How the US tax system treats the LLC should be fairly clear by now. But how is the LLC classified for tax purposes outside the US?
The reality is that most foreign tax authorities struggle with the LLC.
Comparable legal forms are simply very rare abroad, and the LLC's hybrid character (part corporation, part partnership) causes confusion again and again.
This is especially true of the single-member LLC:
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In the best case, the LLC is treated as tax-transparent. The LLC's income is then subject to income tax in your country of residence.
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However, many countries, such as the UK, classify the LLC as "opaque" depending on the overall situation. That means it can be classified as a corporation or as a partnership.
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The LLC can only be run tax-efficiently in countries that give foreign income favourable tax treatment.
That is why we advise clients who live in typical high-tax countries against forming an LLC. The zero-tax LLC described here is meant for tax nomads and for people who live in a low-tax country abroad.