A US LLC: what changes and, above all, what does not
The question nearly always arrives in the same shape: "if I set up a US LLC, do I stop paying tax at home?" The short answer is no. The long one is more interesting, because it explains what a US company is actually for and why many people form one for the wrong reason.
It is worth covering now that international tax is moving again. *The Economist* reported last week that the IRS has turned its attention to American companies' overseas profits. That is about large corporations, but it points in a direction that reaches everyone: tolerance for structures whose only purpose is moving profit around is narrowing, not widening.
We form US companies through Kodiak Base, so this conversation comes up often. What follows is what we answer.
Where you are taxed is decided by where you live, not where you register
The underlying confusion mixes two separate things: where a company is formed and where the person controlling it is tax resident. They are independent axes. You can hold a Wyoming company and remain tax resident in Spain, and then you still have obligations in Spain.
An LLC is also transparent by default: it does not pay tax as an entity, its result is attributed to its members. The company is not a wall between you and your tax authority. It is a legal form, not a tax domicile.
What it is actually for
That said, there are solid reasons to form in the US, and all of them are about operating, not about tax:
- Getting paid in dollars without friction. A US bank account and the payment rails that accept it solve a real problem for anyone invoicing customers there.
- Contracting and invoicing normally in that market. Many US companies have vendor processes that assume a local counterparty. Not impossible without one — slower.
- A corporate structure people recognise. If an investor ever comes in or ownership is shared, the LLC and its sibling the C-Corp are shapes everyone in that ecosystem reads instantly.
- Separation of liability. The limited liability in the name: keeping personal assets apart from the activity. This one is real protection, and it is the one most often mentioned in passing.
None of those reasons is fiscal. All of them are operational. And any of them is sufficient on its own if your business faces that market.
What the brochure leaves out
A company is a recurring obligation, not a one-off. There are annual filings, a registered agent to maintain, an EIN to manage and information returns to file even in a year with no revenue. A forgotten LLC does not disappear: it accumulates.
The real cost, then, is not formation. It is staying current, year after year. Comparing formation prices without comparing maintenance is comparing the small half.
A company is not a procedure you complete. It is a calendar you take on.
The state matters less than you think
Half the internet argues Delaware versus Wyoming versus New Mexico. For a small operating company that debate is oversized: the real differences between states are annual cost, registry privacy and paperwork, not whether you will be able to operate. None of them will stop you invoicing.
Delaware matters when institutional investment is in play, because its corporate law is the one funds know by heart. If you are not in that conversation, you are paying for legal infrastructure you will not use. Wyoming and New Mexico are cheaper to maintain and publish less about the member, which for a one- or two-person operation is usually what counts.
What is worth checking before choosing: the annual report fee, whether the state charges a franchise tax, and what the registry publishes about you. Three concrete questions with public answers, and answering them takes less time than reading a thread of opinions.
And then there is the bank
The part most underestimated is not formation: it is opening the account. A bank wants to understand what the company does, who controls it and where the money comes from, and it wants that documented. Turning up with a formation certificate and an EIN but no file is the fast route to an unexplained refusal.
Which is why the useful deliverable of a formation is not the certificate. It is the complete file you present when applying for the account: formation, EIN, operating agreement, address, and a coherent account of the activity. With it the process is administrative. Without it, a lottery.
How to decide without getting it wrong
The test we suggest is simple. Write the reason you want the company in one sentence. If that sentence contains the word "tax", start again: the question is framed wrong, and the adviser you need is a tax one, in your own country, before any form.
If the sentence says "I need to get paid in dollars", "my client requires a US vendor" or "I want to separate my personal assets from the activity", then the tool fits the problem and the rest is execution.
And that execution is deliberately boring: pick a state, file the formation, obtain the EIN, leave the file ready to open an account. None of it requires travelling or holding a prior US tax number — the EIN has its own route for applicants without an SSN or ITIN, which is where most people get stuck.
Context matters, and it is changing
The regulatory wind blows towards more transparency, not less. That does not make a US company worse: it makes a US company built as a hiding place worse. If yours exists for an operational reason you can state in a sentence, regulatory change is paperwork. If it exists in order to explain nothing, it is a risk.
Building a company that lasts is mostly about not burying mines. It is why we simplified our own brand structure: an organisation that explains itself in one sentence survives close inspection; one that needs a diagram does not.
