LLC: Limited Liability Company Definition
What is an LLC? A concise definition of Limited Liability Company, how it works, and why non-US founders need one for US payment access.
Definition
A Limited Liability Company (LLC) is a US business structure that combines:
- Liability protection: Personal assets (home, savings) are separated from business debts
- Pass-through taxation: Profits “flow through” to members; no corporate-level income tax
- Operational simplicity: Fewer compliance requirements than C-corps or S-corps
Why Non-US Founders Need an LLC
If you’re building a SaaS, ecommerce, or digital product business from outside the US, you need an LLC to access:
- Payment processors: Stripe, PayPal, and similar require a US business entity
- US bank accounts: Banks (Mercury, Relay) need an EIN and US entity
- Contractual credibility: US clients prefer dealing with formally registered entities
How LLC Taxation Works
LLCs are “disregarded entities” for tax purposes when owned by a single non-US person. This means:
- Business income is reported on your personal tax return
- No US corporate tax unless you elect C-corp treatment
- You may need Form 5472 if the LLC is foreign-owned and meets gross revenue thresholds
Quick Comparison
| Entity Type | Liability Protection | Tax Treatment | Best For |
|---|---|---|---|
| LLC | Yes | Pass-through | Non-US founders, single member |
| C-Corp | Yes | Double (corporate + personal) | VC-backed startups |
| S-Corp | Yes | Pass-through | US-resident small businesses |
Related Terms
- EIN: Employer Identification Number, required to open US bank accounts.
- Registered Agent: A US-based representative required to receive legal documents for your LLC.
- FinCEN: The US Treasury bureau where LLC owners must file Beneficial Ownership Information (BOI) reports.
This is a dictionary entry. For full formation guide, see What is LLC Formation?