If you’re planning to start a US LLC, Wyoming offers significant advantages, from privacy protection to favorable tax treatment. If you’re a non-US resident with a Wyoming LLC, you won’t be taxed on foreign income. In fact, Wyoming consistently ranks in the top states to form an LLC with low tax rates, including no state…
If you’re planning to start a US LLC, Wyoming offers significant advantages, from privacy protection to favorable tax treatment. If you’re a non-US resident with a Wyoming LLC, you won’t be taxed on foreign income. In fact, Wyoming consistently ranks in the top states to form an LLC with low tax rates, including no state income tax and no franchise tax. Wyoming’s sales tax is also lower than average. Read on to learn about Wyoming LLC taxation for non-US residents.
Understanding the Importance of Taxation for a Foreign-Owned Wyoming LLC
Additionally, Wyoming offers favorable tax treatment. Even for US residents, Wyoming has no income or franchise tax. Sales tax is also lower than the national average at just 4%. Moreover, you’ll only have to pay $60 as annual reporting fees, keeping maintenance costs low for your LLC.
Finally, you won’t have to pay taxes on foreign income. For US-sourced income, you’ll pay a flat income tax rate of 30% directly to the IRS.
How Does LLC Taxation in Wyoming Work for Non-US Residents?
Then, your federal tax liability depends on whether your business is considered an active business and if you’re engaged in trade or business in the US (ETBUS). To qualify as ETBUS, you’ll need to have at least one dependent agent in the US and that dependent agent must do something substantial to further your US business.
If your country of residence has a tax treaty with the US, tax treatment may vary. In many cases, you’re only subject to tax if the company is ETBUS and you operate in the US through a permanent establishment. Simply put, if the people who run your business are in the US, you’ll be subject to income tax.
If your business only has a foreign source of income and doesn’t qualify as ETBUS, you won’t have to file in the US.
To file this tax with the IRS, you’ll need an EIN for the LLC. A foreign person who owns a single-member LLC must file Form 5472 and Form 1120. In the case of a foreign-owned multi-member LLC, it must file an informational Partnership Return (Form 1065) and issue K-1s to each LLC member. In addition, each LLC member is responsible for filing a U.S. income tax return. However, it’s worth checking with a tax professional or CPA to ensure compliance and correct filings.
Engaged in Trade or Business in the US (ETBUS)
Companies that are engaged in trade or business, abbreviated ETBUS, are companies that, according to the IRS, have at least one dependent agent in the US. That dependent agent must do something substantial to further your US business, and not just something administrative or ministerial.
This is important for the taxation of your Wyoming LLC as Wyoming doesn’t have any state tax, so the only tax liability will be a federal tax if the company is ETBUS.
Foreign Source Income vs US Source Income
Foreign income is income earned outside the United States. US sources of income require reporting and are taxed at a flat rate of 30% at the federal level to the IRS. You must file taxes at the end of the year on Form 1040-NR. However, there are exceptions to this.
For example, inventory produced and sold outside the US is considered foreign income. But a song you produced while living in Portugal is still considered US income if the royalties come from US sales.
Where produced, although allocation may be necessary
Depending on whether it’s a U.S. or foreign corporation
Location of the property
Royalties, patents, or copyrights
Where a copyrighted item is used
Sale of real property
Location of the property
Sale of personal property
Seller’s tax home
Where services were performed that earned the pension
Scholarships or Fellowships
Usually, the residence of the payer
Sale of natural resources
Based on the fair market value of the product at the export terminal. More in IRC section 1.863–1(b).
How Tax Treaties Can Help Your Wyoming LLC as Non-US Residents?
The US has several tax treaties with other countries. If your home country has a tax treaty with the US, it could simplify taxes for your Wyoming LLC. You can check with the IRS or a certified tax professional who understands tax implications in your country of residence and the US.
You could potentially qualify for:
reduced rate of tax
other treaty benefits or safeguards
How to File Taxes for Your Foreign-Owned Wyoming LLC?
Once you have identified your income source and individual taxpayer identification number or ITIN, you can proceed with the following steps to file taxes for your foreign-owned Wyoming LLC.
Gather Necessary Documents
Necessary documents to file taxes for your LLC include income statements, expense records, and any other documentation. You can consult a CPA or tax professional to ensure you have all documentation.
Decide on Your Tax Classification
As a non-US resident, your Wyoming LLC can be treated as a disregarded entity, a partnership, or a corporation for tax purposes. There are pros and cons to each, and which taxation structure you elect depends on the size of your business, type of business, and business goals.
Fill Out the Appropriate Tax Forms
Filing taxes for a Wyoming LLC may require one or more of the following, depending on whether you elect to be taxed as a pass-through entity, as a foreign partner within an LLC, or as a corporation:
Form 1040-NR for Nonresident Alien Income LLC owners to declare the profits they earned from the LLC.
Form 1042: Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
Form 8804: Annual Return for Partnership Withholding Tax
Form 8805: Foreign Partner’s Information Statement
Form 5472: Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business
Form 1120-F: U.S. Income Tax Return of a Foreign Corporation
Form 8288: U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons
Pay Any Required Taxes
If you owe taxes to the US government, make sure to pay them by the deadline. Filing dates vary based on whether you elect to be taxed as a corporation or as a pass-through entity. For partnerships, multi-entity LLCs, and S-corporations, the filing date is March 15 for filing 1065 and 1120S returns with the Schedule K-1s. For C-corporations, Form 1120 is due on April 15 of the following year. Learn more about tax filing requirements for your US company here.
Do non-US residents need to file personal income tax returns in the US if they own a Wyoming LLC?
If you own a Foreign LLC and are not engaged in US trade or business as defined by the IRS, you are not required to file 1040NR or pay personal income taxes. However, you can check with a CPA or tax professional to understand your individual tax obligations.
What taxes do non-US residents need to pay for their Wyoming LLC?
Non-US residents don’t need to pay taxes to Wyoming. However, Wyoming LLCs are taxed on any US-sourced income at 30%, paid to the IRS.
Are non-US residents eligible for any tax benefits or exemptions?
You generally cannot claim any tax benefits or exemptions. However, if you do business in the US, the LLC may qualify for tax benefits, credits, or exemptions. Likewise, if your country of residence has a tax treaty with the US, you might qualify for an exemption.
Are there any withholding requirements for non-US residents operating a Wyoming LLC?
Wyoming does not have a personal or corporate income tax. However, a Wyoming LLC is responsible for paying federal tax at 30%.
How can non-US residents ensure compliance with Wyoming LLC tax obligations?
Non-US residents can ensure compliance with tax obligations by working with a tax professional or CPA. You must obtain an EIN for your non-US resident business to file taxes.
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