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Limited Liability Company (LLC)

Company formation in United States

Best Answer

The LLC is best suited for: Freelancers, Small businesses, Foreign entrepreneurs, Real estate investors, Consulting firms. Single-member LLC: disregarded entity — income reported on owner's personal return. Multi-member LLC: taxed as partnership by default. Can elect C-Corp or S-Corp taxation. No federal entity-level tax for default LLCs. Non-resident aliens with no US-sourced income may owe zero US tax, but must still file. State taxes vary significantly — Wyoming and Delaware have no state income tax on out-of-state LLC income.

Who this is for
  • Freelancers
  • Small businesses
  • Foreign entrepreneurs
  • Real estate investors
  • Consulting firms

Key Facts

Min. Shareholders1
Max. ShareholdersUnlimited
Min. Directors0
Minimum CapitalNo minimum
LiabilityLimited to capital contribution
Setup Timeline1–3 business days
Annual Cost$300–$1,500/year (state fees + registered agent)

Step-by-Step Formation Process

1

Choose your state

Wyoming, Delaware, and Florida are the most popular for non-residents. Wyoming offers no state income tax and strong privacy. Delaware has the most business-friendly court system.

2

Choose a company name

Must include "LLC" or "Limited Liability Company". Check availability via the state's business registry.

3

Appoint a registered agent

Required in every state. Must be a person or service with a physical address in the formation state. Costs $50–$300/year.

4

File Articles of Organization

Submit formation documents to the Secretary of State. Filing fees range from $50 (Wyoming) to $500 (Massachusetts).

5

Obtain an EIN

Apply for an Employer Identification Number from the IRS. Required for bank accounts and tax filing. Free. Non-residents may need to apply by fax or mail.

6

Draft Operating Agreement

Not required in all states but strongly recommended. Defines ownership structure, profit sharing, and management roles.

Required Documents

  • Passport copy (for EIN application)
  • US address or registered agent address
  • Articles of Organization (state-specific form)
  • Operating Agreement (recommended)
  • EIN confirmation letter (after filing)

Cost Overview

Cost Breakdown (USD)
Annual Cost
$300–$1,500/year (state fees + registered agent)
Country Formation Range
$50 – $2,500+

Tax Treatment

Single-member LLC: disregarded entity — income reported on owner's personal return. Multi-member LLC: taxed as partnership by default. Can elect C-Corp or S-Corp taxation. No federal entity-level tax for default LLCs. Non-resident aliens with no US-sourced income may owe zero US tax, but must still file. State taxes vary significantly — Wyoming and Delaware have no state income tax on out-of-state LLC income.

Pros & Cons

Advantages
  • No minimum capital requirement
  • Pass-through taxation (no double taxation by default)
  • Flexible management structure (member-managed or manager-managed)
  • Strong liability protection
  • Wyoming/Delaware LLCs offer excellent privacy
  • No requirement to be a US resident
  • Can elect to be taxed as S-Corp for payroll tax savings
Disadvantages
  • Banking is difficult for non-residents without a US visit
  • State-by-state compliance complexity
  • Annual report and franchise tax obligations vary by state
  • Self-employment tax on active income (15.3%)
  • No ability to issue stock (cannot raise VC funding as LLC)
  • Some states have high annual fees (California $800/year minimum)

Other Structures in United States

C Corporation (C-Corp)
S Corporation (S-Corp)

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This content is educational and does not constitute legal or tax advice. Always consult a qualified professional for your specific situation. Data last verified March 2026.