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Why It's Still Attractive in 2026 to Own a U.S. Company When You're Not Based There

This post gives an overview of the main takeaways when forming and managing your LLC in either Delaware or Wyoming — and what's changed on the privacy front since we first wrote this.

Delaware and Wyoming LLCs are extremely popular entities both for American citizens and foreigners alike. The USA is actually one of the largest offshore jurisdictions in the world due to:

  1. The lack of reciprocity in reporting
  2. The laissez-faire approach of some of the states
  3. The importance of the US Dollar and the American banking system

And while the applications of US LLCs stretch far and wide, the reporting and tax requirements for the people who use them can appear to be equally unending.

In reality, the reporting and tax requirements of an LLC are quite manageable. It's all about understanding what type of LLC your entity will be classified as and identifying sources of income.

US LLCs vs C-Corps

It's essential to understand the difference between the two main US company types that are popular international vehicles: LLCs and C-Corporations. These entities are often confused, especially in how they pay taxes and do reporting.

Legally speaking, LLCs are akin to partnerships where the Partners are called Members, whilst C-Corps are corporations and their owners are stockholders or shareholders. They share some common characteristics:

  • They both offer limited liability protection. Company owners and managers are not personally liable for the company's obligations.
  • They both offer protection for intellectual property.
  • They both can have an unlimited number of owners or as few as one.

There are also significant differences.

Structure

An LLC is extremely flexible. The Operating Agreement does not have to follow any established standards, and members are free to agree on any structure they see appropriate.

A C-Corp is much more structured, utilising clear, well-understood concepts like stocks representing ownership, a board of elected directors, company officers, and so on — and a significant body of best practices has grown around its setup.

Privacy

This is the section that most needed an update.

Members of an LLC are still not listed on the public company records at the state level, and a C-Corp's shareholders can also stay private — though a C-Corp's elected officers and board members do have to be public (some companies mitigate this by using nominee directors, which remains entirely legal).

Where the real change happened is federal, not state. The Corporate Transparency Act, which took effect January 1, 2024, briefly required most US LLCs — including foreign-owned ones — to report their beneficial owners directly to FinCEN, a level of federal disclosure that didn't exist when we first wrote this piece. That didn't last. Treasury announced in March 2025 that it would narrow the rule, and FinCEN's interim final rule, issued March 21, 2025, redefined "reporting company" to cover only entities formed under foreign law that register to do business in a US state — explicitly exempting every entity formed in the US, and every US person, from the beneficial ownership reporting requirement. A Delaware or Wyoming LLC is a US-formed entity regardless of who owns it, so this exemption applies whether the member behind it lives in Wyoming or Warsaw.

Worth flagging: this is an interim rule, not yet a finalized one — FinCEN has said it intends to finalize it, and as of mid-2026 that final rule is still working its way through review. The direction has been consistently toward keeping domestic LLCs out of BOI reporting, but "interim" is doing real work in that sentence. If beneficial ownership privacy is central to why you're setting up the entity, it's worth checking FinCEN's current guidance before you rely on it long-term.

Ready to set one up? Order your Delaware LLC or order your Wyoming LLC — both include registered agent service and a local address, with Otonomos handling the paperwork.

Taxation

Most crucially, LLCs and C-Corporations fall under very different taxation rules.

LLCs are considered "pass-through" entities and are taxed at the level of the individual owners. If those owners live in a low-tax country, tax on their LLC income will be highly optimised.

A C-Corp, on the other hand, has to pay corporate taxes, and shareholders are personally taxed as well on any income they generate from the company (dividends, capital gains, and so on). Getting taxed twice certainly doesn't sound as good as pass-through taxation. However, the C-Corp has other benefits for different use cases, mainly when it comes to fundraising.

The rest of this piece is dedicated to illuminating the ways a US LLC may have to pay taxes and conduct its reporting.

Income Taxes and Reporting

There are three distinct types of LLCs with very different requirements:

  1. Domestic LLCs
  2. Foreign-owned LLCs
  3. Multi-member LLCs

Multi-member LLCs are typically what a DAO LLC would be considered to be — this includes any LLC generated with multiple owners via a multi-sig wallet.

Domestically-owned Single-member LLCs

These are US LLCs owned by one person who is a resident of the USA.

It's up to the individual member of the LLC to pay taxes personally based on the LLC's profit for that year. In practice, this means including a Schedule C with the 1040 personal income tax form.

The member is required to declare and pay taxes regardless of whether the member actually "receives" the profit or it is "kept inside" the business.

Tip: Don't forget, you'll be responsible for paying self-employment taxes.

Foreign-owned Single-member LLCs

For those of you who have no roots in the USA, these are the entities for you: US LLCs owned by one member who is not a resident or citizen.

If you have US source income, you'll likely be required to file a personal income tax form (1040-NR) and get an ITIN (Individual Taxpayer Identification Number). Some examples of US source income would be services performed in the USA or goods sold in the USA.

If you do not have any US source income and engage in business purely outside the USA, you'll likely not have any US income taxes to file.

Tip: You could be required to file taxes both in the USA (for the US source income) and your own country of residence (for other taxable income).

There are additional reporting requirements if your LLC has "reportable transactions" and they are with a "related party" (including but not limited to: family members or subsidiary companies).

These LLCs are required to file a Form 5472 alongside a pro forma Form 1120 every year, regardless of whether there is income that must be reported to the Internal Revenue Service (IRS). This one is worth taking seriously: the IRS penalty for a late or missing Form 5472 is a minimum of US$25,000 per form — not a percentage of tax owed, a flat fee — with additional US$25,000 penalties for every 30 days it stays unfiled after an IRS notice. In most cases, a transaction is not a "reportable transaction" if neither party is a United States person, which keeps things simple for foreign-operated businesses.

Tip: If you do not engage in "reportable transactions" with "related parties," and have no US source income, you could have zero income tax reporting obligations to the USA as a foreigner — but the Form 5472 filing requirement for foreign-owned disregarded entities still applies regardless, so don't skip it on that assumption.

Multi-member LLCs

These LLCs are taxed much the same way as single-member LLCs, but each member is required to pay taxes personally for their share of the LLC's profits.

The tax requirements will be based on each member's local jurisdiction. In many countries, taxes owed will be based on "allocated profit," not received profit. In this case, the member is required to declare and pay taxes regardless of whether the member actually receives income from the LLC. The Operating Agreement of the LLC, or an additional supplementary agreement, should outline the allocation of profit to all its members.

Some members may live in a country like Brazil, which allows the member to delay paying taxes until actually receiving the funds. Some members may live in a country with no foreign income taxes at all.

Each member of an LLC needs to review the guidelines of their local jurisdiction. Thankfully, US LLCs are very popular and the tax and reporting requirements are well documented in nearly every country.

Unless a multi-member LLC has no income or expenses/credits to claim, a Form 1065 will need to be filed with the IRS and each member will be required to fill out and attach a Schedule K-1. This does not mean you're liable to pay taxes — it's just a reporting requirement.

In some cases, multi-member LLCs may be required to file Forms 8804 and 8805. Be sure to determine if this applies to your circumstance.

Note: non-resident members of the LLC are still supposed to submit a personal 1040-NR for any income sourced from the US and would need an ITIN.

Who Qualifies as a Non-resident Alien?

For foreigners to avoid much of the US tax and reporting requirements mentioned above, it's vital that they pass the "non-resident alien" test. A non-resident alien is someone who is not a citizen or permanent resident (i.e. Greencard holder) of the US, and who does not meet the substantial presence test. In practice, this means counting the number of days spent on American soil. In true IRS fashion, the calculation is anything but straightforward.

To meet the substantial presence test, you must be physically present in the United States on at least:

  • 31 days during the current year, and
  • 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    • all the days you were present in the current year, and
    • 1/3 of the days you were present in the first year before the current year, and
    • 1/6 of the days you were present in the second year before the current year.

If you satisfy these conditions, you're a resident alien from a taxation perspective, and you won't be able to enjoy the benefits reserved for true foreigners.

Getting Started

Reporting and tax requirements for a US LLC are well documented and are, in most cases, quite manageable for both foreigners and residents. Make sure to look up your local jurisdiction's laws with regard to how US LLCs should be handled, and don't hesitate to consult a professional during times of uncertainty — it will almost always be cheaper than the consequences and fines the IRS can impose.

Book a free call with the Otonomos team to talk through Delaware vs. Wyoming for your situation.

Our Delaware LLC and Wyoming LLC packages both include registered agent service and a local address, with incorporation possible in as little as 2 business days.

Sources

Updated about 12 hours ago

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