Using an LLC Tax-Free: How It Really Works

To keep your LLC tax-free, the following conditions must be met:

1. No residence in the US
You are not a US citizen and do not live permanently in the United States.

2. No physical activity in the US
You don’t have an office, employees, or storage facilities in the US.

3. No “US Trade or Business”
Your income does not come from direct US sources, but for example from clients in Europe or other countries worldwide.

4. Single-member LLC with a foreign owner
You are the sole owner and are not considered a US tax resident.

If these points apply, your LLC does not have to pay income tax in the United States. Instead, only an informational filing must be submitted to US authorities.

Even if no taxes are owed, as the owner of a foreign-owned LLC, you must file two forms each year:

• Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation)

• Form 1120 (U.S. Corporation Income Tax Return – filed as a „zero return“)

These are informational forms only – no profit is taxed.

We provide templates and step-by-step instructions for these filings – or we can take care of the submission for you.

The combination of limited liability, international recognition, and the potential for tax exemption makes the US LLC the perfect legal structure for:

• Agency owners

• Dropshippers

• Coaches & consultants

• Online store operators

• Creators & content producers

• Developers & software providers

You can run a global business with your LLC – without paying unnecessary taxes.