Most founders who live outside the US start with a single-member LLC, and for many that is the right call. But “LLC or C-Corp?” is a real decision, and the answer changes with your plans: raising money, hiring in the US, keeping profit in the company. This guide compares the two for a non-US founder, explains the S-Corp question, and ends with a short decision list.
The short answer
- Choose an LLC if you run a service, agency, content or online business from abroad, take the profit out as you go, and do not plan to raise venture capital.
- Choose a C-Corp if you plan to raise investment, issue stock options, or keep most of the profit inside a company with US operations.
- An S-Corp is not available to you: S-Corp shareholders must be US citizens or residents.
How each one is taxed
Single-member LLC: taxed through you
A single-member LLC owned by a non-US person is a disregarded entity by default. The LLC itself pays no federal income tax. Its profit is treated as yours, and you owe US tax only on income effectively connected with a US trade or business. For a founder doing the work from outside the US, that is often nothing. The full test is in foreign-owned LLC taxes.
C-Corp: taxed on its own profit, then on dividends
A US C-Corp is a separate taxpayer. It pays a flat 21% federal corporate tax on its profit, and a US corporation is taxed on its worldwide income, wherever the work happens. If it pays you a dividend, that dividend is US-source income to you, and the company generally withholds 30% unless a tax treaty with your country lowers the rate.
That two-step tax is the main cost of a C-Corp. It is also why a C-Corp suits companies that reinvest profit rather than pay it out each year.
Side by side
| Question | Single-member LLC | C-Corp |
|---|---|---|
| Federal tax on the company | None by default | 21% of profit |
| Tax when you take money out | None on the draw itself | Dividends: 30% withholding unless a treaty lowers it |
| Taxed on income earned abroad? | Only ECI, usually not for work done abroad | Yes, worldwide income |
| Yearly federal filing | Form 5472 with a pro-forma Form 1120 | Full Form 1120, plus Form 5472 if 25% foreign-owned |
| Bookkeeping needed | Clean records of owner transactions | Full books: income statement and balance sheet |
| Raising venture capital | Usually not accepted | Standard, typically a Delaware C-Corp |
| Stock options for a team | Possible but unusual | Standard |
| Yearly Delaware state payment | $400 LLC tax, June 1 | $50 report fee plus franchise tax ($175 minimum), March 1 |
Delaware amounts from the Division of Corporations, checked October 2026. Wyoming charges both LLCs and corporations an annual report license tax of $60 minimum.
Why investors ask for a Delaware C-Corp
Venture funds usually invest through preferred stock, use standard documents built for Delaware corporations, and often cannot hold LLC interests because of their own investors’ tax position. If raising money is part of your plan in the next year or two, starting as a Delaware C-Corp avoids a conversion later. Our Delaware LLC formation guide explains when Delaware makes sense.
If you are not raising money, the LLC’s lower yearly cost and simpler filing usually win. Many founders start with an LLC and convert only when a term sheet is real.
Why an S-Corp is not an option
An S-Corp is a US corporation that elects to pass its profit through to its shareholders. The tax code limits who can be a shareholder: no nonresident aliens are allowed (IRC section 1361(b)(1)(C)). If a non-US person owns even one share, the company cannot be an S-Corp, and an existing S election ends.
So an article that compares “LLC vs S-Corp” for US owners does not apply to you. Your real choice is between the default LLC and a C-Corp, or an LLC that elects to be taxed as a C-Corp.
The middle path: an LLC taxed as a C-Corp
An LLC can file Form 8832 to be taxed as a corporation. It keeps the LLC’s simple state structure and Operating Agreement, but files a full Form 1120 and pays 21% on its profit. Founders choose this when they want corporate tax treatment without converting the legal entity. For most solo founders abroad, it adds tax without a clear benefit, so look at it only with a specific reason.
What a C-Corp means for your books
A C-Corp’s Form 1120 reports its real income and expenses, and larger companies also report a balance sheet. That needs proper bookkeeping all year: every invoice, expense, payroll payment and transfer to or from the owner. Founders searching for “accounting software for a Delaware C-Corp with foreign owners” are usually facing this for the first time. Software helps, but the categories still need to be right, and payments to and from a foreign owner must also appear on Form 5472. Our US business accounting guide covers the basics.
A quick decision list
Answer these honestly:
- Will you raise money from investors within two years? → C-Corp.
- Will you give stock options to a team? → C-Corp.
- Will the company keep most of its profit to grow, with US staff or operations? → Consider a C-Corp.
- Do you do the work yourself, from outside the US, and take the profit out? → LLC.
- Do you want the lowest yearly cost and the simplest filing? → LLC.
Two or more answers pointing the same way usually settle it. If they split, talk it through before you form, because switching later costs time and money.
FAQ
Can I convert my LLC to a C-Corp later?
Yes. Delaware and Wyoming both allow an LLC to convert to a corporation. It is a formal filing with tax effects, so plan it with an adviser when the time comes.
Does a C-Corp pay tax even if I live abroad?
Yes. A US corporation is a US taxpayer on its worldwide profit, wherever its owner lives or the work is done.
Do I need a US director for a C-Corp?
No. Directors and officers of a Delaware or Wyoming corporation can live anywhere.
Which one is cheaper each year?
Usually the LLC: a shorter federal filing, simpler books and, in Wyoming, a $60 minimum annual report. A Delaware C-Corp adds a full Form 1120 and a franchise tax that depends on its shares.
We form both. A single-member LLC starts at $199 a year plus state fees, and C-Corp plans start at $299 a year plus state fees, set up by request. We file the yearly federal return for each through Federal Tax Filing, and Accounting keeps the books a C-Corp needs. Compare the plans on Company Formation, or tell us your plans and we will help you choose.
