LLC vs corporation for foreigners: which one fits you?

In the LLC vs corporation choice, most foreigners who want a U.S. company to sell, invoice and hold a bank account are better off with an LLC: one state filing, light upkeep and flexible taxes. A corporation makes sense when you plan to raise money from U.S. venture investors, who usually expect a Delaware C-Corp. And an LLC can still choose to be taxed as a corporation later.

LLC vs corporation: what is the difference?

Both are companies created under state law, and both keep the company's obligations separate from yours. The difference is in how they're organized and how the IRS taxes them.

An LLC is run under its Operating Agreement, a private document where the members set who owns what and how decisions are made. A corporation is formed by a different filing and runs under its own, more formal structure.

How does the IRS tax an LLC by default?

It depends on the number of members (IRS, LLC):

"Disregarded" applies to income tax only. For employment tax and certain excise taxes, the IRS still treats a one-member LLC as separate from its owner.

Can an LLC be taxed as a corporation?

Yes. The LLC files Form 8832 and the IRS treats it as a corporation. The company stays an LLC under state law; only the tax treatment changes. That makes the LLC a flexible place to start: you don't lock yourself in on day one.

Whether the election pays off depends on where you live and how you take money out of the company, so it's a call to make with your accountant.

When does a corporation make more sense?

When a U.S. venture round is on the table. Delaware is the venture standard, and investors and VCs usually expect a Delaware C-Corp or LLC. In Delaware the LLC is created by a Certificate of Formation (6 Del. C. § 18-201). EXNNA will offer Delaware soon. For how the states compare, see New Mexico vs Wyoming vs Delaware.

Moving from an LLC to a Delaware C-Corp later is a separate legal step, so if you know you'll raise, decide before you form.

Why do foreigners usually start with an LLC?

Cost and simplicity. An LLC in New Mexico (NM), a U.S. state, costs $50 in State fees, files no annual report and pays no annual State fee. Its Articles of Organization don't have to list the owners, so your name stays off the public record. See how an anonymous LLC in New Mexico works.

You don't need to live in the U.S. to own one. The order takes about two minutes, and no ID documents are needed. The step-by-step is in U.S. LLC for non-residents.

What comes after you form the LLC?

Usually an EIN, the LLC's federal tax ID, so the company can open a bank account. You can get it without an SSN; see ITIN vs EIN. A one-member LLC owned from abroad may also file Form 5472 with the IRS.

EXNNA forms your New Mexico LLC online for $200, State fee and 12 months of registered agent included. See every option on our pricing.

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