US Company Formation from El Salvador (2026): US LLC or C-Corp, the 2024 Foreign Income Reform, Dollarisation and the Diaspora

El Salvador uses the US dollar, sends and receives more money to and from the USA (relative to its economy) than almost any other country, and has more than two million citizens and descendants living in Los Angeles, the Washington DC area, Houston, New York and beyond. In recent years the government has also courted foreign capital with tax changes: in March 2024 the Legislative Assembly reformed the Income Tax Law to exclude from taxable income money and certain passive income coming into El Salvador from abroad.

That makes El Salvador an interesting place to own a US company from. It is not, however, a place where all income is tax-free. This guide explains what the 2024 reform did and did not change, how it interacts with a US company, and how US LLC formation compares with US C-Corp formation for owners in El Salvador.

In short: Salvadorans and residents of El Salvador can own 100% of a US LLC or C-Corporation, formed remotely. The March 2024 reform excludes from income tax money of any kind entering El Salvador from abroad, and certain foreign-source passive income of individuals and companies. Income from work performed in El Salvador is still taxed under the Income Tax Law as Salvadoran-source, whoever pays it. Entities in multinational groups that do not qualify on substance can still be taxed on foreign exempt income. There is no US–El Salvador income tax treaty, so US corporate dividends carry 30% withholding. Since 2025, accepting bitcoin is voluntary, and the US dollar is the currency that matters for tax and accounts. With UCB, a Wyoming LLC with EIN is $249 and a Delaware corporation with EIN is $358, all-in.

Who can form a US company from El Salvador

US states do not restrict who owns a company. A Salvadoran citizen, a foreigner living in El Salvador, or a Salvadoran sociedad anónima de capital variable (S.A. de C.V.) can own a US company outright, and an individual owner can be its sole manager or director. You will not need a US visa, an SSN, a US address or a trip. A registered agent in the state of formation is required, and is included for the first year in every UCB formation (see registered agent explained). The company gets its EIN from the IRS without an SSN or ITIN (see EIN for non-residents).

For identity, use your passport. The DUI (Documento Único de Identidad) is not accepted by US banks on its own. For proof of address, use a recent CAESS, AES or Delsur electricity bill, an ANDA water bill, a Tigo or Claro bill, or a bank statement, translated. A Salvadoran company owner should have its NIT, NRC and its registration with the Centro Nacional de Registros (CNR).

What the 2024 reform changed

On 12 March 2024, the Legislative Assembly approved amendments to the Income Tax Law (Ley de Impuesto sobre la Renta). The main points:

• Article 3 now excludes from income money or goods of any kind that come into El Salvador from abroad. That covers loans and financing, remittances, working capital and funds for investment in the country.
• Foreign-source passive income of individuals and companies was excluded from income. Such income includes interest, dividends and similar returns on capital held abroad.
• The obligation to declare income from deposits in foreign financial institutions was repealed.
• Multinational groups. Foreign exempt income obtained by entities of multinational groups domiciled in El Salvador that are "non-qualified", meaning they lack the required substance, is treated as taxable, in line with international pressure on such regimes.

A further reform in April 2025 adjusted the exempt amount for individuals, so check the current figures with your contador.

What it did not change

The Income Tax Law still taxes Salvadoran-source income, and income for services performed in El Salvador is Salvadoran-source, whoever the client is and wherever the money is paid. A designer in San Salvador billing American clients, or a developer in Santa Tecla working for a US start-up, is earning taxable income in El Salvador. Putting a US LLC in between does not move the work abroad.

So for an owner of a US company, the reform matters most for returns on capital, such as dividends, distributions on an investment and interest, rather than for your own professional fees.

US LLC formation from El Salvador

US tax treatment

The IRS disregards a single-member LLC that has one non-resident owner, and looks to the owner instead. If the business is run from El Salvador, with no US office, employees or agents who conclude contracts in the USA, its income is generally not connected with a US trade or business, and no US income tax is due (see effectively connected income explained). The LLC has no corporate layer, so distributions carry no 30% dividend withholding. It must still file Form 5472 with a pro forma Form 1120 every year. Missing it carries a $25,000 penalty (see Form 5472 explained).

Two examples

These are illustrative examples, not client cases. El Salvador uses the dollar, so there is no conversion.

A freelancer. Gabriela is a bilingual customer-experience consultant in San Salvador whose clients are US software companies. She forms a Wyoming LLC that invoices US$70,000 a year. In the USA, the LLC files Form 5472 and owes no income tax. In El Salvador, her contador treats the income as hers for services performed in El Salvador, taxable under the Income Tax Law at the individual rates, with the reform's exclusion not applying to it. The LLC's benefit is commercial: her clients pay a US vendor by ACH, and she has a US account.

An investor. Roberto, a Salvadoran entrepreneur, owns 40% of a US LLC with two partners in Houston. It runs a property-maintenance company operating in Texas, and it is clearly a US business with US staff and premises. As a multi-member LLC it is a partnership for US tax. It files Form 1065 and Texas returns, and it withholds US tax on Roberto's share of the US business profits, which he reports on a US non-resident return. In El Salvador, his contador considers whether the profit share he brings home falls within the reform's exclusion for income from abroad, which it is designed to cover. See single-member vs multi-member LLC and Texas LLC for non-residents.

US C-Corp formation from El Salvador

US tax treatment

A C-Corporation pays federal tax of 21% on its profits, plus state tax where it operates, and files Form 1120 and Form 5472 each year (see the 21% corporate tax explained and the C-Corp guide for non-residents). With no US–El Salvador treaty, dividends paid to a Salvadoran shareholder are withheld at 30%, and so are royalties and related-party interest. Even if El Salvador then excludes the dividend under the 2024 reform, the US cost of corporate profits paid out is about 44.7%.

When to choose it

• Nearshore service companies. Salvadoran contact centres and software firms serving US enterprises use a US corporation to sign contracts, carry insurance and employ US account managers. The Salvadoran company is paid an arm's-length fee for the work done in El Salvador, taxed there as Salvadoran-source, and the US corporation is taxed on its own margin.
• Exporters. Coffee, sugar, apparel and food producers sell into the USA under CAFTA-DR. The US corporation acts as importer and distributor, often in Los Angeles, Houston or the Washington DC area. A corporation keeps US tax on the US distribution business inside the US company. See US subsidiary for a foreign company.
• Start-ups raising investment need a Delaware C-Corporation (see raising US investment as a foreign founder).

Diaspora and family businesses

A large share of US companies with Salvadoran owners are family businesses run across the border: pupuserías, construction and cleaning companies, transport and courier services, and real estate. When some owners are US citizens or green card holders:

• the US owners pay US tax on their share of the profits;
• a multi-member LLC files Form 1065;
• the US business must be formed or registered, and pay tax, in the state where it operates (often California, Texas, Maryland, Virginia or New York).

The Salvadoran owner's share of US business profits is taxed in the USA, through withholding and a non-resident return, whatever El Salvador does with it afterwards.

Bitcoin

Bitcoin was made legal tender in 2021. After the IMF programme agreed in late 2024, the law was amended in early 2025: businesses are no longer required to accept bitcoin, and taxes are paid in dollars. If your US company receives or holds crypto-assets, its US tax and reporting follow US rules for property, and US banks will ask how crypto fits your business.

Which state

• Wyoming or New Mexico for a service business run from El Salvador.
• The state where the business operates, for a business with US premises or staff: California, Texas, Maryland, Virginia and New York are common.
• Delaware for a corporation raising investment.

See best state for non-residents and the state selector.

What it costs

UCB's formation prices include state fees and the first year of registered agent service:

• A Wyoming LLC with EIN is $249, or $348 with a US bank account application.
• A Texas LLC with EIN is $504.
• A Delaware corporation with EIN is $358.

Keeping a Wyoming LLC active is $121 a year, or $421 including the annual federal return. A US business address with your own suite number is $60 a year. See what a US LLC costs every year.

Banking

US banks and fintechs generally accept Salvadoran owners. Prepare for the usual questions:

• what the business does, in specific terms;
• who the customers are;
• where the money comes from.

Have an English website, matching documents and a US business address with your own suite number. Moving dollars from the US account to a Salvadoran bank is an ordinary international wire, with no currency conversion. See US business bank accounts for non-residents, why banks reject non-resident applications and Stripe for non-residents.

Common mistakes

• Assuming the 2024 reform made all income tax-free. Income for work performed in El Salvador is still Salvadoran-source.
• Paying dividends from a US corporation to El Salvador at 30% US withholding with no treaty.
• Ignoring US tax on a share of a US business because El Salvador excludes the money when it arrives.
• Running a US business through a disregarded LLC owned by a Salvadoran company, which makes the company a US taxpayer.
• Missing Form 5472, or Form 1065 for a multi-member LLC.

Frequently asked questions

Can a Salvadoran citizen own 100% of a US company? Yes, without visiting the USA or holding a US visa.

Is income from my US company tax-free in El Salvador? The 2024 reform excludes money coming in from abroad and certain foreign passive income. Income for work you do in El Salvador remains taxable as Salvadoran-source. Check the details for your case with a contador.

Is there a US–El Salvador tax treaty? No income tax treaty. US dividends, royalties and related-party interest paid to El Salvador are withheld at 30%.

Does my US LLC pay US tax? Not if it has no US office, staff or agents. A US business with US operations does pay US tax. Every foreign-owned LLC files Form 5472 or Form 1065 each year.

How UCB can help

We handle US company formation from El Salvador remotely: the state filing, EIN, registered agent, US business address and bank application. Each year we file the federal return through our US tax filing service, including Form 1065 for family partnerships. Your Salvadoran contador handles Ministerio de Hacienda filings, and we supply the US records they need. See our formation, EIN and bank account package and the Guatemala guide for a regional comparison.

Setting up a US company from El Salvador? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.