Frequently Asked Questions
US Taxes and Foreign Owned LLCs
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Do foreign owned LLCs have to pay US taxes?
Any Single Member LLC—whether foreign-owned or not—that has not elected to be treated as a corporation is automatically a “disregarded entity” for the purposes of taxation.
Disregarded entities exist legally as being separate from their owners, but they don’t have to pay any income taxes unless they are generating income that are FDAP or effectively connected to US Trade or Business.
That’s part of why so many foreign citizens form Single Member LLCs instead of being taxed as a C Corporation.
All profits from a C corporation are subject to double-taxation under U.S. tax law. Double taxation in the sense that the profit is taxed at the corporate level , and dividend paid out to shareholders are also subject to taxes.
A foreign-owned sole-member LLC, on the other hand, sends pass-through profit distributions straight to the owner or owners (in cases of partnerships).
That means any “distribution” of profits from the LLC to the owner in your own country (ie. India if you are an Indian citizen) would be taxable in your own country. If you retain profits in the USA then you’d likely not pay taxes in India or the USA.
LLCs are clearly a good choice.