How to use a foreign-owned US LLC to pay 0% US tax

My name is Arjun Mahadevan, and I’m the CEO and founder of doola.

My journey to starting doola has been shaped by my international background and a desire to help global entrepreneurs succeed. I was born in London and raised in Wales by Indian doctor parents, which gave me a firsthand understanding of the challenges faced by people living and working across borders. After studying in the U.S. and working in the tech space, I realized how difficult it was for international founders to access the same business opportunities that U.S.-based entrepreneurs often take for granted, especially when it came to forming, scaling, and selling a business. That’s why I started doola—to help entrepreneurs anywhere in the world set up U.S. LLCs and gain access to the benefits of the U.S. market, without needing to be physically present. Today, doola has empowered thousands of founders in over 175 countries to start, grow, and manage their businesses with ease.

In today’s interconnected world where entrepreneurship knows no borders, starting a business is easier than ever before. For international entrepreneurs, setting up a company in the United States is an increasingly attractive option, even if they have no ties to the country. From accessing the vast U.S. financial ecosystem to building credibility with international clients and investors, forming a U.S. LLC (Limited Liability Company) or C-Corp can unlock significant opportunities. 

In this blog, we explore the real-world challenges faced by founders in non-OECD countries, the benefits of incorporating in the U.S., and why service providers like doola are crucial for global founders seeking to take advantage of U.S. business infrastructure.

PS: I’ll also touch on the title (I know, it’s a bit clickbaity, but it is possible to actually pay 0% US income tax in the US while paying taxes in your home country).

Challenges with Setting Up a Business in Countries Outside of the OECD

Entrepreneurs from non-OECD (Organisation for Economic Co-operation and Development) countries often face a range of barriers when starting or scaling their businesses. From complex regulations to limited access to capital, these challenges can make launching a company a difficult and risky endeavor. Here are a few real-world examples:

1. Regulatory Barriers: In countries like India, Brazil, and Nigeria, setting up a business often involves dealing with layers of bureaucratic red tape. In India, for instance, it can take several weeks and multiple visits to government offices to register a company. Entrepreneurs are often required to obtain licenses, permits, and certificates, which can significantly delay the process.

2. Limited Access to Capital: For entrepreneurs in countries like Kenya and Pakistan, securing venture capital or even basic business loans can be a major hurdle. The venture capital ecosystem in these countries is still underdeveloped compared to the U.S., where VCs are more readily accessible. For example, many Nigerian tech startups have had to relocate their headquarters to the U.S. to attract serious investor interest.

3. Currency Instability: Countries like Argentina and Venezuela face rampant inflation and unstable currencies. This can make it difficult for businesses to plan for the long term or to deal with international clients who expect payments in stable currencies like the U.S. dollar.

4. Payment Processing Difficulties: In several African and Southeast Asian nations, access to global payment gateways like Stripe or PayPal can be limited or non-existent. For example, Stripe is not available in countries like Nigeria, which forces business owners to rely on more expensive and less reliable alternatives.

These issues can stifle innovation and growth, pushing entrepreneurs to explore alternative jurisdictions where they can launch and scale their businesses with fewer roadblocks. This is where U.S. LLCs and C-Corps come into play.

The Ease and Legal Benefits of a U.S. LLC

Incorporating a business in the U.S. is surprisingly straightforward, even for foreign founders. The U.S. offers a more streamlined and business-friendly environment compared to many non-OECD countries. Here are some key legal and practical benefits of forming a U.S. LLC:

1. Simplified Registration Process:

Unlike the protracted process in many developing countries, registering an LLC in the U.S. can often be completed online in a matter of days. There is no need for the business owner to be physically present in the U.S., and some states, such as Delaware and Wyoming, are known for their minimal regulatory hurdles and business-friendly laws.

2. Limited Liability Protection:

One of the key reasons entrepreneurs opt for an LLC is the limited liability protection it offers. If the business incurs debts or faces legal action, the personal assets of the owners are shielded from claims. This legal separation between personal and business assets is critical for mitigating risk, especially for startups.

3. Flexible Tax Options:

An LLC offers flexibility in taxation. By default, LLCs are considered "pass-through" entities for tax purposes, meaning that the profits and losses of the company pass through to the individual owners' personal tax returns. However, LLCs can also elect to be taxed as a corporation if that is more beneficial for the owners.

4. No U.S. Residency Requirement:

You don’t need to be a U.S. citizen or resident to form an LLC or C-Corp. Many foreign founders from countries like India, Russia, and South Africa have successfully incorporated U.S. entities without setting foot on U.S. soil. This opens the door for global entrepreneurs to tap into the world’s largest economy without having to relocate.

“I live in Philippines, India, Dubai, etc. Does this 0% tax scenario apply to me? I also have more questions…”

doola offers free consultations, and you can schedule a consultation with the team today to answer any questions you have on formation, banking, of federal taxes:

https://www.doola.com/free-consultation

Benefits of a U.S. LLC

In addition to the ease of formation, setting up a U.S. LLC offers several business advantages, particularly when it comes to accessing the U.S. financial system, investors, and credibility-building tools.

1. Access to U.S. Banking

One of the most immediate benefits of forming a U.S. LLC is access to U.S. banking services. U.S. banks are among the most stable and globally recognized financial institutions in the world. Opening a business bank account in the U.S. gives entrepreneurs access to reliable and secure banking services, including the ability to hold and transact in U.S. dollars—a stable and globally trusted currency.

Real-world example: Iyinoluwa Aboyeji, a Nigerian entrepreneur, co-founded Flutterwave, a leading African payment technology company. Flutterwave established its legal entity in the U.S., which allowed it to open a U.S. bank account and provide seamless cross-border payment solutions for businesses across Africa.

2. Access to Venture Capitalists

U.S.-based companies, even those run by foreign founders, are far more attractive to American venture capitalists (VCs). Many VCs are hesitant to invest in businesses that are incorporated outside of the U.S. due to unfamiliarity with foreign legal systems and potential difficulties in enforcing contracts.

For instance, Oluwatomi Solanke, founder of Trove, a Nigerian investment platform, incorporated his company in Delaware to access U.S. venture capital. Trove raised funds from prominent U.S. investors who might not have been as enthusiastic if the company was incorporated in Nigeria.

3. Payment Gateways

Global payment platforms like Stripe, PayPal, and Square often limit their services to businesses registered in certain countries, with the U.S. being at the top of the list. By setting up a U.S. LLC, entrepreneurs from countries like Egypt, Kenya, and Bangladesh can unlock access to these essential financial services.

Real-world example: Pingback, a Romanian software company, registered an LLC in Delaware to access Stripe, which wasn't available in Romania at the time. This move allowed the company to streamline its payment processing and expand its customer base internationally.

4. Business Identity and Credibility

Incorporating a U.S. LLC instantly elevates the credibility of a business. Clients, investors, and partners are more likely to trust a company that is legally registered in the U.S. The U.S. has a reputation for strong legal protections, making it a preferred jurisdiction for doing business.

For example, Mercado Libre, one of Latin America's largest e-commerce companies, is headquartered in Argentina but is incorporated in the U.S. This helped the company gain international recognition and investor trust when it went public on NASDAQ in 2007.

5. Business Credit Score and Credit Cards

Establishing a U.S. LLC also opens the door to building a business credit score. This is critical for securing loans, lines of credit, and business credit cards, which can be used to manage cash flow and cover operational expenses. For foreign founders, gaining access to U.S. financial tools is a game-changer in terms of scaling their businesses globally.

Run your online business from anywhere with a U.S. business

With a U.S. LLC or C-Corp, entrepreneurs can run their online businesses from anywhere in the world, without the need for a physical office or presence in the U.S. Thanks to advancements in technology, remote operations, and digital financial services, managing a U.S.-based business from abroad is easier than ever.

Take Buffer, for example, a social media management company that operates as a fully remote organization. Although Buffer was founded by a British entrepreneur and is a U.S.-incorporated company, its team works remotely from over 15 countries around the world. The company’s U.S. business structure gives it access to the American market while allowing it to maintain a truly global workforce.

Similarly, ConvertKit, an email marketing company founded by Nathan Barry, was registered in the U.S. but has employees spread across several continents. Barry has publicly stated that the flexibility of running a U.S. LLC allowed him to scale his business without being tethered to a specific location.

Why should I use doola to set up an LLC as a foreign founder?

For foreign entrepreneurs, navigating the complexities of U.S. legal and financial systems can be daunting. This is where service providers like doola come in. doola simplifies the process of setting up a U.S. LLC or C-Corp for non-U.S. residents, providing comprehensive support and guidance throughout the entire process.

Here’s why using doola is a smart move for foreign founders:

1. End-to-End Support:

doola handles everything from registering your U.S. LLC or C-Corp to securing an Employer Identification Number (EIN) from the IRS, setting up a U.S. mailing address, and even opening a business bank account. This level of service eliminates the guesswork for foreign entrepreneurs.

2. Registered Agent Services:

U.S. law requires LLCs and C-Corps to have a registered agent—someone who can receive legal documents on behalf of the company. doola provides this service, ensuring that your business remains compliant with U.S. regulations.

4. Banking Setup:

doola assists in opening a U.S. bank account, a step that can be difficult for foreign entrepreneurs without a Social Security Number (SSN). They guide you through

Can you really pay 0% US Tax with a foreign-owned LLC?

The short answer is yes, it’s possible in certain scenarios. For example, if you're a UAE resident owning a U.S.-based Wyoming LLC and running an online business with no physical presence in the U.S. (known as "Effectively Connected Income" or ETBUS), you may not owe any U.S. federal income taxes. This is because the U.S. only taxes income that is effectively connected to a U.S. trade or business, and an online service business with no U.S. operations doesn’t usually trigger this tax obligation.

In this case, the Wyoming LLC would not be taxed in Wyoming (as Wyoming doesn't impose corporate income tax) and the UAE does not have personal income tax for its residents. Therefore, in this specific setup, the owner can enjoy the profits without any taxation from either country.

However, while this tax structure sounds appealing, it's crucial to understand that the U.S. tax-free status applies only if the business has no physical or economic presence in the U.S. Additionally, while U.S. taxes might be avoided, we always recommend consulting with a tax professional in your home country (such as the UAE in this case) to ensure you comply with local tax laws and avoid any unintended liabilities.

“I live in Philippines, India, Dubai, etc. Does this 0% tax scenario apply to me? I also have more questions…”

doola offers free consultations, and you can schedule a consultation with the team today to answer any questions you have on formation, banking, of federal taxes:

https://www.doola.com/free-consultation