're designed for. You don't need:

  • A visa or work permit
  • A Social Security Number (SSN)
  • A physical address in the US
  • To travel to the United States
  • To speak English (that's what we're here for)

If something in this structure left you wanting more detail, 10 tax mistakes Spanish freelancers make (and how to avoid them) dives into a neighbouring piece of the puzzle we usually keep for a separate write-up.

Tax compliance in your country: CFC, controlled-foreign rules and income attribution

A US LLC is a fully legal, internationally recognized vehicle. But compliance does not end at incorporation: as an owner who is tax-resident elsewhere, your local tax authority still has the right to tax what the LLC earns. The key is under which regime.

By jurisdiction

  • Spain (LIRPF/LIS). An operative single-member disregarded LLC (real services, no significant passive income) is generally treated under income attribution (art. 87 LIRPF): the LLC's net profits are attributed to the member in the year they arise and integrated into the general IRPF base. If instead the LLC elects corporation treatment (Form 8832) and is controlled by a Spanish resident with mostly passive income, the CFC regime (art. 91 LIRPF for individuals, art. 100 LIS for companies) can apply. The choice is not optional: it depends on economic substance, not on the label.
  • Information returns. US bank accounts with average or year-end balance >€50,000: Form 720 (Law 5/2022 after CJEU C-788/19, 27/01/2022, penalties now under the general LGT regime). Related-party transactions and dividend repatriation: Form 232. US-custodied crypto: Form 721. Relax: at Exentax this is what we do every week, we close it before the letter ever lands in your inbox.
  • Spain–US tax treaty. The treaty (BOE 22/12/1990, Protocol in force 27/11/2019) governs double taxation on dividends, interest and royalties. An LLC without a permanent establishment in Spain does not by itself create a PE for the member, but effective management can if all activity is run from Spanish territory.
  • Mexico, Colombia, Argentina and other LATAM jurisdictions. Each has its own CFC regime (Mexico: Refipres; Argentina: foreign passive income; Chile: art. 41 G LIR). Common principle: profits retained inside the LLC are deemed received by the member if the entity is treated as transparent or controlled.

Practical rule: an operative LLC with substance, properly declared in your country of residence, is legitimate tax planning. An LLC used to hide income, fake non-residence or shift passive income with no economic justification falls within art. 15 LGT (anti-abuse) or, worse, art. 16 LGT (simulation). The facts decide, not the paperwork.

At Exentax we structure the entity to fit the first scenario and document every step so your local return can be defended in case of review.

Legal and regulatory references

This article relies on rules currently in force. Main sources for verification:

  • United States. Treas. Reg. §301.7701-3 (entity classification / check-the-box); IRC §882 (tax on foreign income effectively connected with a US trade or business); IRC §871 (FDAP and withholding on non-residents); IRC §6038A and Treas. Reg. §1.6038A-2 (Form 5472 for 25% foreign-owned and foreign-owned disregarded entities); IRC §7701(b) (tax residency, substantial presence test); 31 U.S.C. §5336 (Corporate Transparency Act, BOI Report to FinCEN).
  • Spain. Law 35/2006 (LIRPF), arts. 8, 9 (residency), 87 (income attribution), 91 (CFC for individuals); Law 27/2014 (LIS), art. 100 (CFC for companies); Law 58/2003 (LGT), arts. 15 (anti-abuse) and 16 (simulation); Law 5/2022 (Form 720 penalty regime after CJEU C-788/19 of 27/01/2022); RD 1065/2007 (Forms 232 and 720); Order HFP/887/2023 (Form 721 crypto). Breathe: at Exentax this is routine, we bring you up to date and the next review closes in one round, no drama.
  • Spain–US treaty. BOE of 22/12/1990 (original DTT); Protocol in force since 27/11/2019 (passive income, limitation on benefits).
  • EU / OECD. Directive (EU) 2011/16, amended by DAC6 (cross-border arrangements), DAC7 (Directive (EU) 2021/514, digital platforms) and DAC8 (crypto-assets); Directive (EU) 2016/1164 (ATAD: CFC, exit tax, hybrid mismatches); OECD Common Reporting Standard (CRS).
  • International framework. OECD Model Convention, art. 5 (permanent establishment) and Commentaries; BEPS Action 5 (economic substance); FATF Recommendation 24 (beneficial ownership).

Applying any of these rules to your specific case depends on your tax residency, the LLC's activity and the documentation you keep. This content is informational and does not replace personalized professional advice.

Banking and tax facts worth clarifying

Fintech and CRS information evolves; here is the current state:

Before going further, put numbers on your case: the Exentax calculator compares, in under 2 minutes, your current tax bill with what you would carry running a US LLC properly declared in your country of residence.

> Start today, 100% online

Notes by provider

  • Mercury operates with several federally chartered partner banks and FDIC coverage via sweep network: mainly Choice Financial Group and Evolve Bank & Trust, with Column N.A. still in some legacy accounts. Mercury is not itself a bank; it is a fintech platform backed by those partner banks. If Mercury closes an account, the balance is typically returned by paper check mailed to the account holder's registered address, which can be a serious operational problem for non-residents; keep a secondary account (Relay, Wise Business, etc.) as contingency.
  • Wise ships two clearly different products: Wise Personal and Wise Business. For an LLC you must open Wise Business, not the personal account. Important CRS nuance: a Wise Business held by a US LLC sits outside CRS because the account holder is a US entity and the US is not a CRS participant; the USD side operates via Wise US Inc. (FATCA perimeter, not CRS). In contrast, a Wise Personal opened by an individual tax-resident in Spain or another CRS jurisdiction does trigger CRS reporting via Wise Europe SA (Belgium) on that individual. Opening Wise for your LLC does not bring you into CRS through the LLC; a separate Wise Personal in your own name as a CRS-resident individual does report.
  • Wallester (Estonia) is a European financial entity with an EMI/issuing-bank licence. Its European IBAN accounts are within the Common Reporting Standard (CRS) and therefore trigger automatic reporting to the tax administration of the holder's country of residence.
  • Payoneer operates through European entities (Payoneer Europe Ltd, Ireland) that are also in scope for CRS for clients resident in participating jurisdictions.
  • Revolut Business: when paired with a US LLC, it operates under Revolut Technologies Inc. with Lead Bank as its US banking partner. The account delivered is a US account (routing + account number); no European IBAN is issued to a US LLC. The European IBANs (Lithuanian, Belgian) belong to Revolut Bank UAB and are issued to European clients of the group. If you are offered a European IBAN tied to your LLC, confirm exactly which legal entity holds that account and which regime it reports under.
  • Zero tax: no LLC structure delivers "zero tax" if you live in a country with CFC/tax transparency or income attribution rules. What you achieve is no double taxation and correct reporting at residence, not elimination.

Residents vs non-residents with LLC: the tax differences that change everything

US federal taxation for an LLC depends less on legal form and more on who the owner is. Same LLC, same Wyoming, same EIN: if owner is US tax-resident the outcome is one, if non-resident it is radically another. Worth being clear on the four structural differences before choosing where to "live" if you have flexibility.

  • Federal taxation of profit. Single-member LLC with US resident owner: federal IRPF (10%-37% marginal) + self-employment tax 15.3% + state per residence (0% TX/FL, up to 13.3% CA). Single-member LLC with non-resident owner without ETBUS and without US-source income: 0% federal, 0% self-employment, 0% state. Effective difference: 30%-50% of profit.
  • Personal filing obligations. US resident: Form 1040 annual + Schedule C + state. Non-resident: Form 1040-NR only if US-source income, not if all foreign-source via disregarded LLC. Herein lies the "real 0%" of non-residents: not that they pay less, but they are NOT REQUIRED to be taxed US-side for that profit.
  • Access to banking and credit. Resident with SSN: instant approval of Mercury, Brex, Ramp; personal and business credit cards; SBA-eligible credit lines; US mortgage. Non-resident with EIN: more selective approval; no traditional credit cards (only debit/secured); no SBA; no easy residential mortgage.
  • International information obligations. US resident: Form 8938 (FATCA) for foreign accounts + FBAR (FinCEN 114) if total >10k. Non-resident: no US obligation on foreign accounts (not US person for FATCA), but ALL residence-country obligations (Spain 720, France 3916, Italy RW, Germany AStG).

What we are asked the most

If I become US resident (Green Card or citizenship), do I lose the 0%? Yes, completely. You move to worldwide taxation: IRS taxes all global income, including LLC-generated, with partial offset via foreign tax credit. The most expensive fiscal decision when migrating.

Can I "rotate" between resident and non-resident to optimise? No. Substantial Presence Test automatically classifies you as resident if you spend >183 weighted days in US current year or three-year average. Residence is not optional.

At Exentax we model every residence change (entry or exit from US system) with exit-tax calculation if applicable, pre-residence planning and LLC restructure so transition does not destroy value.

Legal & procedural facts

FinCEN and IRS reporting requirements moved recently; the current state is:

  • BOI / Corporate Transparency Act: your LLC is NOT required to file (a competitive advantage). After FinCEN's March 2025 interim final rule, the BOI Report obligation was narrowed to "foreign reporting companies" (entities formed OUTSIDE the US and registered to do business in a state). A US-formed LLC owned by a non-resident does NOT file the BOI Report: one fewer filing on your calendar, less paperwork, and a cleaner structure than ever. If your LLC was formed before March 2025 and you already filed BOI, keep the acknowledgement. The regulatory status can change again: we monitor FinCEN.gov on every filing and, if the obligation comes back, we handle it at no extra cost. Current status verifiable at fincen.gov/boi.
  • Form 5472 + pro-forma 1120. For a Single-Member LLC owned by a non-resident, the final regulations of Treas. Reg. §1.6038A-1 (in force since 2017) treat the LLC as a corporation for 5472 purposes. Procedure: pro-forma Form 1120 (header only: name, address, EIN, tax year) with Form 5472 attached. It is filed by certified mail or fax to the IRS Service Center in Ogden, Utah, not e-filed via standard MeF. Due date: April 15; extension via Form 7004 to October 15. Penalty: $25,000 per form per year, plus $25,000 per additional 30 days of non-filing after IRS notice.
  • Substantive Form 1120. Only applies if the LLC has filed a check-the-box election to C-Corp (Form 8832): it then pays 21 % federal corporate tax and files a substantive 1120. A standard disregarded LLC does not file a substantive 1120 and does not pay federal corporate tax.
  • EIN and notice. Without an EIN you cannot file 5472 or BOI. The IRS does not warn before imposing penalties; you find out when an EIN is flagged or a later filing is rejected. This is where Exentax steps in: we file the form, archive the receipt and, if the authority asks, your answer is already on the desk.

What if HMRC, the IRS or my local tax authority asks about my LLC?

It's the question every client raises in the first consultation, and the short answer is: your LLC isn't opaque, and a properly declared structure closes any inquiry in standard forms. Your tax authority can request the state Certificate of Formation (Wyoming, Delaware or New Mexico), the EIN issued by the IRS, the signed Operating Agreement, the Mercury or Wise statements for the year, the Form 5472 plus pro-forma 1120 you filed, and the bookkeeping that reconciles income, expenses and movements. If all of that exists and is delivered in order, the inquiry doesn't escalate.

What tax authorities do pursue, and rightly, is sham ownership (nominees, paper residency) and undeclared foreign accounts. A well-structured LLC is the opposite: you appear as beneficial owner in the BOI Report when applicable (verifiable at fincen.gov/boi), you sign the bank accounts and you declare the income where you actually live. The structure is registered with the state Secretary of State, with the IRS and, when European banks are involved, inside the CRS perimeter of the OECD standard.

The mistake that really sinks an inquiry isn't having an LLC; it's not attributing the income correctly in your domestic return, not declaring foreign accounts when the year-end balance exceeds the local threshold (€50,000 in Spain via Modelo 720; the equivalent FBAR / Form 8938 in the US for residents; T1135 in Canada), and not documenting related-party transactions between the member and the LLC. Those three fronts are worth closing before any request arrives, not after.

## What an LLC does NOT do

- It does not exempt you from tax in your country of residence. If you live in Spain, France, Germany or Portugal, you are taxed there on worldwide income. The LLC organises your US side (zero federal tax for non-resident SMLLC pass-through, absent Effectively Connected Income); it does not switch off your domestic taxation. The income tax is computed on the attributed profit, not on the dividends actually paid.

- It is not an offshore vehicle or a BEPS scheme. It is a US entity recognised by the IRS, registered in a specific state with physical address, registered agent and annual informational filings. Classic offshore jurisdictions (BVI, Belize, Seychelles) leave no public trace; an LLC leaves a trace in five different places.

- It does not protect you if you commingle funds. The pierce the corporate veil doctrine kicks in as soon as a judge sees the LLC and the member behaving as the same wallet: mixed accounts, personal expenses paid from the LLC, no signed Operating Agreement, no bookkeeping. Three suspicious transactions are enough.

- It does not save you social security contributions at home. If you are self-employed in Spain, France or Germany, your monthly social contribution remains identical. The LLC handles the trading side with international clients; your personal contribution is independent.

- It does not exempt you from declaring foreign accounts. Spain residents file Modelo 720 / 721; UK residents, the SA106; Portugal residents, the Anexo J of Modelo 3 IRS; Germany residents, the Anlage AUS. Those obligations belong to the individual, not to the LLC.

At Exentax we cover those five fronts every year alongside the US federal calendar (Form 5472, pro-forma 1120, FBAR, state Annual Report and BOI Report when applicable). The goal is that no inquiry finds a loose end and that the structure withstands a 5-to-7-year retroactive review.

Want to discuss it now? Message us on WhatsApp and we'll get back to you today.

If you want to see the full process in detail, check our services page with everything we cover.

Or call us directly at +34 614 916 910 if you'd rather talk.

Prefer a calendar slot? Book a free session and we'll review your real case in thirty minutes.

For state-specific details, see our Wyoming LLC service page with closed costs and timelines.

Formation, EIN, BOI, banking and ongoing maintenance — one team that understands your case end to end. Explore all services.