LLC or C corp for a foreign founder

Foreign founders are often told to form a Delaware C corporation because that is what US startups do. For many businesses run from abroad, an LLC is simpler and cheaper. For others, the C corporation is right. This guide compares the two from a non-resident owner's point of view.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

For non-residents, the LLC vs C corp choice comes down to where the business operates and your plans. A single-member LLC owes no US income tax if it has no US trade or business, but its income is yours. A C corporation pays 21% US tax on its worldwide profit, and dividends to you face 30% withholding or a treaty rate. C corps suit founders raising US venture capital.

At a glance

LLC with no US trade or business
Generally no US income tax, Form 5472 each year
LLC with US operations
Owner files Form 1040-NR on effectively connected income
C corporation
21% US tax on worldwide profit
C corp dividends to a foreign owner
30% withholding, or a lower treaty rate
Venture capital
Investors generally expect a C corporation
Home country
May treat the two very differently
LLC or C corp for a foreign founderLLC with no US trade or business: Generally no US income tax, Form 5472 each year; LLC with US operations: Owner files Form 1040-NR on effectively connected income; C corporation: 21% US tax on worldwide profit; C corp dividends to a foreign owner: 30% withholding, or a lower treaty rate; Venture capital: Investors generally expect a C corporation; Home country: May treat the two very differently.KEY FACTS AT A GLANCELLC or C corp for a foreign founderLLC with no US trade or businessGenerally no US incometax, Form 5472 each yearLLC with US operationsOwner files Form 1040-NRon effectively connectedincomeC corporation21% US tax on worldwideprofitC corp dividends to a foreign owner30% withholding, or alower treaty rateVenture capitalInvestors generallyexpect a C corporationHome countryMay treat the two verydifferentlyChecked against official sourcesTax BakersLLC or C corp for a foreign founderLLC with no US trade or business: Generally no US income tax, Form 5472 each year; LLC with US operations: Owner files Form 1040-NR on effectively connected income; C corporation: 21% US tax on worldwide profit; C corp dividends to a foreign owner: 30% withholding, or a lower treaty rate; Venture capital: Investors generally expect a C corporation; Home country: May treat the two very differently.KEY FACTS AT A GLANCELLC or C corp for a foreignfounderLLC with no US trade or businessGenerally no US income tax, Form 5472 eachyearLLC with US operationsOwner files Form 1040-NR on effectivelyconnected incomeC corporation21% US tax on worldwide profitC corp dividends to a foreign owner30% withholding, or a lower treaty rateVenture capitalInvestors generally expect a C corporationHome countryMay treat the two very differentlyChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

How do they compare for a foreign founder?

Single-member LLC (default)C corporation, or LLC taxed as one
Who is the US taxpayerYou, on income effectively connected with a US businessThe company
US tax if all work is done abroadGenerally none21% on worldwide profit
US tax on money paid to youNone on transfers from the LLC30% withholding on dividends, or a treaty rate
Federal filingsForm 5472 with a pro forma 1120, and Form 1040-NR if you have US taxable incomeForm 1120 every year, Form 5472 if 25% or more foreign-owned, Forms 1042 and 1042-S for dividends
Raising investmentHarderThe standard for venture capital
Selling shares laterSale of the business's assets or interests, taxed depending on US connectionSale of shares, generally not taxed by the US for a foreign seller, with exceptions such as US real property

A foreign company doing business in the US directly, without a US entity, files Form 1120-F.

When does an LLC suit a foreign founder?

  • A service business run from abroad, such as consulting, design or software development.
  • An online business with no US staff or office.
  • A founder who wants low costs and simple filings, and has no plans for US investors.

The trade-off is that the business's income is yours, so your home country may tax it as it is earned. See whether foreign-owned US LLCs pay US tax.

When does a C corporation suit a foreign founder?

  • You plan to raise money from US investors, who generally expect a Delaware C corporation with preferred shares. See Delaware C corp for startups.
  • The business has substantial US operations, staff or customers served from the US, so US tax is likely either way.
  • You will reinvest most profit, which is taxed once at 21% until paid out.
  • You want the company, not you personally, to be the US taxpayer and filer.

A C corporation can pay its non-resident founder a salary. See non-resident salary from a US company.

How does your home country change it?

This is often the deciding factor. Some countries treat a US LLC as transparent and tax you on its profit as earned. Others treat it as a foreign company, sometimes under rules that tax undistributed profits of controlled foreign companies. A C corporation may fall under those rules too. Credit for US tax paid, and the treaty rate on dividends, also vary. Get advice in your country of residence before choosing.

Can you switch later?

An LLC can elect to be taxed as a corporation on Form 8832, and can convert to a corporation under state law, typically when investors arrive. Moving the other way, from a corporation to pass-through treatment, is treated as a liquidation and can be costly. Starting as an LLC and converting later is common. See how LLCs are taxed.

The election is made on Form 8832.

What do both need?

A registered agent, an EIN, a bank account and yearly state filings. Both also file Form 5472 for transactions with foreign owners. S corporation status is not available to foreign owners in either case.

Choosing a structure for a US company?

We compare the US tax, filings and costs of each structure for your situation, and form the company once you decide.

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Questions people ask

Should a non-resident choose an LLC or a C corp?

An LLC often suits a business run entirely from abroad with no US investors. A C corporation suits founders raising US venture capital or with substantial US operations.

Does a C corporation owned by a foreigner pay US tax?

Yes. A US C corporation pays 21% federal tax on its worldwide profit, wherever its owner lives.

Is there withholding on dividends to foreign shareholders?

Yes, generally 30%, or a lower rate under a tax treaty.

Can a foreign-owned LLC become a C corporation later?

Yes, by electing corporate tax treatment or converting under state law. Moving back to an LLC can be costly.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. Internal Revenue Code section 11: 21% corporate tax rate
  2. IRS Publication 515: Withholding of Tax on Nonresident Aliens and Foreign Entities
  3. IRS: Instructions for Form 5472 (Rev. December 2024)
  4. IRS: Instructions for Form 1120 (2025)
  5. IRS: Instructions for Form 8832

Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.

Foreign-owned and non-resident companiesDo foreign-owned US LLCs pay US taxStarting a US companyLLC vs S corp vs C corp: which one fits your businessFederal tax formsForm 1120: the C corporation return

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This guide is general information. It is not tax or legal advice for your situation.