Guide to U.S. Business Taxes for Non-Resident Owners

The short answer

U.S. business taxes come in layers: federal (IRS), state and sometimes local. Sales tax is a state tax, not a federal one.
A C corporation pays federal income tax at 21% of taxable income. Dividends paid to a foreign shareholder are generally subject to 30% withholding, unless a tax treaty lowers the rate.
A foreign person pays U.S. income tax on income effectively connected with a U.S. trade or business, at the graduated rates that apply to U.S. taxpayers.
An S corporation cannot have nonresident alien shareholders.
A foreign-owned single-member LLC files Form 5472 with a pro forma Form 1120 when it has reportable transactions. The penalty for not filing is $25,000.

Table of contents

The layers of U.S. business taxes
How your entity choice shapes your taxes
When a foreign owner pays U.S. income tax
Employment taxes, once you hire
Sales tax: a state matter
State income and franchise taxes
Filings that apply even without tax to pay
Bookkeeping: the base of every tax filing
How MyUSAService helps
Frequently asked questions

U.S. business taxes are not one tax. They are several layers, each with its own authority and its own deadlines: federal taxes collected by the IRS, state taxes, sometimes local taxes, and sales tax, which is handled entirely by the states.

For a non-resident owner, two questions come first: how is the company taxed, and which of these layers apply to it. This guide answers both.

The layers of U.S. business taxes

Layer	Who administers it	Main examples
Federal income tax	IRS	Corporate income tax, tax on the owners of pass-through entities
Federal withholding	IRS	Withholding on payments to foreign persons
Employment taxes	IRS and states	Income tax withholding, Social Security and Medicare, unemployment taxes
State income or franchise tax	Each state	California $800 annual LLC tax, Delaware annual tax
Sales tax	Each state, sometimes local	Tax collected on sales to customers in the state

The challenge is rarely paying a tax. It is knowing which ones apply to your company, and when.

How your entity choice shapes your taxes

Single-member LLC. For federal income tax, it is disregarded: the LLC itself pays no federal income tax, and its income belongs to the owner. When the owner is a foreign person, the LLC must still file Form 5472 with a pro forma Form 1120 whenever it has reportable transactions with its owner.

Multi-member LLC. Taxed as a partnership by default. It files Form 1065, and income flows to the members. If the partnership has income effectively connected with a U.S. trade or business, it must withhold tax on the share of that income allocable to foreign partners.

C corporation. A separate taxpayer. It pays federal income tax at 21% of taxable income and files Form 1120 every year, even without income. When it pays dividends to a foreign shareholder, the dividends are generally subject to 30% withholding, unless a tax treaty lowers the rate.

S corporation. Not available to most non-resident founders: an S corporation cannot have nonresident alien shareholders.

The right choice depends on where you live, where the income comes from, whether you plan to reinvest profits and whether investors will join. It is worth deciding with a professional before forming the company, because changing later has its own tax cost. Our comparison of LLC and corporation tax implications goes deeper.

When a foreign owner pays U.S. income tax

A foreign person pays U.S. income tax on income that is effectively connected with a U.S. trade or business. After deductions, that income is taxed at the same graduated rates that apply to U.S. taxpayers.

Whether your activity counts as a U.S. trade or business depends on the facts: where the work is done, where the people and assets are, how the business operates. The same LLC can produce very different tax results for two owners. This is the question to answer with a professional, and the reason “a U.S. LLC is always tax-free for non-residents” is not a safe assumption.

Employment taxes, once you hire

Hiring employees in the United States adds a layer of obligations:

Withholding federal income tax from wages.
Withholding and paying Social Security and Medicare taxes.
Paying federal unemployment tax, and state unemployment contributions.
Filing Form 941 every quarter, Form 940 every year and a Form W-2 for each employee.

Treating an employee as an independent contractor when the law says otherwise is one of the most expensive mistakes in this area. See our guide to payroll compliance.

Sales tax: a state matter

There is no federal sales tax. Each state sets its own rules, and some cities and counties add their own rates.

Since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can require sellers without a physical presence to register, collect and remit sales tax once they pass an economic threshold. Thresholds differ from state to state. For online sellers, tracking sales by state is the only way to know where obligations start. More in our guide to e-commerce sales tax compliance.

State income and franchise taxes

States add their own taxes, often regardless of profit. California charges LLCs an $800 annual tax even without doing business. Delaware charges LLCs a flat annual tax, $400 from the 2026 tax year, and charges corporations a franchise tax. Our guide to annual compliance requirements lists the main state deadlines.

Filings that apply even without tax to pay

Many obligations are information returns, not tax payments. They apply even when no tax is due:

Form 5472 with a pro forma Form 1120, for foreign-owned single-member LLCs with reportable transactions. Penalty for not filing: $25,000.
Form 1120, every year for a corporation.
Form 1065, for a partnership with income or deductible expenses.

For companies with no activity, see zero-revenue U.S. companies. For every due date, see our calendar of IRS filing deadlines.

Bookkeeping: the base of every tax filing

Every return starts from the books. Clean records make deductions defensible, filings faster and questions from a tax agency easier to answer. Keep business and personal money in separate accounts, and keep the documents behind every figure. See our bookkeeping services.

How MyUSAService helps

MyUSAService prepares U.S. returns for companies owned from abroad, through licensed professionals: from $951 for a single-member LLC or a C corporation, and $951 plus $150 for each Schedule K-1 for a partnership. The yearly renewal for a single-member LLC includes Form 5472, the pro forma Form 1120, the registered agent and the state fee. Bookkeeping costs $279 per month. Prices as of September 2026.

Frequently asked questions

What business taxes does a U.S. LLC owned by a non-resident pay?

At the federal level, the LLC itself usually pays no income tax: a single-member LLC is disregarded and a multi-member LLC is a partnership. The owners may owe U.S. income tax on income effectively connected with a U.S. trade or business. State taxes and filing obligations apply regardless.

What is the U.S. corporate tax rate?

21% of taxable income at the federal level, for C corporations. States may add their own corporate taxes.

Can a non-resident own an S corporation?

No. An S corporation cannot have nonresident alien shareholders.

Is there a federal sales tax in the United States?

No. Sales tax is set by each state, and sometimes by local governments.

Do I have to file with the IRS if no tax is due?

Often yes. Form 5472 for foreign-owned single-member LLCs and Form 1120 for corporations are required even when no tax is due.

Unsure about your U.S. tax obligations as a non-resident?

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Sources

First published February 2, 2026. This article is general information, not tax advice for your situation. U.S. tax return filing | Book a free call