How to Open a US LLC as a Foreigner: Etymology, Steps, Running Costs and the USD 25,000 Filing Trap

The LLC is the usual choice for a foreign founder doing business in the United States: the liability shield of a corporation, the tax treatment of a partnership, almost no corporate ceremony — plus one filing obligation that catches more foreign owners than any other rule in US tax law. WHAT IT IS A company created by a state filing whose owners ("members") are not personally liable for its debts, but which is taxed like a partnership — or ignored entirely if there is one owner. Its charter is the articles of organisation (certificate of formation in some states); its governing contract is the operating agreement, optional in most states and expected in practice by banks and courts. WHERE THE NAME COMES FROM The phrase was coined in the United States by Wyoming, which passed the first LLC statute in 1977, effective the following year. The model was German: the Gesellschaft mit beschränkter Haftung (GmbH) of 1892, literally a "company with limited liability" — a company that caps its owners' risk without the double tax and the board-and-bylaws machinery of a stock corporation. The American version became possible after the IRS conceded in 1967, in a case about a Panamanian entity, that an organisation could offer limited liability and still be taxed as a partnership. Every state had an LLC statute by 1996. "Disregarded entity" is Treasury's phrase from the check-the-box regulations of December 1996, effective 1 January 1997: a single-member LLC is treated as an activity of its owner, not a separate taxpayer. HOW TO OPEN ONE 1. Choose the state of formation — it need not be where you live. Delaware for anything that will raise money; Wyoming or New Mexico for privacy and low annual cost; California or New York if the business is physically there. 2. Check the name; it must be distinguishable and usually include "LLC". 3. Appoint a registered agent with a physical street address in the state. This is the step that lets a non-resident own a US company without travelling. 4. File the articles of organisation or certificate of formation. Fees run USD 50-500; same-day service costs extra in Delaware. 5. Get an EIN, free, on Form SS-4. 6. Sign an operating agreement, even a single-member one. 7. Register as a foreign LLC in any other state where you have offices, staff or property, then register for state taxes and local licences and open the bank account. Timeline: same day to about two weeks, most of it the EIN and the bank. HOW TO RUN IT One member: disregarded — an individual US owner reports on Schedule C, a foreign owner files Form 1040-NR. Two or more members: Form 1065 with a K-1 each. Either can elect C-corporation treatment (Form 8832) or, for US residents only, S-corporation treatment (Form 2553). Annual: the state report or franchise tax (Wyoming USD 60, Delaware USD 300 due 1 June, New Mexico nothing, California a minimum USD 800), registered agent renewal, an operating agreement kept current, and clean books. Venture capital will not invest in an LLC — converting to a Delaware C corporation before a priced round is standard. WHAT IT COSTS Formation and first year: state fee USD 50-500 (Delaware 110, Wyoming 100, New Mexico 50, Florida 125, California 70 plus 800 from the second year); registered agent 50-300 a year, typically 100-150; formation packages 150-500; EIN free; bank account 0-50 a year. Every year after: annual state fee 0-800, registered agent 50-300, bookkeeping and tax return 300-1,500, Form 5472 and pro forma 1120 preparation 500-1,500. Realistic all-in for a foreign-owned single-member LLC: USD 600-2,000 in year one, 400-1,200 a year after that. IF YOU ARE NOT A US PERSON Registered agent and address. You do not need to live in the United States, or hold a visa, to own the company. A registered-agent service supplies the in-state street address for USD 50-300 a year and keeps your own address off the public record. EIN without an SSN or ITIN. Apply on Form SS-4 by fax (4-7 business days), mail (4-6 weeks) or phone. Apply before the bank, because the bank will ask for it. Bank account. The hardest step. Fintech business banks (Mercury, Relay, Wise Business) accept non-resident applications remotely; traditional US banks usually want a branch visit. Expect to supply a passport, certified proof of address, formation documents and the EIN. Keep two providers in play. The USD 25,000 trap. A foreign-owned single-member LLC that is disregarded must file Form 5472 with a pro forma Form 1120 every year — even with no income. A one-dollar capital contribution triggers it. The penalty for failing to file starts at USD 25,000 and can be assessed repeatedly. There is no dormant-company excuse. Beneficial ownership. Under FinCEN's final rule of August 2026, US-formed companies — including LLCs owned entirely by non-residents — are permanently exempt from beneficial ownership information reporting. Only foreign-formed entities registered in a US state must file. Home-country tax. With no office, employees or dependent agents in the US, the LLC may have little or no US income tax — but the profit is still taxable where you live. How your country treats a disregarded US LLC (pass-through, foreign corporation, controlled foreign company, permanent establishment) decides what you actually pay. Settle that before you form the company. And remember: state tax follows activity, not registration — a Wyoming LLC with no Wyoming operations owes the 60-dollar report and no Wyoming income tax. Owning a company is not a work permit. Running the business from inside the United States needs a visa — E-2 for nationals of treaty countries, L-1 for intra-company transfers, O-1 for extraordinary ability. The LLC can be the qualifying business; the visa is a separate application. THE SHORT VERSION Cheap to form, cheap to run, real liability protection, and the default structure for a foreign founder selling into the US — provided you file Form 5472 and the pro forma Form 1120 every year, and accept that the profit is taxed where you live. General information, not legal or tax advice. Fees, penalties and filing rules change; confirm current figures with the state, the IRS and a licensed professional before acting.