LLC or Inc: Which Type of US Company Should a Non-Resident Choose?

Once you have decided to form a US company, the next decision is the type: a Limited Liability Company (LLC) or a corporation (Inc, also called a C-Corporation). Both protect your personal assets and both can be 100% owned by a non-resident. The difference is mostly in how they are taxed, how much paperwork they need, and how investors see them.

This guide compares the two from a foreign founder's point of view and ends with clear recommendations.

The short answer

• Choose an LLC if you run a service, e-commerce, content or digital business, want simple administration, and are not planning to raise venture capital.
• Choose a C-Corporation (Inc) if you plan to raise money from investors, issue stock options to a team, or build a company you expect to sell or list, especially as a Delaware C-Corp.

How they are taxed

This is the biggest difference.

LLC

By default an LLC is a pass-through entity: the LLC does not pay federal income tax itself.

• A single-member LLC is "disregarded". Its income is treated as the owner's. For a foreign owner, US federal tax only applies to income that is effectively connected with a US trade or business. An LLC run entirely from abroad, with no US office, staff or agents, often has little or no US federal income tax to pay. See effectively connected income explained.
• A multi-member LLC is taxed as a partnership. The same effectively-connected test applies to each partner's share.

Either way, there are annual federal filings, including Form 5472 for single-member LLCs owned by a foreign person. See Form 5472 explained.

C-Corporation

A corporation is a separate taxpayer.

• It pays the 21% federal corporate income tax on its worldwide profits, wherever the work is done, plus state tax where applicable. See the 21% corporate tax explained.
• When it pays dividends to a foreign shareholder, the payment is generally subject to 30% US withholding, often reduced by a tax treaty. See dividends and withholding.

So profits can be taxed twice: once in the corporation and again when distributed. Many startups never pay dividends, reinvest everything, and aim for a sale or investment instead, which is why the corporation still works well for them.

Side-by-side comparison

Paperwork and running costs

An LLC needs an operating agreement, a registered agent, the state's annual report (if any) and annual federal filings. There is no requirement for board meetings or share certificates. Read why your operating agreement matters.

A corporation needs bylaws, a board of directors, officers, issued shares, a share register and records of major decisions. Delaware corporations also file an annual franchise tax report, which can produce surprisingly large bills if calculated the default way. See Delaware franchise tax explained and directors and officers for foreign founders.

Investors and growth

US venture capital funds almost always invest in Delaware C-Corporations. They want preferred shares, a standard legal framework and predictable tax treatment, which an LLC does not provide. If investment is on your roadmap, starting as a corporation avoids a conversion later. If you already have an LLC, conversion is possible; see converting an LLC to a C-Corp.

What about an S-Corporation?

An S-Corporation is a tax election that lets a corporation pass profits through to its owners. Non-residents cannot be S-Corp shareholders, so it is not an option for foreign founders. See can non-residents elect S-Corp status?

A simple numbers example

Imagine a founder living in India whose US company makes $100,000 of profit in a year from clients worldwide, with all work done in India and no US office, staff or agents. Ignoring state tax and the founder's Indian tax for a moment:

As a single-member LLC. If the income is not effectively connected with the USA, there is typically no US federal income tax. The LLC files Form 5472 with a pro forma 1120. The founder reports the profit at home and pays Indian tax on it.

As a C-Corporation. The corporation pays 21%, or $21,000, of US corporate tax, regardless of where the work was done. If it then pays the remaining $79,000 as a dividend, US withholding applies. Under the India–US treaty the rate for an individual shareholder is generally 25%, or $19,750. Total US tax: about $40,750, before the founder's Indian tax on the dividend (with possible credit for US tax).

The corporation looks expensive in this example, and for a profitable service business that distributes its profits, it usually is. The picture changes for a startup that reinvests everything, pays no dividends and aims for investment or a sale, which is exactly the case corporations are designed for. Your own figures depend on your country, your treaty and how you run the business, so treat this as an illustration, not advice.

What is the same for both

Some things founders worry about do not actually depend on the choice:

• Limited liability. Both protect your personal assets from the company's debts, provided you keep business and personal money separate and the company is properly maintained.
• Foreign ownership. Both can be 100% owned by a non-resident, with no US partner or director required.
• Remote setup. Both are formed without visiting the USA, and both get an EIN the same way.
• Banking and payments. Banks, Stripe, PayPal and marketplaces accept both.
• Privacy. This depends on the state, not the entity type.

Can an LLC be taxed like a corporation?

Yes. An LLC can elect to be taxed as a C-Corporation while staying an LLC under state law. A few founders do this to get corporate tax treatment while keeping the LLC's simpler governance, for example when their home country treats corporate income more favourably. It is a specialised choice with long-term consequences, and once made it generally cannot be reversed for five years, so talk to us before considering it.

Recommendations by business type

Your home country's tax rules can change the answer, because some countries tax LLC profits differently from corporate dividends. It is worth a short conversation with a local adviser alongside us.

Frequently asked questions

Can I start as an LLC and switch to a corporation later?

Yes. Many founders start with an LLC and convert when they raise money. Conversion involves state filings, possibly a new EIN, and updates with your bank and platforms, so it is best done at a planned moment rather than in a hurry before an investment closes.

Is a corporation more credible with clients?

Not really. US clients deal with LLCs every day. What matters to them is a proper company with an EIN, a W-9, a US bank account and professional invoices.

Which is cheaper to run each year?

The LLC, in almost every case. It has fewer formalities, and a foreign-owned single-member LLC's federal filing is simpler than a corporation's full tax return.

Can a corporation have only one shareholder?

Yes. One person can be the sole shareholder, director and officer of a US corporation.

How UCB helps

We form both LLCs and corporations in all 50 states for non-residents, with the EIN, registered agent and, if you like, a US business bank account and ITIN in the same order. Prices for both entity types are on each state page, and you can choose LLC or Corporation when you start your order.

Still unsure which structure fits? WhatsApp us at +91 8105 199 399 or email info@ucbsolutions.com with a few lines about your business and plans, and we will recommend LLC or Inc for your situation.