A US Company for SaaS Founders Abroad: LLC or C-Corp, Stripe or a Merchant of Record, Sales Tax, US Tax and Enterprise Customers

Software sold as a subscription is one of the most natural businesses to run from anywhere. A founder in Bangalore, Lahore, Lagos or Dubai can build a product, host it in the cloud and sell it to customers in fifty countries without ever meeting them. Sooner or later, though, most SaaS founders outside the USA run into the same set of questions. US customers want to pay in dollars by card. Enterprise buyers send vendor forms asking for a US entity. Investors ask whether the company is a Delaware C-Corp. And a payment provider that works smoothly for US companies turns out to be unavailable, or much harder, in the founder's own country.

A US company answers many of these questions. It also raises new ones: which kind of company, how to handle sales tax, and what the company owes the IRS. This guide covers the decisions a non-US SaaS founder actually faces, in the order they usually come up.

Short answer: a bootstrapped SaaS business with a founder abroad usually starts with a US LLC, often in Wyoming or New Mexico, with an EIN, a US bank account and Stripe. A SaaS company that plans to raise venture capital should usually be a Delaware C-Corporation from the start. Under final regulations issued in January 2025, cloud and SaaS revenue is treated as income from services, so a foreign-owned LLC whose product is built and run entirely from abroad often owes no US federal income tax, but it still files Form 5472 every year. Sales tax on SaaS depends on the state, and roughly half the states tax SaaS in some form: many founders avoid the work by selling through a merchant of record.

Why SaaS founders form a US company

• Payments. Stripe is the default billing platform for SaaS, and its full feature set, including subscriptions, invoicing and US bank payouts, is available to a US company with an EIN and a US bank account, even when the founder lives abroad. See Stripe for non-residents.
• Dollar revenue in a dollar account. Subscription revenue lands in a US account, without conversion on every payment. See US business bank accounts for non-residents.
• Selling to US businesses. Procurement teams at US companies are used to US vendors: a US legal entity, a W-8 or W-9 form, a US bank account for ACH payment. A US company removes friction in each of those steps. See receiving payments from US clients by ACH and wire.
• Investors and acquirers. US investors usually invest in Delaware corporations, and acquirers of small SaaS businesses often prefer a clean US entity with its own accounts and records.
• Credibility on the listing. App marketplaces, integration directories and B2B buyers see the company's name rather than the founder's.

LLC or C-Corporation?

This is the first real decision, and it depends almost entirely on whether you plan to raise outside investment.

Two practical rules follow:

• If you expect to raise money in the next year or two, start as a Delaware C-Corp. Converting an LLC into a corporation later is possible, but it is a legal process with tax consequences, and it is not something we do; we refer it to a specialist. See raising investment through a US corporation.
• If you will grow from customer revenue, an LLC is usually simpler and cheaper to run. See LLC vs Inc for non-residents, the 21% corporate tax explained and US C-Corporation for non-residents.

Which state?

For an LLC, the usual choices are Wyoming (low yearly cost, simple annual report) and New Mexico (no annual report). For a corporation that will raise money, it is Delaware, because investors and their lawyers expect it. A SaaS business does not need to be formed in the state where its customers are. See best state for an LLC for non-residents, Wyoming LLC for non-residents, New Mexico LLC for non-residents and our state selector.

Billing: Stripe directly, or a merchant of record?

This choice affects your tax workload more than any other.

Selling directly through Stripe means your company is the seller. Customers pay your company; your company issues the invoice; and your company is responsible for any sales tax in US states and VAT or GST in other countries where your sales trigger registration. Stripe offers tax calculation tools, but registering and filing returns in each place remains the seller's job.

Selling through a merchant of record (MoR) means a reseller, such as Paddle, buys your software and resells it to the customer. The MoR is the seller for tax purposes: it charges, collects and pays sales tax and VAT worldwide, and pays your company its share. The cost is a higher percentage per transaction.

Many founders start with an MoR to avoid sales tax and VAT work in the early years, then move to Stripe directly once revenue justifies a tax provider. Either way, a US company with a US bank account makes payouts simpler.

Sales tax on SaaS: the state question

There is no national sales tax in the USA. Each state decides whether SaaS is taxable, and the answers vary: roughly half the states tax SaaS in some form, for example New York, Texas, Pennsylvania and Washington, while others, such as California and Florida, generally do not.

A seller has to collect a state's sales tax only if it has nexus in that state. Since a 2018 Supreme Court decision, most states have economic nexus rules: sales into the state above a threshold, commonly $100,000 a year, create the obligation even with no physical presence. California's threshold is higher, at $500,000, and several states have dropped the older "200 transactions" test. Some states count all sales towards the threshold, even non-taxable ones.

What this means in practice for a small SaaS company owned from abroad:

• In the early years, sales into most individual states are below the thresholds.
• Once revenue grows, the company needs to track sales by state and register where a threshold is crossed in a state that taxes SaaS.
• A merchant of record avoids the problem; selling directly means it has to be managed.

We do not provide sales tax registration or returns. We can explain where you stand and refer you to a sales tax specialist. See state taxes for a foreign-owned LLC.

US federal income tax on SaaS revenue

This is where foreign-owned SaaS LLCs often benefit.

In January 2025, the Treasury issued final regulations saying that cloud transactions, including SaaS, platform-as-a-service and infrastructure-as-a-service, are treated as services, not as sales or leases of software. Separate proposed rules, not yet final, would source that service income to where the work is performed, looking at where the people, intangible property and equipment that deliver the service are located.

For a foreign-owned single-member LLC whose founder builds, runs and supports the product from abroad, with no US office, employees or dependent agents, this usually means:

• the income is generally not effectively connected with a US trade or business, so the LLC owes no US federal income tax and the owner usually has no US return to file;
• the owner reports the profits in their home country under its rules;
• the LLC still files Form 5472 with a pro forma Form 1120 every year, with a $25,000 penalty for missing it.

Two caveats matter. First, the facts change the answer: a founder who spends months working in the USA, hires US staff, or uses a US agent who signs contracts can create US business income. Second, using US cloud servers is generally not, by itself, treated as a US business for a company run from abroad, but where the servers and people are located is exactly what the proposed sourcing rules look at, so it is worth reviewing when those rules are finalised. See effectively connected income explained and Form 5472 explained.

A C-Corporation pays 21% federal tax on its profits wherever its people work, because it is a US taxpayer in its own right.

Selling to US enterprise customers

B2B SaaS sold to US companies brings paperwork that consumer software does not.

• Tax forms. A US customer will ask for a form before paying. A foreign-owned single-member LLC is disregarded for US tax purposes, so the correct form is usually the owner's W-8BEN (an individual owner) or W-8BEN-E (a company owner), not a W-9. A C-Corp gives a W-9. See W-8BEN-E vs W-8BEN explained.
• Vendor onboarding. Expect requests for the company's formation document, EIN letter, bank details on company letterhead, a certificate of insurance and sometimes a certificate of good standing. Keep these ready.
• Contracts. Enterprise customers often send their own master agreement and data protection terms. Contract review and negotiation is legal work for a lawyer; see contracts with US clients for the basics.
• Security reviews. Larger buyers may ask for security questionnaires or certifications. These are about the product, not the company, but a US entity with clean records makes the rest of the process easier.

Hiring and contractors

Most early SaaS teams are outside the USA, and a US LLC can pay contractors abroad from its US account. Hiring US employees is different: it creates payroll obligations, state registrations and, usually, US business income for the company. Payroll is not a service we provide; see hiring in the USA as a non-resident company.

The yearly picture

With UCB, keeping a Wyoming LLC active including the federal return costs $421 a year. See how much a US LLC costs, our US tax filing checklist and the cost calculator.

Worked examples

These are illustrative examples, not client cases.

Example 1: the bootstrapped tool. A developer in Kochi sells a $29-a-month analytics tool to small businesses worldwide, about 40% of them in the USA. They form a Wyoming LLC with EIN and a US bank account, bill through a merchant of record so sales tax and VAT are handled, and receive payouts in dollars. The work is all done in India, so the LLC usually has no US business income, and it files Form 5472 with a pro forma 1120 each year. The founder reports the profit in India.

Example 2: the venture-backed startup. Two founders in Lagos are joining an accelerator that invests through a SAFE. The accelerator requires a Delaware C-Corporation. They form a Delaware corporation, issue founder shares and open a US bank account. The corporation files Form 1120 each year and pays 21% on any profit. See raising investment through a US corporation.

Example 3: crossing a sales tax threshold. A Pakistani founder bills directly through Stripe. After two years, sales to customers in one state that taxes SaaS pass $100,000 in a year. The company needs to register for sales tax in that state and start collecting. We refer the founder to a sales tax specialist, and they consider moving billing to a merchant of record.

Example 4: the enterprise vendor form. A UK founder's LLC signs its first US enterprise customer. The customer's procurement team asks for a W-9. Because the LLC is a foreign-owned disregarded entity, the founder gives their own W-8BEN as the LLC's owner instead, and supplies the EIN letter and a bank letter. The customer pays by ACH to the LLC's US account.

Common mistakes

• Forming an LLC when investors will need a Delaware C-Corp, then facing a conversion later.
• Forming a C-Corp for a bootstrapped product and paying 21% tax that a foreign-owned LLC often would not.
• Selling directly with no plan for sales tax and VAT, and discovering obligations years later.
• Giving a US customer a W-9 for a foreign-owned single-member LLC.
• Assuming "no US tax" means "no US filing". Form 5472 is due every year.
• Hiring a US employee or spending long periods in the USA without checking the US tax effect.
• Using a registered agent address as the business address on Stripe or bank applications. See US business address and virtual office explained.
• Inconsistent names and addresses across the state record, EIN letter, bank and Stripe, which triggers verification delays.

How UCB helps

We form US LLCs and corporations for SaaS founders abroad, all-in: a Wyoming LLC with EIN is $249, and a Delaware corporation with EIN is $308, including the state fee and first-year registered agent. Our formation, EIN and bank account package adds the US business bank account application. Each year we keep the company active and file the federal return (Form 5472 and pro forma 1120, or Form 1120). We do not handle sales tax, VAT, payroll or legal contracts, but we will tell you when you need them and refer you to a specialist. If you are unsure whether an LLC or a C-Corp suits your plans, we will give you a straight answer.

Building a SaaS product and need a US company behind it? WhatsApp us at +91 8105 199 399 or email enquiries@ucbsolutions.com, and we will recommend the right structure and state for your plans.