US Estate Tax on a Foreign Owner's US Company (2026): Why Shares in a US Corporation Are Taxed Above $60,000, the Unsettled Position of LLC Interests, Estate Tax Treaties, Lifetime Gifts, Holding Structures, and What Your Family Faces If You Die

Founders abroad plan carefully for US income tax. Almost none plan for the US tax that can be the largest of all: estate tax. A non-resident who dies owning shares in a US corporation can leave a US estate tax bill of up to 40% of the value above a tiny $60,000 exemption. A founder whose Delaware company is worth US$2 million can leave a US tax bill of over US$700,000, payable before the family can take control of the shares.

The rules are old, rarely discussed, and in some areas unsettled. That is precisely why they catch people. This guide explains when US estate tax applies to a foreign owner's US company, how corporations and LLCs differ, which treaties help, and the planning that is available, much of it simple if done early.

In short: A non-resident, non-citizen of the USA is subject to US estate tax on US-situs assets at death, with an exemption of only $60,000 (a $13,000 credit) and rates rising to 40%. Shares of a US corporation are US-situs, wherever you live and wherever the certificate is kept. The position of an LLC interest is less settled: a single-member LLC may be looked through to its assets, and a multi-member LLC's interest may be US-situs depending on where it does business. US bank deposits not connected with a US business are generally excluded. Estate tax treaties with about fifteen countries, including the UK, Germany, France and Japan, can reduce or remove the tax, and Canada's income tax treaty gives a pro-rata credit; India, the UAE and most of Asia and Latin America have no estate tax treaty. Lifetime gifts of shares by a non-resident are generally outside US gift tax. A foreign holding company can keep US shares out of the US estate, at a cost. Executors must file Form 706-NA within nine months and obtain a transfer certificate before US assets are released.

Who is subject to US estate tax as a non-resident

For estate tax, the test is domicile, not income tax residence. A non-citizen who is not domiciled in the USA at death, meaning they did not live there with the intention of staying indefinitely, is taxed only on assets situated in the USA. That covers most foreign founders, whether they live in London, Dubai, Mumbai or São Paulo.

The $60,000 figure is set in law and is not indexed for inflation.

What counts as a US-situs asset

US corporations

This is the clearest rule. If you own shares in a Delaware or Wyoming corporation, they are US-situs property at their fair market value at death. For a start-up that has raised money, or a profitable company, that value can be large and hard for the family to pay without selling the company.

Single-member LLCs

A single-member LLC owned by a non-resident is usually disregarded for income tax. For estate tax, there is no specific rule. Two views are taken in practice:

• the LLC is looked through, and the owner is treated as owning its assets directly, so US real estate and US-located tangible property inside it are US-situs, while bank deposits not connected with a US business and receivables from foreign customers may not be;
• the LLC interest is treated as an interest in an entity, and its situs depends on the rules for partnerships or corporations.

For an LLC that holds mainly cash, receivables from foreign clients and intangible assets, the look-through view may produce little US estate tax. For an LLC with US inventory, property or a valuable US business, it can produce a lot. Because the law is uncertain, assume the risk is real if the value is significant.

Multi-member LLCs

A multi-member LLC is a partnership for income tax. The situs of a partnership interest for estate tax is not settled: the IRS has taken the view that it can be where the partnership does business, while other approaches look to the deceased partner's domicile. An LLC that runs an active US business is at risk of being treated as US-situs.

An LLC that elected to be taxed as a corporation

If your LLC filed Form 8832 or 2553 to be taxed as a corporation, treat its membership interests like shares of a US corporation: US-situs.

How much: an example

These are illustrative figures, not a client case.

A founder living in Bengaluru owns 100% of a Delaware C-Corporation valued at US$2,000,000 at death, plus US$50,000 in the company's own bank account (which is part of the company's value, not a separate asset). India has no estate tax treaty with the USA.

The family cannot simply sell a few shares to pay it: the company is private, the tax is due nine months after death, and US banks and transfer agents will not release or re-register the shares until the IRS is satisfied. India has no inheritance tax, so there is no credit at home either.

Estate tax treaties

The USA has estate and gift tax treaties with about fifteen countries, including the UK, Germany, France, Italy, the Netherlands, Austria, Denmark, Finland, Greece, Ireland, Japan, Norway, Switzerland, Australia and South Africa. They work in two main ways:

• Situs limitation: some treaties, such as the US–UK treaty, allow the USA to tax a non-US domiciliary only on US real property and business property of a US permanent establishment. Shares of a US corporation owned by a UK-domiciled person are then generally outside US estate tax.
• Pro-rata exemption: others allow the deceased's estate a share of the full US exemption (about US$15 million in 2026) in proportion to the US assets' share of the worldwide estate. Canada gives this through its income tax treaty. A Canadian founder with a US$2 million US company and a US$6 million worldwide estate gets about a quarter of the full exemption, which would remove the US tax entirely.

Treaty benefits usually have to be claimed on the estate tax return, with a disclosure. India, the UAE, Saudi Arabia, Singapore, Hong Kong, China, Brazil, Mexico and most other countries have no estate tax treaty with the USA.

Lifetime gifts: an unusual opening

US gift tax applies to a non-resident only on gifts of US real property and tangible property located in the USA. Gifts of intangible property, including shares of a US corporation and interests in a US LLC, by a non-resident non-citizen are generally not subject to US gift tax (special rules apply to some former US citizens and long-term residents).

So a founder abroad can, in principle, give shares in a US company to children or a trust during life without US gift tax, removing the value from the US estate. Points to check:

• your home country's gift or inheritance tax, and income tax on transfers (some countries treat a gift as a sale for capital gains);
• control of the company, which you may want to keep through share classes or an operating agreement;
• for an LLC, transfer restrictions in the operating agreement and the state, bank and IRS updates that follow a change of ownership (see changing the owners of a US LLC);
• whether a gift of an LLC interest could be seen as a gift of the LLC's underlying US tangible assets.

Holding the US company through a foreign company

Shares of a foreign corporation are generally not US-situs, even if the foreign corporation's only asset is a US company. Many non-residents therefore hold US companies through a holding company in their home country or another jurisdiction, as an "estate tax blocker".

The trade-offs:

• Income tax: dividends from a US corporation to a foreign holding company carry US withholding (30%, or a treaty rate if the holding company qualifies). A foreign corporation owning a US LLC with US business income is taxed as a foreign corporation doing business in the USA, possibly with branch profits tax.
• Home-country rules: CFC rules, substance requirements and the cost of running another company.
• Formalities: the holding company must be a genuine company with its own decisions and records. If it is ignored in practice, the IRS can argue that the founder owned the US assets directly.
• Cost: formation and annual costs in another country.

For an Indian resident, a foreign holding company also raises ODI questions. See the ODI guide. For corporate parents, see US subsidiary for a foreign company.

Other approaches

• Life insurance on the owner's life, held outside the US estate, to provide cash for the tax.
• Trusts, which can work if properly structured under both US and home-country law; poorly structured trusts can make things worse.
• Joint ownership with a spouse, though for non-residents the rules are complex and each spouse's share may still be taxed.
• Keeping cash outside the company, since a company's bank balance increases its share value, while personal US deposits not connected with a US business are generally excluded.
• Choosing a treaty-protected structure if you live in a treaty country, and making sure the treaty claim is documented.

What happens when an owner dies

Even without much tax, a death creates practical problems that planning can avoid.

1. The bank freezes the company's account when it learns of the death, if the deceased was the only signatory.
2. The executor must file Form 706-NA within nine months if the US-situs assets exceed US$60,000, and pay any tax.
3. A transfer certificate from the IRS is generally required before US banks, brokers and transfer agents will release or re-register a non-resident's US assets above the threshold. It can take many months.
4. Home-country probate or succession documents may need to be recognised in the US state; US institutions often ask for court documents, translations and apostilles.
5. The company's own records must be updated: new members or shareholders, new officers, a new responsible party on Form 8822-B.
6. The company keeps filing: the US returns for the year of death and afterwards, and the state annual reports, or it falls out of good standing while the family sorts out the estate.

Put these in place now

• An operating agreement or shareholder agreement that says who takes over management on death or incapacity, and how a deceased member's interest passes.
• A second authorised signatory or manager on the bank account, where the bank allows it.
• A will that deals with the US company, recognised in your country, and possibly a separate US will for US assets.
• A note for your family: the company's state, EIN, registered agent, bank, accountant and where the documents are.

Frequently asked questions

Does US estate tax apply to me if I have never lived in the USA? Yes, on US-situs assets, including shares in a US corporation, above US$60,000, unless a treaty protects you.

Is my US LLC subject to US estate tax? Possibly. The law is unsettled. A single-member LLC may be looked through to its assets; a multi-member LLC running a US business may be US-situs. An LLC taxed as a corporation is treated like shares.

Are my company's US bank deposits taxed? Personal US bank deposits not connected with a US business are generally excluded. A company's deposits are part of the value of its shares or of the LLC's assets.

Can I give my shares to my children to avoid US estate tax? Gifts of intangible property, such as shares, by a non-resident non-citizen are generally free of US gift tax. Check your home country's taxes and keep control where you need it.

Does India have an estate tax treaty with the USA? No. Neither do the UAE, Singapore and most of Asia and Latin America. The UK, Germany, France, Japan and about a dozen others do, and Canada gives a pro-rata credit under its income tax treaty.

How UCB can help

We form US companies for founders abroad, and help keep them in good standing: registered agent, state filings and the yearly US returns through our US tax filing service. When ownership changes after a gift or a death, we handle the state, IRS and bank updates. For estate planning, we work alongside US and home-country estate lawyers, who should design any gift, trust or holding structure.

Owner of a US company thinking about succession? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.