What You Can Use Your US Limited Liability Company (LLC) For

Anyone forming a US company usually has a clear idea of what they want to do with it. For most clients, the main reason is simple: they want to do business in the USA. Often they have already built a successful company at home and now want to expand into America.

The LLC is a versatile, flexible legal form, and the USA is a major and fascinating place to do business. Quite a few clients especially like the fact that the USA lies outside the European Union. You can find the key advantages of the LLC at a glance here.

Besides expanding into the US, there are many less obvious reasons to set up a US company. In these cases, clients are looking for a specific solution to a challenge they face. We go through some of these scenarios in detail below.

Want a US LLC that stays tax-free in the US? Then our sister site zerotax.llc is the right place. It covers the LLC for owners who live outside the US and whose business does not take place in the US: no permanent establishment, no US tax on the profit. This site covers the opposite: companies that genuinely operate in the US, have a permanent establishment there and pay taxes in the US. Both are run by the same firm in Austin, Mount Bonnell Advisors.

1Doing business in the US market with your LLC

The most obvious use of an LLC is, of course, to enter the American market and take part in US business life.

It doesn't matter what industry you're in or whether you mainly sell B2B or B2C. The LLC is widely accepted and works for almost anything.

The members of an LLC can be individuals or legal entities, so the LLC can be set up as part of your existing group of companies. Tax aspects must be considered, of course (including US withholding tax).

The LLC offers effective liability protection. Members are not liable with their personal assets, only with their contribution to the LLC.

As with any foreign company, it's important to build enough substance in the USA in the early phase of your LLC, at least if you are the controlling member of the LLC and live in a high-tax country with strict rules on holdings in foreign companies (think CFC rules). Substance means that the company's day-to-day business is not managed from your country of residence and that the company has premises and staff in the USA. These points are much less of an issue if you are only a minority member of the LLC.

2The LLC as a global business

There are plenty of good reasons to build a business in the USA with a global focus, one that also serves customers in the European Union, for example, and deliberately goes beyond the American market.

Among them: a business-friendly environment, moderate taxes and the American "can do" attitude that every entrepreneur I know truly appreciates.

Of course, every industry is different, and this option isn't attractive for everyone. Software developers in Silicon Valley, for instance, seem to cost far more than in most European countries. So whether it makes economic sense to open a software shop there without access to venture capital is a fair question.

That aside, all profits the LLC earns worldwide would be taxed at favorable American rates. So if you're planning to do business in the USA through an LLC anyway, it can make sense to serve other markets through that company as well.

A thriving LLC can also be a platform for applying for a US visa later on, if you'd like to live in the USA, at least for a while.

3The LLC as sponsor for a US visa or green card

If you want a visa to live in the USA as an entrepreneur, in many cases you'll build a business there and earn your place in America. The US company then acts as the sponsor for your visa.

The LLC is ideal for setting up and running your US business in a visa-compliant way. It always makes sense to involve your US immigration attorney, because how ownership of the LLC is structured definitely matters for the visa.

4The LLC as a US real estate company

Investing in US real estate can be attractive and profitable if you know the business well. How you go about it depends on a number of factors.

You can certainly buy as a private individual without any company at all. The question is what happens if the project goes wrong: then your own assets are on the line.

A limited liability company like the LLC is therefore highly recommended. And there's another consideration beyond liability risk for your asset planning: if you ever get into financial trouble yourself, it can be ideal for asset protection if your US properties are held by an LLC rather than by you personally.

Who owns and controls the LLC can be kept confidential. If you hold the properties in your own name, that isn't possible.

Whether the LLC is the best legal form for your real estate investment, or another US legal form suits you better, depends heavily on your individual circumstances, for example whether you live and pay taxes in the USA or in other countries.

Either way, a thorough analysis before forming a company makes sense. With real estate in particular, you don't want to leave anything to chance.

5The LLC as a temporary company

You can't always set up the company structure you consider ideal right away. Time and cost are factors that often get in the way, especially in the early stages.

This scenario reminds me of a specific client, a very talented software developer who had built a fintech app with a group of friends and without any outside capital.

Strictly speaking, the app should now have been placed into a "mature" company structure with outside investors on board. But that is exactly what the client wanted to avoid. He calculated that he could significantly increase the company's value by putting the app into operation first. That way he could convince investors that the app was actually up and running, with real customers using the service.

For this proof of concept, the client chose an LLC and started selling the app in the US App Store, with decent success. From the moment the company was formed, the client knew it would only be a temporary solution.

Sure, you could argue it's money down the drain, since the plan is to close the LLC again in a few months or years. But who cares, if it helps you raise half a million more in investment?

For the client, by the way, it was a complete success. Around 18 months after formation, investors came on board and were impressed by how far the client and his partners had come with relatively modest means.

As planned, the LLC was closed and the app moved into its permanent legal structure.

6The LLC as a website imprint company

A legal requirement to publish an imprint (legal notice) on your website exists in only a handful of countries and is a typically German phenomenon. Most European countries have no such requirement, and neither does the US.

Or you work in an industry known for competitors harassing each other with cease-and-desist letters. What then?

A European company wouldn't work either. As you know, in Europe it's now almost impossible to set up a company that effectively shields its owners. The details of everyone involved, including the shareholders of a corporation or partnership, are published in the company register.

Beneficial ownership registers are also on the rise and already enshrined in law in countries such as the UK. There, even trust arrangements have to be disclosed in the company register, in full public view.

7The LLC when you need a company very fast (with or without a business account)

Sometimes things have to move fast. A particular deal only happens if you can sign a contract within three days. Otherwise you can watch it slip away. And the first payment is due a week later.

What now? Where do you get a corporation within three days that can invoice immediately and accept payments within a week?

With European companies, you're used to the fact that formation can be very quick in some countries (4 hours in the UK). But that's when the fun starts. In England, opening a bank account takes at least two weeks. Then you still need a VAT number.

The solution (you guessed it) can be a US LLC, which can be formed almost as quickly as a UK Limited. The account opening, on the other hand, is fast and smooth: you don't need to be in the USA. You leave the bank with your account number in hand and can receive your first payments the same day.

And as you know, there is no VAT in the US. You simply issue net invoices and don't need to worry about a VAT number.

8The LLC as a fallback company held by a trusted person to keep you operational in insolvency

Just to be clear: we would never advise you to move assets abroad when insolvency looms and thereby harm your creditors. That is a criminal offense. We have been supporting clients through EU insolvency proceedings in England and Ireland since 2007, and we can assure you it's not a good idea.

Instead, we bring in the LLC as a fallback company through which you can invoice entirely new revenue, often on a temporary basis, and so stay operational.

Because insolvency requires you to disclose all your assets, you cannot be the owner or beneficiary of the LLC. You need a trusted person (a brother, friend, son, uncle) who takes care of forming the LLC and is its member. You must under no circumstances have a trust agreement with this person. The LLC must not belong to you. Full stop.

Once the LLC is formed, your customers can pay the company and your trusted person can manage its funds.

Why is the LLC in particular interesting as a fallback company? Couldn't you just form a local company at home? Yes, absolutely. And in many cases the LLC isn't the obvious solution either.

But if, for example, you don't have a trusted person nearby, or that person can't be the director of a local company, you have to turn to an alternative.

This is where the LLC comes in. An LLC with a US business account is quick to set up and offers a high level of confidentiality (no information exchange under the OECD CRS, and members are not made public). In the right circumstances, the LLC can be the ideal immediate step in a very difficult time.

As we said, this is not always possible or advisable, and you should always discuss your approach with your lawyer. But a number of our clients have used a temporary LLC to bridge a very difficult period and came out safely on the other side. Each of them set up an LLC for exactly that purpose.

9The LLC for asset protection in separation and divorce

We are by no means suggesting that you should hide assets from the court in divorce proceedings to keep your ex-spouse from being paid out.

You know it yourself: you made your bed, now you have to lie in it. You entered into this marriage, so now you have to take responsibility, as you agreed, and share your assets with your ex-spouse. Acceptance is an important step in the healing process; we all understand that.

However, we regularly speak with clients in separation and divorce situations where the ex-spouse is so hateful and aggressive that it's no longer about getting the fair share of assets he or she is entitled to. No, some ex-spouses want to destroy their former partner.

If the angry ex finds out that you're starting a new business venture after the divorce, she may try to make your life difficult and use lawyers and the courts to force you to open your books, believing she is still owed something.

In situations like these, it can be extremely helpful to set up a new company that operates abroad. And of course we mean the US LLC. The LLC stands out for its high level of confidentiality (for example, your name does not appear in the public company register).

As we said, even in emotionally extreme situations it is important to act properly. You cannot move existing assets into the LLC to shield them from your ex-spouse. But you can build new wealth and spare yourself constant trouble with lawyers and the courts.

10The LLC as a solution when the tax authorities block or freeze your accounts

Tax authorities in particular are known for flexing their muscles and freezing every domestic account of an otherwise blameless citizen suspected of a possible tax offense on the basis of vague suspicions.

The problem here is not that the tax office accuses you of failing to declare your taxes properly and now hits you with large demands. As a business owner you can somehow deal with that and work out a solution with your lawyer. At least you can still act, prepare and plan.

Once your accounts are frozen, though, you usually lose the ability to act, and it is very easy to panic: suddenly you cannot pay the rent, the salaries, the car lease or even your phone bill.

Here, too, the LLC is ideally suited as a temporary emergency measure to help you stay able to act. The LLC offers a high level of confidentiality (no information exchange under the OECD CRS, and members are not made public) and can be set up quickly.

You do need to meet certain conditions. You need customers who accept invoices from a US LLC. Or you can invoice the company of a business owner who is a friend or family member. In short, you must be able to route your revenue into the LLC.

This is not always possible or advisable, and you should always discuss your approach with your lawyer. But a number of our clients have used a temporary LLC to bridge a very difficult period and came out safely on the other side. Each of them set up an LLC for exactly that purpose.

11Using an LLC to work around a non-compete clause

If you leave a well-paid position or sell your company, you are often bound by a non-compete for a few years, designed to stop you from using your personal contacts and deep expertise to compete with your former employer or the buyer of your business.

Such non-competes do not always fit the reality of the "early retiree." Not everyone who leaves a stressful job or sells a company wants to spend the rest of their life cycling through Tuscany with their spouse or playing the world's golf courses.

You often get plenty of partnership offers that you cannot pursue because the non-compete is far too strict. Our early retiree may be convinced that the new venture does not compete with the former employer or company at all, but the legal department sees everything in black and white and has no time for nuance. Request denied. End of story.

So what can you do?

Well, you guessed it: a US LLC can help. Your name does not appear anywhere in the public company register. Nobody links you to the company.

US companies in general, and the LLC in particular, offer a high level of confidentiality, far more than European companies. Members are not published in the company register, and only one member of management has to be listed there (usually the US manager we provide for the LLC when we form it for you).

Through the LLC you can sign contracts, issue invoices and wait calmly until you are free of the non-compete.

12Forming an LLC to stay out of sight of competitors

Sometimes, as a business owner, you do not want competitors looking over your shoulder. Perhaps you want to experiment with a new product line or break into a new market. Or perhaps you want to leave your core business behind and build something new.

In Europe it is now almost impossible to form a company whose owners stay effectively private. The details of everyone involved and of all shareholders in a corporation or partnership are published in the company register.

Beneficial ownership registers are also on the rise and already enshrined in law in countries such as the UK. There, even trust arrangements have to be disclosed in the company register, in full public view.

Here, US companies in general, and the LLC in particular, offer far more protection. Members are not published in the company register, and only one member of management has to be listed there (usually the US manager we provide for the LLC when we form it for you).

So as a business owner you can set up a new company calmly and discreetly, without worrying that competitors will dig through the register to find out who is behind it.

13Forming an LLC to stay out of sight of customers

We once had a client from the UK who ran a successful wholesale business for plumbing supplies and installation materials, including in the USA. The company's customers were around 10,000 plumbers.

The client now planned to go directly after consumers and DIYers in the USA and sell through Amazon and eBay as well, in some cases at lower prices than the plumbers offered their own customers.

To protect the existing business with the plumbers, it was vital not to alienate them or give the impression of competing with their own customers. So the direct business could not possibly run under the same flag as the main business.

So the client decided to form a US LLC with a completely different company name and business address, and to run the end-customer business through it.

Thanks to the high confidentiality of an LLC, the people running and owning the LLC can be effectively kept out of view. So even if someone is especially curious and looks up the online company register, with an LLC they cannot see who is behind the business.

Go deeper with everything on US LLC taxation, taking profits out of an LLC and the important reasons why we often advise clients living in Europe against the LLC. The US company formation section gives you the full overview, and the page on uses of the US LP shows the alternative. For the tax-free US LLC without a US permanent establishment, our sister site zerotax.llc is the place to go.

In short

• The obvious use of the LLC is doing business in the American market, either as a stand-alone company or as part of your group.
• If you are a controlling member living in a high-tax country, the LLC needs real substance in the US: premises, staff and management on the ground.
• The LLC can act as a visa sponsor and hold US real estate with limited liability.
• Members do not appear in the company register, which is why business owners also use the LLC to stay out of sight of competitors or customers.

How we help you

• Form an LLCThe US LLC with a permanent establishment, turnkey in six states.
• Form a Limited PartnershipThe US LP for structures with a general partner and limited partners.
• Visa Roadmap for Company FormationFormation and visa in one plan, so the company carries the visa.
• US Bank Account OpeningYour own access to the American financial system, even without an SSN.
• Company formation consultationEntity type, state and tax consequences, before you commit.