The vast, dynamic American market is a tempting frontier for entrepreneurs worldwide, and UK citizens are no exception. Whether you are launching an e-commerce platform, offering consulting services, or investing in US real estate, establishing a US Limited Liability Company (LLC) is often the most strategic move. The good news is that, yes, a UK citizen can absolutely start and own a US LLC—and the process is surprisingly straightforward, despite the common misconceptions surrounding foreign ownership and compliance.
A US LLC offers UK entrepreneurs critical benefits: personal liability protection, access to US payment processors, and perceived legitimacy in the American market. However, success depends on navigating the precise legal and tax distinctions that apply to non-resident aliens (NRAs) like yourself. This guide will walk you through the essential steps, from initial formation to ongoing US tax compliance.
Phase 1: Formation—The Legal Setup
1. Choosing Your State of Formation
As a UK citizen, you are not required to form your LLC in the state where you live (since you don't live in the US). You have the freedom to choose any state. The most popular choices for non-US residents are Wyoming and Delaware, though many also choose their primary state of business (if applicable).
- Wyoming: Often favored for its strong privacy laws, low annual fees, and lack of state income tax. It is an excellent choice for holding companies and digital businesses.
- Delaware: Renowned for its sophisticated business court system (Court of Chancery) and historical legal precedent. It's often preferred by companies anticipating future venture capital funding, though it requires higher annual fees and a state-level franchise tax.
- Other States (e.g., Florida, Texas): These can be good options if you plan to have a physical presence or significant sales activity in that specific state.
2. Appointing a Registered Agent
Every US LLC, regardless of where the owner resides, must have a Registered Agent in the state of formation. This agent is a physical person or company designated to receive official legal and tax documents on the LLC’s behalf.
- You Cannot Be Your Own Agent: Since you live in the UK, you must hire a professional Registered Agent service that operates within the US state where you form the LLC.
- Privacy Protection: The Registered Agent's address is public record, which is often a key factor for UK owners seeking to maintain personal privacy.
3. Filing the Articles of Organization
This is the official document filed with the chosen state government to legally create your LLC. You will need to provide basic information, including the LLC's name and the Registered Agent's details. Once approved, the state issues your Certificate of Formation (or Articles of Organization).
4. Creating an Operating Agreement
While often not legally required, the Operating Agreement is essential. This internal document dictates ownership structure, management duties, and rules for adding or removing members. For foreign-owned LLCs, this document is critical for proving the LLC's structure to banks and tax authorities.
Phase 2: Essential Post-Formation Requirements
1. Obtaining an Employer Identification Number (EIN)
A UK citizen forming a US LLC must obtain an EIN from the IRS. This is essentially the business's social security number and is required to open a US bank account and file taxes. The process is unique for NRAs:
- No SSN or ITIN Required: Unlike US citizens, you can obtain an EIN without first having a US Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
- Form SS-4: You must complete and submit IRS Form SS-4. As a foreign individual, you will typically need to mail or fax this form to the IRS, as the online system requires a valid SSN/ITIN.
2. Opening a US Business Bank Account
This step is non-negotiable for liability protection and tax compliance. You must keep business finances separate from your personal UK finances (a process called "separating the veil").
- Remote Banking Challenges: Traditional US banks often require the owner to be physically present to open an account. However, several modern, digital-first banking solutions cater specifically to non-resident LLC owners, allowing you to complete the process online using your passport and EIN.
Phase 3: Navigating US Tax Implications (FATCA and ITIN)
This is the most complex part of owning a US LLC as a UK citizen, as it involves coordinating between US and UK tax laws.
The Default Tax Status: Disregarded Entity
A US Single-Member LLC owned by a non-US resident (NRA) is typically classified as a “Disregarded Entity” by the IRS. This means the LLC itself does not pay federal income tax. Instead, the profits "pass through" to the owner, who files the tax return.
No US Federal Income Tax for Foreign Source Income
Crucially, if your LLC meets three conditions (the "Non-Effectively Connected Income" rule), you likely will not owe US federal income tax:
- The LLC has no physical presence or "permanent establishment" in the US (i.e., no office, inventory, or employees).
- The income is generated exclusively from outside the US (e.g., selling digital services to customers in the UK, Australia, or Canada).
- The LLC does not have an "Effectively Connected Income" (ECI) that is tied to a US trade or business.
If your LLC sells physical goods stored in the US or provides services performed within the US, it may be subject to ECI rules and US income tax.
Mandatory Annual Tax Filings (Even with Zero Tax Due)
Even if you owe zero US income tax, you have two mandatory annual filing requirements:
- Form 5472 and Form 1120: These forms are required for foreign-owned Disregarded Entities to report their operations. Failure to file Form 5472 results in a massive $25,000 penalty, making this the most critical compliance step.
- State Annual Reports: You must file an annual report and pay any required state fee in your state of formation (e.g., $50 in Wyoming, $300 in Delaware).
The ITIN Requirement for NRAs
While you can get an EIN without an ITIN, the IRS generally requires the foreign individual owner to apply for an Individual Taxpayer Identification Number (ITIN) when filing the required tax forms (5472/1120) for the first time. The ITIN is needed to identify you, the foreign individual, to the IRS.
Phase 4: Understanding UK Tax Implications
As a UK resident, you remain subject to UK tax laws, particularly HM Revenue & Customs (HMRC) self-assessment rules. The US LLC is typically viewed by HMRC as a transparent entity for tax purposes, meaning you will generally be taxed in the UK on the profits of the LLC, regardless of whether you withdraw the money from the US bank account or leave it in the business.
- Double Taxation Treaty: The US and UK have an extensive double taxation treaty. This treaty is designed to ensure you do not pay tax on the same income to both countries. If you do pay US tax (e.g., because your income is ECI), you can claim that tax as a credit against your UK tax liability.
Final Steps for UK Entrepreneurial Success
Starting a US LLC is a powerful strategy for global expansion, but it requires careful attention to detail. The greatest risks for UK owners are not formation hurdles, but compliance failure—specifically neglecting the mandatory IRS annual filings (Form 5472) and failing to maintain a clear separation between personal and business finances.
Consulting with an accountant specializing in international tax (one who understands both US NRA rules and UK self-assessment) is highly recommended. By establishing your legal foundation in the US correctly and maintaining strict compliance, your US LLC can serve as a seamless, protected, and profitable vehicle for your American business ambitions.