Incorporating and Maintaining a US LLC: The Essential Guide for Digital Nomads

Being a digital nomad has lots of perks. The freedom to travel while earning money opens up a wealth of opportunities, from experiencing new cultures to meeting people from all over the world.

However, many digital nomads meet a stumbling block when it comes to managing their business and understanding their tax responsibilities. Being location independent is great, but it can lead to confusion about the best way to manage your business while remaining compliant— and avoiding the dreaded double taxation.

One popular business structure for remote workers and entrepreneurs is the Limited Liability Company (LLC), specifically, a U.S. LLC.A U.S. LLC involves incorporating your company within a state of your choosing in the U.S.A, and can offer superb flexibility, protection for your personal assets, as well as leading to tax benefits, making it an attractive choice for digital nomads.

For example, if you operate through a U.S. LLC and perform the services from a different jurisdiction, which has a double taxation treaty agreement with the U.S., you may be able to benefit from far lighter taxes as the U.S. will allow the country that the work is being performed in to collect the tax, instead of the U.S. Thus, being a tax resident in what is considered a tax-friendly jurisdiction (such as Portugal or Malta), and operating through a U.S. LLC can lead to significant reductions in tax. You also don’t need to be a US citizen or resident to have a US LLC, and LLCs are easy to set up.

If you’re feeling confused, don’t worry. In this guide we’ll walk you through starting up an LLC, explain the benefits it offers, and what’s required to maintain it.

Why an LLC?

Before we dive into the nitty-gritty of setting up an LLC, let’s talk about the advantages of an LLC, and why this structure is a great fit for digital nomads and entrepreneurs.

Benefits of an LLC

1. Limited Liability Protection: An LLC protects your personal assets from business liabilities. If your business faces debt or legal trouble, your personal finances are generally safe.
2. Tax Flexibility: LLCs give you options. You can choose to be taxed as a sole proprietorship, partnership, S corporation, or C corporation—whatever works best for your situation.
3. Less Red Tape: Compared to corporations, LLCs have fewer formalities and reporting requirements. Plus, they offer flexibility in management and profit-sharing.
4. Boost Credibility: Having an LLC can make your business look more professional and trustworthy to clients and partners.
5. Location Freedom: You can incorporate a U.S. LLC no matter where you are in the world, and you do not have to be a U.S. citizen.

Why LLCs Are Great for Digital Nomads

Many digital nomads choose an LLC structure because of their flexibility and how easy they are to set up. You can incorporate a U.S. LLC remotely, and there is no requirement to travel to the U.S.A.

FreshOps can manage the entire setup process for you to ensure that everything goes smoothly, leaving you to focus on running your operations with no disruption.

Steps to Incorporate an LLC

There are a few steps you’ll need to take to set up an LLC. Here’s a quick introduction:

1. Choose Your State

You can set up your LLC in any state, but some, like Delaware and Wyoming, are popular for their business-friendly laws and tax benefits. We often recommend Wyoming because Wyoming does not have any state tax, there are no residency requirements, its incorporation costs are lower than other states, and should you wish to amend your structure in the future, it is very easy to do within this state.

2. Pick a Name

Choose a unique name for your LLC that meets state regulations. It must include "Limited Liability Company" or an abbreviation like "LLC" or "L.L.C."

3. Appoint a Registered Agent

A registered agent receives legal documents on behalf of your LLC. This could be you, a business partner, or a professional service. If you decide to use a professional service you will usually pay for a year at a time.

4. Decide on Management

Choose between a member-managed or manager-managed structure. This is a crucial step and can lead to significant tax savings if your LLC is structured correctly. In a member-managed LLC, the owners will appoint one, some, or all of the members to handle day-to-day operations.

In a manager-managed LLC, one or more managers are appointed by the members and run the business. This is usually an external service provider who does not have an equitable share in the business. The members will then act more like passive investors. We at FreshOps provide bespoke manager-managed services including bringing in experienced business professionals to propel your company forward.

5. File Articles of Organization

Submit the Articles of Organization to the state agency, typically the Secretary of State. This document includes your LLC’s name, address, and members.

6. Draft an Operating Agreement

An Operating Agreement outlines how your LLC will operate. It’s not always legally required, but it’s a smart move to prevent conflicts and keep things running smoothly.

An Operating Agreement sets out how your business will be run according to the rules and specifications of its members, and it will include issues like how profits will be allocated, and what happens if a member wants to leave. A properly drafted operating agreement is a smart choice to ensure you get the most out of your LLC.

7. Get an EIN

An Employer Identification Number (EIN) is necessary for tax purposes and opening a business bank account.

8. Check Local Regulations

Depending on your business type and location, you may need additional licences or permits. For instance, if business is conducted in a different state to where your LLC is incorporated you will need to register within that state too, which can lead to increased costs and taxation requirements. You will need to research local state rules to ensure compliance.

9. File a BOI (Beneficial Ownership Information) Report

Since 2024, you will need to also file a BOI (Beneficial Ownership Information) report. It is a requirement of the Financial Crimes Enforcement Network (FinCEN) and details who owns, runs and benefits from the company. This filing typically is standard now when you incorporate an LLC, so there is nothing to worry about.

Maintaining Your LLC

Once your LLC is up and running, you’ll need to maintain it and ensure that all paperwork is kept up to date. Here’s how:

1. File Annual Reports

Most states require LLCs to file annual or biennial reports and pay a filing fee. These reports keep the state updated on any changes in your LLC’s information, such as its members and their addresses.

2. Pay Taxes

LLCs must follow federal, state, and local tax regulations. This includes filing annual tax returns and paying required taxes. Depending on your tax structure, you might need to make quarterly estimated tax payments.

It’s important to note that even if no tax is due, you are still required to file a tax return. If you fail to do this, you can be fined or your LLC can be struck off the register.

3. Keep Detailed Records

Maintain accurate financial and operational records. This includes accounting documents, meeting minutes, and any changes to your LLC’s structure or ownership. FreshOps management services can help with records and meeting minutes, and we advise using accounting software to track payments and make life easier when it comes to filing your tax return.

4. Renew Licences and Permits

Ensure all necessary business licences and permits are up to date. Renewal requirements vary by location and industry.

5. Follow Employment Laws

If your LLC has employees, comply with employment laws, including payroll taxes and workers’ compensation insurance.

6. Update the Operating Agreement

As your business grows, update your Operating Agreement to reflect changes in management, profit distribution, or other operational aspects.

Set Up Your LLC with FreshOps

Incorporating and maintaining an LLC as a digital nomad can be a game-changer. With benefits like liability protection, tax advantages, and operational flexibility, you can build a strong foundation for your business while enjoying the freedom to travel and live wherever you choose.

We specialise in helping digital nomads and global freelancers understand and implement the optimal structure for their scenario and can assist with the LLC incorporation process from start to finish. Our experienced team of lawyers and tax experts can help you structure your LLC and operating agreement to put you in the best possible financial position, as well as assisting with LLC maintenance and to ensure that your business remains fully compliant.

Want to learn more about how FreshOps could help you take the next step in your business journey? Get in touch with admin@fresh-ops.co.uk for free advice and consultation.