Establishing a Limited Liability Company in the United States is not a good idea.

For non-US citizens, tax consequences are heavy-handed.

The establishment of an LLC (Limited Liability Company) compels non-US citizens to file the income tax return in America

Many customers contact us because they want to start a Limited Liability Company (LLC) in the United States.

We strongly advise companies against establishing an LLC due to the numerous tax consequences.

An LLC is a mixed corporation, which is between a joint-stock company and a partnership. It is a company structure which limits property liability as do joint-stock companies, but is open to natural persons only. In other words, a joint-stock company cannot hold shares in an LLC; only natural persons can hold shares in an LLC.

Besides the fact that the actual "limited liability" definition of an LLC on property has not yet been tried in court, there are other problems associated with the participation of a foreign citizen in an American LLC.

Tax structure of a LLC

The income of an LLC is taxed to shareholders. In other words, the LLC records revenues, deducts expenses, and calculates income before taxes. The income is then divided among the shareholders of the LLC pro rata of the percentage of participation in the corporation.

For example:

Revenues of the LLC = $100,000
Expenses of the LLC = $40,000
Income before taxes of the LLC = $60,000

If a foreign citizen holds 50% of company shares, they will receive $30,000 of income added to their other personal income. They will then be individually taxed using the rates in effect according to each income tax band.

Here lies the problem: since a foreign citizen cannot file an income tax return in the United States, they cannot be a shareholder of an LLC.

Aside from that, we would like to underline that it is deeply inconvenient to file your personal income tax return in the United States, as this country taxes income at a global level. In other words, the US taxes the income one produces anywhere in the world.