Get to know the authorIf you want to start a limited liability company (LLC) based in the United States while living abroad — or have just done so — you probably have questions about how taxes work.
While filing taxes as an expat LLC owner can be complicated, it’s often well worth the effort. When you open an LLC, you immediately receive greater liability protection than you would as a sole proprietor. Typically, this protects your personal assets from seizure in the case of business debts or lawsuits.
As a dedicated US expat tax firm, we have plenty of experience filing taxes for small business owners living abroad. Below, we’ll go over how expats with LLCs file taxes, what forms they need to file, when they need to have them filed, and more.
Part 1: Expat LLC taxes 101
Federal income taxes
All American permanent residents and citizens who meet the minimum income reporting threshold must file a federal tax return and are subject to federal income taxes. By default, the US classifies LLCs as pass-through entities. This means that, for tax purposes, the business’s income “passes through” to you, the owner, as if it were personal income.
Note:
When you open an LLC, you can elect to be taxed as an S corp or C corp as well, but for the sake of this article, we’ll focus on the default, disregarded entity status.
As such, you’ll file taxes as an individual — for your single-member LLC — rather than filing a dedicated business return. Federal income taxes on your net earnings will range from 10% to 37%, depending on how much you earn. As an expat, however, you may be able to reduce your federal income taxes.
Rather than paying income taxes all at once by the tax deadline, LLC owners should pay them in quarterly estimated installments.
State income taxes
In some cases, you may also have to file state taxes — especially if you most recently lived in California, New Mexico, New York, South Carolina, or Virginia. If so, you may benefit from changing your residency to a state with low or no income taxes. You should always consult with a US expat tax professional first to make sure it’s the right move.
Self-employment taxes
Besides federal income taxes, as an LLC owner you’ll also have to pay Medicare and Social Security taxes. You may also hear them called self-employment taxes or payroll taxes. Self-employment taxes currently total 15.3%: 12.4% of that goes toward Social Security, while the remaining 2.9% goes toward Medicare.
In some cases, you may be able to pay social security taxes to your country of residence rather than the US — we’ll go into more detail on that later.
Income taxes in your country of residence
Living and working in a foreign country for an extended period usually requires paying income taxes where you live as well.
Typically, if you meet the legal requirements for tax residence, you must pay taxes on all of your income — regardless of where it comes from. If you don’t meet their definition of tax residence, you usually just pay taxes on income sourced from within that country. Each country has different rules, so make sure to research laws specific to your country of residence.
Part 2: Filing requirements & deadlines
Required forms & schedules
Some of the tax forms owners of US-registered LLCs living abroad may need to file include:
| Form Number | Purpose | Who Files It |
| Form 1040 | Reporting individual income | Single-member LLCs |
| Form 1065 | Reporting partnership income | Multi-member LLCs |
| Schedule C | Reporting individual business profits and losses | Single-member LLCs |
| Schedule SE | Reporting self-employment taxes | Single-member LLCs |
| Schedule K-1 | Reporting partnership income, deductions | Multi-member LLCs |
| Form 8804 | Reporting a foreign partner’s information & income | Multi-member LLCs with a foreign member |
| Form 8805 | Reporting & withholding taxes due on a foreign partner’s share of income | Multi-member LLCs with a foreign member, foreign-registered multi-member LLCs with US income |
| Form 5472 | Reporting certain transactions, such as a transfer of money or assets | Multi-member LLCs with at least 25% foreign ownership, foreign-registered multi-member LLCs with US income |
While this list is a great place to start, it’s not comprehensive.
Most states, for example, require LLCs registered there to file annual reports. They may also require you to file a state tax return or additional documents. When in doubt about your tax and reporting obligations, always check with a tax professional to ensure full compliance.
Note:
To ensure filing accuracy and protect yourself in the case of an audit, it’s critical to keep detailed records for your LLC on income, expenses, tax payment receipts, etc.
Deadlines for expat LLCs
While the typical due date for taxes is April 15th, Americans abroad get an automatic two-month extension. US expats’ filing deadline is generally June 15th. You can extend this deadline even further to October 15th by filing Form 4868.
If any of those dates fall on a weekend, the deadline moves to the next business day. For example, June 15th, 2024, falls on a Saturday — so the actual deadline for expats’ 2023 taxes is June 17th, 2024.
Note:
The extension applies only to filing the return itself. You still must pay any outstanding taxes by the traditional April 15th deadline.
Part 3: Credits & deductions to maximize savings
As an expat, you can claim many of the same tax breaks that you would if you were living in the US, such as:
- Business expense deductions, including for:
- Home offices: Operating a business from home allows you to deduct property-related expenses like rent and utilities, based on how much of your property you dedicate to the home office
- Assets: Equipment like laptops, monitors, and tablets may be deductible based on how often you use them for business-related activity
- Advertising, branding, & promotional activities: Most marketing-related expenses are deductible
- Vehicles: When using your vehicle(s) for business purposes, you can choose between the standard mileage expense deduction or itemize the actual costs
- Insurance: You can deduct certain types of insurance (e.g. general liability insurance) if the policy is in the name of your LLC rather than your own
- Legal & professional fees: Expenses related to legal and professional costs (including tax consultations!) are often deductible
- Services & subscriptions: Services like software (e.g. Photoshop) and subscriptions like industry newsletters are typically deductible
- The Child Tax Credit, for US expats with qualifying children or dependents under age 17 by the end of the year
- Charitable contributions, for those who have made donations to qualifying 501(c)(3) nonprofits
- Student loan interest, for those who have paid interest on student loans
- Retirement account contributions, for those who have contributed to eligible retirement accounts like a US-based traditional IRA or 401(k)
As an expat, you also qualify for a few tax breaks that Americans living within the US don’t.
Expat-specific tax breaks
The three main tax breaks for US expats include the:
Foreign Tax Credit (FTC)
What it does: The FTC gives Americans dollar-for-dollar credits on any foreign income taxes they’ve paid, allowing them to subtract what they’ve paid in foreign income taxes from their US tax bill. If you live in a country where taxes are higher than in the US, this usually not only eliminates your US tax liability, but also gives you credits you can carry forward to future returns.
Who qualifies: Americans who have paid foreign taxes that are a) legal, b) based on income, and c) paid in their name
How to claim it: File Form 1116
Foreign Earned Income Exclusion (FEIE)
What it does: The FEIE allows Americans abroad to exclude a certain portion of their foreign earned income from income taxes (but not self-employment taxes). For tax year 2023 — the taxes you file in 2024 — the FEIE limit is $120,000. In tax year 2024, it increases to $126,500 to account for inflation.
Who qualifies: Anyone who meets either of the following two tests:
- Physical Presence Test: Spend at least 330 days of any 365-day period outside of the US
- Bona Fide Residence Test: Be an official resident of another country for at least one year, and be able to prove it with official documents like residence permits
How to claim it: Complete and file the relevant portion of Form 2555
B!T note: You can only exclude active income under the FEIE. Passive sources of income — such as dividends, royalties, interest, and rental income — are not eligible.
Foreign Housing Deduction (FHD)
What it does: The FHD lets self-employed Americans living abroad deduct a portion of qualifying housing expenses, such as rent, utilities, furniture rental, rental insurance, parking passes, and more.
Who qualifies: Anyone who meets either the Physical Presence Test or Bona Fide Residence Test
How to claim it: Complete and file the relevant portion of Form 2555 (the same form you use to claim the FEIE)
A US expat tax specialist can help you determine which tax breaks you qualify for and even identify options not listed above.
Part 4: Additional considerations for expat LLC owners
Tax treaties
Those living in a country that has signed a tax treaty with the US might wonder how to use such treaties to their advantage. These agreements prevent nationals of one country living in another from paying income taxes to both governments, in theory.
In practice, they rarely benefit US citizens.
A tricky clause called the saving clause gives the US government the right to tax Americans as if the treaty didn’t exist, rendering them largely ineffective. However, some tax treaties include exceptions to the saving clause.
For example, the US/UK tax treaty allows Americans living in the UK to withdraw a one-time, tax-free lump sum from their pension. Other groups that can often successfully claim these treaties include students, researchers, teachers, and diplomats.
To claim the benefits of a tax treaty, you must file Form 8833. That said, most Americans are better off claiming one of the abovementioned tax breaks.
Totalization agreements
Oftentimes, expats must also pay social security taxes in their country of residence in addition to the US. However, if you live in one of the dozens of countries that have signed a totalization agreement with the US, you won’t need to worry about paying social security taxes to two different countries.
Totalization agreements prevent nationals of one country living in the other from having to pay social security taxes to both countries. Which country you pay social security taxes to generally depends on how long you’ll be there. A loose rule of thumb, which may vary by agreement is:
- Less than 5 years: Pay social security taxes to the US
- 5 years or more: Pay social security taxes to your country of residence
In some cases, though, expats may choose to pay social security taxes to their country of residence regardless of how long they plan to be there. For example, you might choose to pay social security taxes to France rather than the US to gain access to French public health insurance.
Common expat reporting obligations
Beneficial Ownership Information Reporting (BOIR)
The BOIR is among the newest reporting obligations for US businesses. It requires you to state who the beneficial owners are — aka who’s truly at the helm of your business — rather than just stating the names that appear on the official paperwork.
Businesses registered on or after January 1, 2024 must file a BOIR within 90 days of the state officially recognizing them as a business. Businesses formed before that date, meanwhile, have until January 1, 2025 to file the BOIR. Not all who open a business must file a BOIR, however. Certain businesses — such as money service businesses, publicly registered accounting firms, and insurance companies — are exempt.
Note:
You can submit the BOIR directly on the Financial Crimes Enforcement Network (FINCEN)’s website, or upload a completed PDF version.
Foreign Bank Account Report (FBAR)
Any American with over $10,000 across foreign financial accounts must file the FBAR. This $10,000 refers to the sum total of all your foreign financial accounts, including business and personal bank accounts, brokerage accounts, etc.
This doesn’t levy a separate tax on this income — it just gives the US government visibility into your foreign account holdings. The goal is to facilitate compliance and reduce the risk of foreign money laundering.
Like the BOIR, you’ll file the FBAR with FinCEN. You can complete FinCEN Report 114 online through the BSA E-Filing System. The deadline for expats is October 15th.
Statement of Specified Foreign Assets (Form 8938)
Americans abroad with more than $200,000 in foreign assets on the last day of the tax year or more than $300,000 in foreign assets at any time during the tax year must file Form 8938. Again, this doesn’t place additional taxes on you — it just helps the government enforce tax compliance.
Unlike the two reports mentioned above, you’ll file Form 8938 with the IRS along with your federal tax return.
B!T note: Filing the above forms accurately and on time is essential. Penalties for late, missed, or incorrect filings can be steep, even if they were accidental. FBAR penalties, for example, start at $10,000 per non-willful incident, and can reach as high as $100,000 — or 50% of the account’s value at the time you failed to file — per willful incident.
Expat LLC taxes made easy
By now, you can probably tell that the tax implications of forming an LLC are complex — but you shouldn’t let that hold you back from starting your business abroad. To avoid spending hours poring over legal documents and worrying about potential mistakes, it’s best to work with a US expat tax specialist like Bright!Tax.
