LLC in the USA and Social Security — How Does the US Contribution System Work for Non-Residents?
There is no equivalent of a mandatory social security system in the United States. American business owners do not pay compulsory monthly contributions to any state health or pension fund. A non-resident operating an LLC in the USA is generally not subject to US self-employment tax — provided they do not live or physically work on US territory. The LLC itself also pays no federal income tax. This is a fundamental difference from most European business structures and the primary reason international entrepreneurs choose this form.
What Is an LLC and Why Is It Popular Globally?
LLC (Limited Liability Company) is a US business structure combining limited liability with tax transparency. It can be formed in 3–10 business days, entirely remotely, without visiting the United States. Wyoming and Delaware attract entrepreneurs from around the world due to their lack of state income tax, strong member privacy protections, and clear corporate law.
For internationally active entrepreneurs — selling services or products to Western markets — an LLC unlocks access to US payment infrastructure (Stripe, PayPal Business, Amazon Seller Central, Shopify Payments) that is unavailable or heavily restricted for non-US entities. Foreign clients and partners respond more readily to a US-registered entity — a visible difference from day one.
How Does the US Social Security System Work?
The American social insurance system is built around 2 federal programmes: Social Security (retirement and disability) and Medicare (partial health coverage for those over 65). Both are funded through self-employment tax — a 15.3% levy on net income from US-based activity.
This tax applies exclusively to individuals conducting business on US territory and subject to US taxation. A non-resident who lives and works outside the United States and operates an LLC is generally not subject to this levy. There are no monthly mandatory contributions, no state pension fund to pay into, no equivalent of Europe’s social insurance systems.
Health insurance, retirement savings and accident coverage are entirely private decisions for the business owner — a competitive private market with no compulsion.
LLC Pays No Income Tax — How Is That Possible?
An LLC is treated by default as a pass-through entity. The LLC itself pays no federal corporate income tax whatsoever — no CIT, no equivalent. Income is not taxed at entity level; it flows directly to the member and is reported only in their personal tax return.
Compare this to a standard limited company: the company pays corporate tax, then the shareholder pays dividend tax on top. In an LLC, that double layer does not exist — income appears once, at member level.
Single-Member LLC vs Multi-Member LLC
For a single-member LLC, the IRS treats the entity as a disregarded entity — all profit is reported directly on the owner’s return. A multi-member LLC allocates profit proportionally according to the operating agreement. In both cases, the LLC remains tax-neutral at entity level.
Reporting Obligations for Non-Residents
No tax does not mean no obligations. Non-residents operating an LLC must file Form 5472 and Form 1120 annually with the IRS, documenting transactions between the owner and the company. The penalty for failure to file is $25,000. This is the most frequently overlooked obligation when forming an LLC without professional support.
4 Real Advantages of an LLC for International Entrepreneurs
- Access to US payment infrastructure — Stripe, PayPal Business, Amazon Seller Central, Shopify Payments and dozens of other platforms operate fully or exclusively for US-registered entities.
- Credibility with international clients — a US address, EIN and American bank account build professional standing in Western markets faster than any other structure.
- Personal asset protection — limited liability separates private finances from company obligations.
- Structural flexibility — an LLC can operate solo or with partners; the operating agreement gives near-total freedom in structuring the business relationship.
How to Form an LLC — Step by Step
The formal scope is predictable — differences arise at the state level. For a non-resident, the standard process looks like this:
- Choose a state — Wyoming or Delaware are the two dominant choices. Wyoming: lower annual fees, stronger privacy. Delaware: preferred by startups seeking VC investment.
- Company name — must be unique in the chosen state and include the designation “LLC” or “L.L.C.”
- Registered Agent — a person or company with a physical address in the state of formation, receiving official correspondence on behalf of the LLC. Required by law.
- Articles of Organization — the formation document filed with the Secretary of State.
- EIN number — issued by the IRS, required to open a bank account and for tax reporting.
- Operating Agreement — the internal governance document. Legally required in Wyoming.
With professional support, the entire process takes 3–10 business days, fully remote.
LLC Bank Account — Mercury, Relay and Alternatives
An LLC without a US bank account is only half the solution. A US business account is the key to full payment infrastructure. The good news: non-residents can open a US bank account entirely remotely.
- Mercury — a neobank built for startups and small businesses. Fully online account opening, no monthly fees, direct Stripe integration. Requires EIN and formed LLC. Processing time: 2–5 business days.
- Relay — a neobank with advanced multi-account functionality (up to 20 sub-accounts), designed for businesses managing multiple revenue streams. Fully remote, no minimum balance.
Traditional US banks (Chase, Bank of America) require a physical branch visit on US territory — making them effectively inaccessible to non-residents.
Ready to form your LLC in Wyoming or Delaware? Contact Thompson&Stein — the only European-origin law firm holding a licensed Registered Agent status in both states. Free initial analysis of your situation.
Licensed Registered Agent vs Intermediary — A Difference That Matters
Several firms globally offer LLC formation in Wyoming or Delaware. Most are intermediaries — companies that do not hold their own Registered Agent licence and rely on third-party US providers. In practice this means an extra link in the chain, higher costs and less control over the process.
Thompson&Stein is the only European law firm holding its own licensed Registered Agent status directly in both Wyoming and Delaware. We operate as a licensed registration agent — no intermediary, no reselling of third-party services. The difference is the same as between a travel agent and your own representative on the ground: faster, more reliable and with full control at every step.
We guide clients through the full lifecycle of the company: formation, EIN, bank account support, annual renewal and reporting deadline management. Our base in Tallinn means we operate in the same time zone and cultural context as our Central European clients.
Everything you need to know about LLC in the USA – Q&A
Running a business across the ocean raises many questions, especially regarding the myths surrounding the American “ZUS” and the tax obligations of non-residents. To help you navigate IRS regulations and the specificities of Wyoming and Delaware, we have prepared a compilation of concrete answers to the most important formal issues. Learn how to effectively and safely manage your American company from abroad.
Does the USA have anything like mandatory social security contributions for business owners?
No. The United States has no mandatory contribution system comparable to European social insurance. American business owners do not pay monthly contributions to any state fund. Health insurance and retirement savings are entirely private decisions.
Does a non-resident operating an LLC pay self-employment tax in the USA?
Generally not. Self-employment tax (15.3%) applies exclusively to individuals conducting business on US territory and subject to US taxation. A non-resident living and working outside the United States is generally not subject to this levy.
Does an LLC pay income tax in the USA?
No. An LLC is treated by default as a pass-through entity — it pays no federal corporate income tax or any equivalent. Income flows directly to the member and is reported solely in their personal tax return.
Can a non-US resident form an LLC?
Yes. Federal US law does not require citizenship or residency. Most states, including Wyoming and Delaware, impose no restrictions on foreign members.
Which state to choose — Wyoming or Delaware?
Wyoming is the best choice for most non-residents: lower annual fees, strong member privacy protections, no state income tax. Delaware is preferred by startups seeking venture capital investment. Thompson&Stein holds a Registered Agent licence in both states.
What are the reporting obligations for a non-resident LLC owner?
Non-residents must file Form 5472 and Form 1120 annually with the IRS. The penalty for failure to file is $25,000. This is the most commonly overlooked requirement when forming an LLC without professional guidance.
What is FBAR and does it affect LLC owners?
FBAR (FinCEN Form 114) is a US obligation to report foreign bank accounts with a combined balance exceeding $10,000. For most non-residents operating an LLC, it is not a standard obligation. Each situation should be assessed individually.
How do I open a US bank account for my LLC while based abroad?
The fastest route is through US neobanks: Mercury and Relay open accounts remotely for LLCs formed by non-residents. They require an EIN, LLC documentation and online identity verification. Traditional US banks require a physical branch visit on US territory.
Is Thompson&Stein an intermediary or a licensed Registered Agent?
Thompson&Stein holds its own Registered Agent licence directly in Wyoming and Delaware — as the only European-origin law firm to do so. We are not an intermediary or reseller. We act directly, which shortens formation time and eliminates additional steps in the process.
Does an LLC need to be renewed annually?
Yes. Each state requires an annual report and state fee payment. Failure to comply results in deactivation of the company. Thompson&Stein monitors these deadlines on behalf of its clients.
FIND OUT MORE
