I'm based in Germany and run a small software consultancy. I want to open a US LLC to invoice American clients and maybe hold a US bank account. I've read about Wyoming and Delaware but honestly the information online is overwhelming and often contradictory. My main concerns are taxes, privacy, and whether I can do this without setting foot in the US. Any practical experiences would help. I don't need a sales pitch from formation agents.
LLC Formation
I'm not American but want to own a US LLC
Wyoming is the usual choice for non-residents. Low fees, no state income tax and they don't require a physical office. But you'll still need a registered agent and an EIN. The EIN is the part that trips most people up because you need to fax or call the IRS, and they don't always make it easy from abroad.
Delaware makes sense if you plan to raise venture capital or have investors. For a one-person consultancy it's overkill and more expensive. Also, be careful about the tax side. A US LLC is usually ignored for federal tax purposes if you're a single member, but that that doesn't mean you owe nothing. Germany will likely tax the profits anyway under controlled foreign corporation rules, though.
I did this from the UK three years ago.Formation was easy. The banking was the hard part. Many US banks don't want non-resident owners, and the ones that do ask for a lot of documentation. I ended up using a fintech account instead of a traditional bank.
That's a key point. Also, some of those fintech accounts aren't actually US bank accounts in the strict sense, so make sure that fits what your clients expect.
Do you actually need a US LLC? If your German clients are paying you in euros and your US clients are fine with international transfers, an LLC might just add cost and complexity. I considered it and decided again st it. The compliance paperwork alone wasn't worth it for me.
The compliance is real. You'll need to file a annual report in Wyoming and potentially a federal tax return even if you owe nothing. And if you're the only member, you might have to file form 5472 and a pro forma 1120. Miss that and the penalty is $25,000. That scares a lot of people off.
I've heard about that penalty. Is it actually enforced for small foreign-owned LLCs that don't do anything? I've seen mixed reports.
It's on the books and the IRS has been increasing enforcement. I wouldn't gamble on it. The form isn't hard if you have a good accountant, but it's another reason to make sure the LLC is actually necessary.
One more thing. If you go ahead, don't use one of those cheap formation services that promise a US address and then disappear. I used a registered agent taht also handled the EIN application and it saved me weeks of frustration. Still, you have to double-check everything they submit.
Thanks. The 5472 penalty and the German tax angle are the parts I hadn't fully mapped out. I'm going to talk to a tax advisor here before I decide anything. The banking issue is also making me rreconsider whether the hassle is worth it.
Good call. A local advisor who knows both US and German rules will save you more than they cost.