If you want to live abroad and run your business through a US LLC, the order of the steps decides whether the plan works. First you stop being tax resident in the country you are leaving. Then the LLC does what it is built to do. Done the other way round, the LLC changes nothing about where you are taxed, and it adds a US filing you still have to keep.
Residence comes first
A country that taxes on residence taxes its residents on their worldwide income, wherever that income arises. The residence tests look at you as a person: where your home and family are, where your personal and economic interests lie, how many days you spend in the country. Forming a company in Wyoming or New Mexico moves none of these. As long as you are resident at home, your home country looks at the LLC's profits through its own rules, whatever the US does with them.
So the first question is not "which state?" but "when, and how, do I stop being resident where I live now?" Every country answers it differently: its own day count, its own registers and presumptions, and in some cases an exit tax on the way out. Where two countries both treat you as resident, a tax treaty between them can decide which one wins.
The US side: what the IRS sees
How the LLC is classified
Unless it elects otherwise, a US LLC with a single owner is disregarded as an entity separate from its owner. With two or more members it is a partnership. Either kind can elect a different classification: a multi-member LLC can be taxed as a corporation instead of a partnership, and a single-member LLC can be taxed as a corporation instead of being disregarded. More on this in how the LLC is taxed.
What the US taxes a non-resident owner on
A non-resident owner is taxed in the US on two kinds of income:
- US-source FDAP income (fixed or determinable annual or periodical income, such as interest, dividends, rents and wages): 30 percent, subject to exceptions and tax treaties.
- Effectively connected income (ECI), meaning income effectively connected with a US trade or business: taxed at the regular graduated rates.
A non-resident who is not engaged in a US trade or business during the year has no effectively connected income, apart from specific listed provisions. Income from sources outside the United States is, as a rule, not effectively connected either. The exceptions are narrow: certain rents and royalties, certain banking and financing income, and sales of inventory, each only where you have an office or other fixed place of business in the US to which the income is attributable.
Two rules decide how far this reaches. Performing personal services within the United States at any time in the tax year is a US trade or business, subject to listed exceptions. And once you are engaged in a US trade or business, your other US-source income, apart from FDAP-type income and capital gains, is treated as effectively connected too.
Two or more members
Under § 875 of the Internal Revenue Code, a non-resident is treated as engaged in a US trade or business if the partnership he or she is a member of is so engaged. For a multi-member LLC taxed as a partnership, that means the partnership's US business becomes each foreign member's US business. The partnership must also pay a withholding tax on effectively connected income allocable to a foreign partner, at the highest rate in section 1 for individuals, and the partner receives a credit for his or her share.
Form 5472 and the pro forma Form 1120
For Form 5472, a single-member LLC owned by one foreign person is treated as a corporation, and the IRS instructions name it as a reporting corporation. It has no income tax return to file, but it must file a pro forma Form 1120 with Form 5472 attached by the due date of that Form 1120, including extensions. On the Form 1120, only the LLC's name and address and items B and E on page one are completed, with "Foreign-owned U.S. DE" written across the top. The filing cannot be made electronically: it goes to the IRS by fax or by mail. An extension is requested on Form 7004 by the regular due date. The LLC uses its owner's US tax year or, if the owner has none, the calendar year.
The penalty is what makes this filing matter: $25,000 for each tax year in which the information is not furnished, plus another $25,000 for each 30-day period, or part of one, that the failure continues more than 90 days after the IRS mails a notice. A substantially incomplete Form 5472 counts as not filed. The annual filing is part of our US tax compliance.
Beneficial ownership (BOI) reporting
FinCEN issued a final rule on 11 August 2026, effective 14 August 2026, that makes permanent the exemptions of its interim final rule of March 2025. Any corporation or LLC created by filing a document with a secretary of state or a similar office under the law of a US state is not a reporting company, so a US-formed LLC files no BOI report. Only entities formed under the law of a foreign country and registered to do business in a US state or tribal jurisdiction still report. More on privacy in the anonymous LLC.
The home-country side: three more questions
Once residence is settled, your home country still has tools that can reach the LLC. They differ from country to country, but they come in three kinds.
Where is the LLC managed? Some countries treat a company as resident where its place of effective management is: where it is directed and where the strategic decisions about the company as a whole are taken. If you still live at home and take those decisions there, your US LLC can become a company resident in your home country.
Is it a controlled foreign company? CFC rules attribute the income of a low-taxed foreign company to the resident who controls it. In the EU, article 7 of the Anti-Tax Avoidance Directive (ATAD) sets the common basis. A company is a CFC where the taxpayer, alone or with associated enterprises, holds a direct or indirect participation of more than 50 percent of the voting rights, capital or profit entitlement, and the tax the company actually pays is lower than the difference between the corporate tax it would pay in the taxpayer's Member State and the tax it actually pays (in other words, less than half). The Member State then includes the company's undistributed income from listed categories, starting with interest and other income from financial assets and royalties and other IP income, in the taxpayer's tax base. ATAD itself applies to taxpayers subject to corporate tax. It does not, by its terms, cover individuals, so whether a private owner is caught is a matter of each country's own law.
How does your home country classify a US LLC? There is no common answer. Some countries look through the LLC and tax its members on the income directly, as for a transparent entity. Others treat a foreign entity as a company in its own right even where the US disregards it, and tax the owner when profits are distributed. Where no authority has classified a single-member US LLC by name, the country page says so.
What this means: leave properly, then form
- Work out when you stop being resident under your home country's rules, and which country a treaty gives you to if both claim you.
- Check whether leaving triggers an exit tax, and what has to be filed and when.
- Move your life and the management of the business: decisions about the LLC are taken where you now live.
- Form the LLC, and keep its US filings, Form 5472 first of all, every year.
Sources
Checked 26 October 2026.
- 26 CFR § 301.7701-3 (classification of eligible entities): ecfr.gov; 26 CFR § 301.7701-2(c)(2)(vi): ecfr.gov
- 26 U.S.C. §§ 864, 871, 875 and 1446: law.cornell.edu § 864, § 871, § 875, § 1446
- 26 U.S.C. § 6038A: law.cornell.edu; 26 CFR §§ 1.6038A-1, 1.6038A-2 and 1.6038A-4: ecfr.gov
- IRS, Instructions for Form 5472 (Rev. December 2024): irs.gov
- FinCEN, Beneficial Ownership Information Reporting: fincen.gov; FinCEN press release of 21 March 2025: fincen.gov; 31 CFR § 1010.380: ecfr.gov
- Council Directive (EU) 2016/1164 (ATAD), article 7: publications.europa.eu; Council Directive (EU) 2017/952 (ATAD 2), article 1: publications.europa.eu
Your own case
This page is general information, not advice on your case. Your move, your LLC and your deadlines are checked in the consultation, held in English.
Form your LLCWhat your home country still claims when you leave is set out on the country pages below.