If you’re a non-US resident looking to start a business in the United States, you should consider two main business structures: a Limited Liability Company (LLC) or a C Corporation (C Corp).
Foreign-owned US LLCs are popular and seem the go-to for many international founders. However, C Corps can have tax and other benefits for some businesses.
In this guide, we compare LLCs vs C Corps for non-residents, including how they differ in ownership rules, taxes, compliance, and use cases, so you can choose the best structure for your US business.
LLC vs C Corp for non-residents: Quick overview
While most people have heard of US LLCs and think that’s the only (or best) way to go, a US C Corporation is another option. For most foreign-owned businesses, a US LLC makes sense. But a C Corp excels in certain areas.
Before we go into the details, here’s a quick comparison of the main features of a LLC vs C Corp:
| Feature | LLC | C Corporation |
| Ownership | One or more non-resident individuals | Unlimited shareholders, including foreigners |
| Liability Protection | Yes | Yes |
| Taxation | Pass-through or C Corp (if elected) | Flat 21% corporate tax + dividend tax |
| Best For | Solo entrepreneurs, online business | Startups, raising capital, e-commerce with ECI |
| US Bank Account Access | Yes | Yes |
| Stripe/PayPal Eligibility | Yes | Yes |
Why LLCs are popular with non-resident founders
A Limited Liability Company (LLC) is the simplest, most flexible structure for foreign entrepreneurs launching a business in the United States.
Key benefits of a US LLC:
- No US citizenship or residency required
- Limited liability: Your personal assets are protected
- Straightforward taxation: Default pass-through taxation, or elect to be taxed as a C Corp
- Simpler compliance: Fewer filing requirements compared to C Corps
- Bank account access: Can apply for a US business bank account with EIN and documents
- Great for solo founders: Works well for one-person operations
Considerations for e-commerce entrepreneurs
If you’re running a US-based e-commerce business as a non-resident, your income may be treated as Effectively Connected Income (ECI). This is because the physical products you sell change ownership from your company to US customers. Our Ultimate Guide to Foreign-Owned LLC Taxation explains this in more detail.
ECI (Effectively Connected Income)
When a business engages in a trade or business in the United States, all income sourced from within the United States is “Effectively Connected Income”.
In this case, you as the LLC owner must pay US tax on the income. You would have to file a US personal tax return and pay US income tax on the entire net income.
A C Corporation may offer better tax treatment for ECI, especially when profits are reinvested in the company rather than distributed.
With a C Corporation, the income does not directly pass through to the owner. The business must pay US tax on the income. The owner only pays US income tax on any dividends they receive.
Depending on the income level, and some other factors, a C Corp can make more sense than an LLC for an e-commerce company. Our experienced team can help with this analysis.
Foreign-owned LLCs are ideal for:
- Online service providers that don’t look for investors
- Consultants, software developers, coaches, etc.
Not sure which company type is best for you?
When a C Corporation is better for non-residents
A C Corporation (C Corp) is the structure of choice for startups looking to raise venture capital or issue equity. It allows to issue stock and raise money from investors,
A C Corp can also be beneficial for non-residents with ECI (Effectively Connected Income). As a corporation, it pays a flat 21% corporate tax rate on net profits, regardless of whether the income is ECI or not.
Foreign shareholders can take out the profits from the C Corp as salaries, which are not taxed in the US. The salaries will also reduce the net profits of the C-corp and thus reduce the actual taxes paid. However, taking out salaries has to follow specific rules and should be planned carefully.
As you can see, a C Corp could save you US taxes but the setup is a lot more complex than an LLC. Discuss this with a qualified accountant who has experience with this. You can schedule a consultation with one of our US tax specialists here.
Key Benefits of a C Corporation
- Global investor-ready: Can issue stock and raise money from VCs
- Unlimited shareholders: No restrictions on foreign ownership
- Separate entity: More credibility with banks, investors, and partners
- Flat tax rate: 21% federal corporate tax (plus possible state tax)
- Better with ECI: Salaries of foreign shareholders are not taxed in the US
C Corporations are ideal for
- Tech startups looking for investors
- E-commerce businesses with US presence (inventory, fulfillment, etc.)
- Businesses planning to raise funds or issue equity
Important Considerations for international entrepreneurs
- Double taxation potential: The company pays tax, then shareholders pay tax on dividends
- More compliance: Annual reports, shareholder meetings, board minutes, and more
LLC vs C Corp – Which one should you choose?
Choose an LLC if:
- You’re a solo entrepreneur or a small team providing services
- You want simplicity, flexibility, and pass-through taxation
- Your income is not US-sourced or is limited in ECI exposure
Choose a C Corp if:
- You plan to raise capital from investors
- You want to issue stock options to employees
Need help to decide between an LLC and C Corp?
Are you running a business with ECI, such as an e-commerce business selling physical products to US customers and are not sure which option is better for you? We’re here to help.
What about LPs or Sole Proprietorships?
You may have heard of Limited Partnerships (LPs) or Sole Proprietorships, but these are rarely viable options for non-residents:
- LPs: Mostly used for investment structures; require a General Partner with unlimited liability
- Sole Proprietorships: Not suitable for non-residents due to lack of liability protection and banking access
| Entity Type | Viable for Non-Residents? | Use Case | Key Notes |
| LLC | Yes | Consulting, software development, service providers in general, e-commerce, US real estate | Flexible, simple, good for taxes |
| C Corporation | Yes | Startups, raising capital, tech companies, e-commerce | Double taxation, but great for VCs |
| Limited Partnership (LP) | With caution | Investment funds, real estate partnerships | Needs proper structuring, expensive |
| Sole Proprietorship | Not recommended | None. Use an LLC instead | No liability protection or credibility |
Stick to either an LLC or a C Corporation – they’re the most reliable and recognized options.
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