Educational content only — not legal or tax advice for your specific facts. Cross-border outcomes depend on details like where services are performed, where servers/equipment sit, how contracts are signed, whether you have U.S. agents/employees, and how your home country taxes foreign entities and foreign-source income.
Who this FAQ is for
- This is written for non-U.S. owners (individuals or foreign companies) who:
- own a Wyoming single-member LLC (or any U.S. single-member LLC),
- run a global online business (hosting, SaaS, consulting, ecommerce, etc.), and/or
- the LLC owns U.S. real estate (like a Pennsylvania rental),
- and you’re trying to understand whether you should stay a disregarded entity or elect to be taxed as a corporation, and what that means for U.S. income tax + U.S. estate tax exposure.
Key idea to understand first
- A U.S. LLC’s “tax classification” is separate from its “legal existence”
- Your LLC exists legally under state law (Wyoming, Delaware, etc.).
- For federal tax, the IRS classifies it (by default or by election) as:
- Disregarded entity (single owner), or
- Partnership (2+ owners), or
- Corporation (if elected, or if a corporation owns it in certain ways).
FAQ
- 1) If I’m not a U.S. resident, do I still owe U.S. tax if my LLC owns U.S. rental property?
- Very often, yes. U.S. real estate is one of the clearest “U.S. touchpoints.” If you earn rental income from U.S. property, U.S. tax filing is commonly required (and state filing is usually required in the state where the property sits).
- 2) My Wyoming LLC is single-member and foreign-owned. Is it still a “disregarded entity” even though it owns U.S. real estate?
- Yes, by default. Owning U.S. real estate does not automatically change the LLC’s default federal classification.
3) If my LLC is disregarded, what U.S. returns might I need to file?
- A) Income tax returns related to the rental property
- Many non-U.S. individual owners file Form 1040-NR and Schedule E to report U.S. rental activity (often together with a state nonresident return where the property is located).
- 4) Do I need an ITIN?
- If you must file a U.S. individual tax return (like Form 1040-NR) and you don’t have a Social Security Number, you generally need an ITIN.
5) Should I “fix” the disregarded entity issue by adding a U.S. citizen friend as a partner?
- Usually not as a first move. Adding a second member typically converts the LLC into a partnership for tax purposes, which often increases complexity substantially.
- 6) What does it mean to “elect to be taxed as a corporation”?
- It means you keep the LLC as an LLC legally, but you file a federal tax election (commonly Form 8832) so that for federal tax the LLC is treated like a corporation going forward.
7) What’s the biggest “gotcha” when electing corporate treatment?
- A U.S. corporation is generally taxed as a U.S. taxpayer on worldwide income.
- 8) Does electing corporate taxation eliminate “double taxation” concerns?
- It can reduce or increase your overall tax cost depending on how you take money out.
9) If I only care about avoiding my home country taxing the income personally, is corporate election automatically the answer?
- Not automatically. Home countries vary dramatically on how they treat foreign corporations you control.
- 10) What about U.S. estate tax exposure if I die owning a U.S. rental property?
- This is a major issue for many non-U.S. owners. The filing trigger can be low for nonresident noncitizens.
11) Do estate tax treaties help?
- Sometimes—but only for certain countries and only under specific treaty language.
- 12) Can I avoid U.S. estate tax just by writing a will that gives the property/LLC to someone else?
- A will helps with who receives assets, but it generally does not eliminate estate tax exposure by itself.
13) What are common estate-planning approaches foreigners consider (at a high level)?
- These strategies vary widely, and each can create new income tax and compliance consequences.
- 14) If I’m running a global hosting business through a Wyoming LLC, does that automatically mean I’m engaged in a U.S. trade or business?
- Not automatically. For online businesses, the U.S. tax result often turns on facts like where the services are actually performed.
If you want a clear, written, facts-and-circumstances analysis (USTB/ECI exposure for the online business, the best entity classification for your goals, rental structuring, and estate-risk overview), book a paid consultation here: https://oandgaccounting.com/appointment-booking-form/
