A US LLC for Indian freelancers, SaaS founders and e-commerce sellers: what to file and when
A Delaware or Wyoming LLC is quick to form, but a foreign-owned single-member LLC must generally file Form 5472 every year — with a USD 25,000 penalty for missing it. The US and Indian rules, in plain terms.
A US limited liability company (LLC) is often the simplest way for an Indian founder to contract with American customers, receive payments through US platforms or sell on US marketplaces. The state filing itself can often be completed within days. The filings that follow are where most founders slip.
Forming the LLC
- State. Delaware and Wyoming are common choices for non-resident owners. Each requires a registered agent in the state at all times.
- EIN. The LLC applies for an Employer Identification Number on Form SS-4. If the responsible party has no US Social Security Number or ITIN, or the principal place of business is outside the US, the online application cannot be used; the application is made by phone, fax or mail instead.
- Operating agreement. Not filed publicly, but banks and payment platforms often ask for it.
The federal filings
| Single-member LLC | Disregarded for income tax by default, but treated as a corporation for reporting: it files a pro forma Form 1120 with Form 5472 for each year in which it has a reportable transaction with its owner or another related party (contributions, distributions and formation costs count), even when no tax is due. The penalty for failing to file is USD 25,000 per return, with further penalties if the failure continues after IRS notice. |
| Multi-member LLC | A partnership by default: it files Form 1065 and may have to withhold US tax on effectively connected income allocable to foreign partners. |
| Beneficial ownership (BOI) | Companies formed in the United States are exempt from FinCEN beneficial ownership reporting — first under FinCEN's interim final rule of March 2025 and, since 14 August 2026, under its final rule. Only foreign-formed entities registered to do business in a US state remain reporting companies, and state rules can apply separately. |
Will you pay US tax?
A non-resident owner is taxed in the US on income effectively connected with a US trade or business, and on certain US-source income such as some interest, dividends and royalties. Services you perform physically outside the US are generally foreign-source income, even when billed through a US LLC. Under the India–US tax treaty, business profits of an Indian resident are taxable in the US only if they are attributable to a permanent establishment there. These questions are fact-specific: staff, offices, inventory or dependent agents in the US can change the answer, and state taxes can apply separately.
State fees
Delaware charges LLCs a flat annual tax, due by 1 June each year, with a penalty and interest for late payment. Wyoming charges an annual report licence tax, with a minimum of USD 60. Missing these can lead to the LLC losing good standing.
The Indian side
- ODI. An interest in a US LLC is an overseas direct investment for a resident individual. The LLC must be an operating business that meets the ODI conditions; Form FC is filed through your bank and the APR is due by 31 December each year.
- Income tax. As a resident, you are taxed in India on your worldwide income. Because a single-member LLC is "disregarded" in the US but is a separate entity under Indian law, the timing and character of income, and the credit for any US tax, can be complex and should be planned in advance.
- Disclosure. The LLC interest is disclosed in Schedule FA of your return.
Our ODI checklist covers each Indian step.
US LLC or a UAE company?
If your clients are worldwide rather than mainly American, compare a UAE free zone company, which can support a UAE residence visa and a UAE bank account application (subject to the bank's own approval); UAE Corporate Tax and VAT are handled by our UAE practice at pbz.ae. See our US LLC page or ask us.
Sources: Treas. Reg. §1.6038A-1 (T.D. 9796) and IRS Instructions for Form 5472; IRS Instructions for Form SS-4; IRS guidance on effectively connected income and partnership withholding (section 1446); FinCEN interim final rule of 21 March 2025 and final rule of 11 August 2026 (effective 14 August 2026) on beneficial ownership information reporting; Delaware Division of Corporations (LLC annual tax); Wyoming Secretary of State fee schedule; India–US DTAA (signed 12 September 1989), Article 7; Foreign Exchange Management (Overseas Investment) Rules, 2022.