What is a US LLC and Why?

A limited liability company (LLC) is a hybrid type of legal entity that combines the limited liability features of a corporation with the tax efficiencies and ease of management of a partnership.

The “owners” of an LLC are referred to as “Members.” In most states the Members can consist of a single individual, two or more individuals, corporations or other LLCs.

If the LLC elects to be treated as a “disregarded entity” LLCs are not taxed as a separate business entity. If there is only one Member of the LLC then the LLC is treated as simply a business operation of that Member. If there are more than one Members of the LLC, it will be treated as a partnership.

For more information on how an LLC can be treated:”Disregarded Entity” vs “Taxable Association”: what is the best way to structure your LLC?

We advise non-residents to have only one Member of the LLC, and for the single Member to be an individual (usually the client) or an International Privacy Trust. By doing so the client may be able to avoid having to file any US tax returns as long as the Member is not a US citizen or resident, and the LLC avoids being considered a corporate tax resident, and avoids earning any “effectively connected US Source income” (this generally means the product or service is not made, stored, or transported by the company inside the USA).