US LCC alternatives for digital nomads: We have looked through all of them for you and talked to tax accountants to understand them.
US LLC for foreigners: who uses it and what is it for?
US LLC structure: taxes, costs, dividends
US LLC taxes
US LLC is typically called a pass-through entity. This means there is no corporate tax and instead, the tax burden is on the personal level (taxable for personal income).
Therefore, depending on which country you are living in and the personal income tax in that country will decide how much you pay as a tax to that country.
Example: Suppose you live in Brazil. You have a US LLC and earn a hundred K per year.
This money is now taxable in Brazil for personal income tax. But the US government will neither apply corporate tax nor personal income tax.
US LLC costs
Because the US LLC has no corporate tax for individuals, there is no real accounting or bookkeeping involved. Therefore, it is quite cost-effective.
If you do it yourself, you may just pay 100-200 Dollars per year. If you do it through an agency, you may pay up to 2000 Dollars per year.
US LLC pays out to shareholders:
As there are more dividends in the US LLC, you can basically pay yourself whenever you like.
You should pay attention to pay yourself to your personal bank account and (that has your name the same as the name of the shareholder of the company). And you should avoid transferring more than 4000 Dollars per transaction so your personal bank does not flag or block the transaction.
US LLC advantages and disadvantages
The benefits of the US LLC are:
- Low taxes if you have low personal income tax in the country you live in
- Low maintenance costs
- Low maintenance duties
- Good reputation as an American company.
The disadvantages of the US LLC are:
- It becomes increasingly difficult to obtain bank accounts for foreign-owned or non-resident-owned US LLC. The only banks that work fine are Wise, Relay, Mercury.
- It is difficult to have credit card with the bank
- How the US LLC income is interpreted by the tax government in your country is not always clear. Sometimes, they consider it personal income and sometimes dividend income.
US LLC most suitable target groups
We usually recommend US LLC only for digital nomads (not living in any country more than 6 months in a row). For anyone else living in the country long-term, the US LLC can be a risk factor as you never know how the tax department in your country will interpret a pass-through entity.
1 – US LLC alternative: Singapore LLC vs US LLC
Singapore LLC structure: taxes, costs, dividends
Singapore LLC taxes
The taxes in Singapore LLC are two-fold:
- Corporate tax: this is 7-17% depending on the amount of revenue.
- Dividend tax: this is 0% if you as a shareholder do not live in Singapore (this still means dividend tax will apply on personal level in the country you live in).
Example:
Suppose you live in Vietnam and you have an IT business service for Australian clients.
Imagine you have a Singapore LLC to invoice your clients and you have 100K Australian Dollar revenue per year.
Now, you would be obliged to the following taxes:
- Corporate tax: you would pay 7% corporate tax on your revenue. This amounts to 7K Australian Dollars.
- Dividend tax: If you pay yourself out of the company only dividends (which we recommend if you live in Vietnam as personal income tax), then the tax rate is 0%. This is because Singapore will not tax you on your dividends (because you live in Vietnam) and Vietnam has a 0% dividend tax on single-member LLCs (you may read on the internet 5% dividend tax in Vietnam, but this only applies to multiple member LLCs).
Total: You would pay 7K Australian Dollars on taxes.
Singapore LLC costs
The costs can be divided into 2 blocks:
- Set-up costs: from our research, set-up costs in Singapore amount to approximately 1K USD.
- Maintenance costs: usually maintenance costs for a Singapore LLC amount to 3K-4K per year (all-inclusive: accounting audit tax filling).
Singapore LLC pays out to shareholders:
Usually, a Singapore LLC pays out dividends to a non-resident shareholder.
This could mean that you can only pay yourself in quarterly periods.
Singapore LLC advantages and disadvantages
Singapore LLC advantages are the following:
- It has a good reputation
- It has a good bank infrastructure (it is easy to receive money)
- It has a solid company infrastructure, including dividends.
The disadvantages can be:
- It is more costly than the US LLC
- You may only pay yourself out every 3 months
- You need a Singaporean director (this is mandatory by law).
Singapore LLC most suitable target groups
The best target groups for the Singapore LLC could be the following:
- If you have clients in Singapore
- If you live in Asia and want a closer location for your company
2 – US LLC alternative: Estonia LLC vs US LLC
Estonia LLC structure: taxes, costs, dividends
Estonia LLC taxes
The taxes in Estonia for a non-resident are the following:
- Corporate tax is 0% if it is not paid out as dividends. Otherwise, corporate tax is 20%.
- A dividend tax: there is no dividend tax in Estonia. You basically pay 20% of corporate tax if you take out dividends from your Estonia company.
- Personal income tax: As you do not live in Estonia, therefore you do not pay personal income tax in Estonia. You will pay personal income tax in the country you live in. It can happen that the Estonia tax government asks you for the tax slip in the country of your residence.
Estonia LLC costs
There are two kinds of costs that you need to be aware of when you open a company in Estonia.
- Setup costs: should be around 300-500 USD depending on the providers.
- Yearly maintenance costs: You should count with 1000 USD per year for accounting and bookkeeping.
Estonia LLC pays out to shareholders:
Two ways to pay yourself out as a company owner of Estonia LLC. You can pay yourself dividends or income. The choice is yours and depends on your circumstances which one has a better tax benefit for you.
Example: Suppose you live in Vietnam. Vietnam taxes your world income. This means both your dividends and your income would be taxed in Vietnam. If you pay yourself out dividends, you pay 20% tax in Estonia and 0% tax in Vietnam as dividends as a single member LLC in Vietnam are tax-free. If you pay yourself out dividends, you end up paying no taxes in Estonia, but paying up to 35% taxes in Vietnam.
This is for you to play around in order to find the right balance. But generally speaking, an Estonia LLC is not the best combination with the Vietnamese residency.
On the other hand, if you live in Thailand, all foreign source incomes are tax-free.
This means you can pay yourself out income through your Estonia LLC and neither pay taxes in Estonia nor Thailand.
Estonia LLC’s advantages and disadvantages
Estonia LLC’s benefits are
- The reputation of company (if you have European conservative clients who care that the billing company is in the EU)
- No profit on income (if your residency is in a country where they do not tax foreign source incomes)
The disadvantages are as follows:
- It becomes increasingly harder to open an Estonia LLC if you are not a resident
- It may require to go to Estonia personally in particular to open a business bank account
- It is not the best company structure for saving taxes
Estonia LLC’s most suitable target groups
We recommend Estonia not as a primary company to save taxes because there are better alternatives out there. However, an Estonia LLC is very suitable for conservative branches (IT firms, finance firms, enterprise company deals) where companies in the EU like to work with other companies within the EU due to data protection and compliance.
If that is the case, we suggest having an Estonia LLC as an interface company for the client to bill them and a backend company (US LLC or HongKong LLC) to then bill your Estonia LLC and take out your money.
3 – US LLC alternative: Dubai LLC vs US LLC
Dubai LLC structure: taxes, costs, dividends
Dubai LLC taxes
Until very recently, Dubai had 0% income tax, dividend tax, and corporate tax.
But since 2024, it has changed.
Now, there is a 9% corporate tax for many companies in Dubai.
This is more than taxes for a US LLC as a non-resident, but if you want to live in Dubai, you may need a Dubai company for your visa.
Dubai LLC costs
The setup cost for a Dubai LLC is usually 15000 USD and the annual maintenance cost is 5000 USD.
Dubai LLC pays out to shareholders:
You can pay yourself out dividends or income as both are taxed 0% in Dubai. It only makes a difference when you live outside of Dubai and dividends or income are taxed differently. For example, in Vietnam, your dividends are taxed 0% and your income will be taxed up to 35%.
Dubai LLC’s advantages and disadvantages
The benefit of Dubai LLC is only in the visa for Dubai. If you do not want to live in Dubai, a Dubai company is not the best option here and US LLC could be better for you.
The disadvantages of Dubai LLC are:
- Very expensive (setup and maintenance costs)
- Very hard to open a bank account
- Very non-digital business atmosphere
- High corporate taxes than other low-tax countries
Dubai LLC’s most suitable target groups
The most suitable target groups for Dubai LLC are people who want to live in Dubai. Even if you live in Dubai, you may be able to optimize taxes with a foreign company structure like in Hongkong or US LLCs.
4 – US LLC alternative: Hong Kong LLC vs US LLC
Hong Kong LLC structure: taxes, costs, dividends
Hong Kong LLC taxes
Taxes in Hong Kong are two folds:
- If your clients are in Hong Kong, you pay 8-18% corporate taxes
- If your clients are outside of Hong Kong, you are eligible for offshore tax exemption with 0%.
Hong Kong LLC costs
The costs of Hong Kong LLC can be divided into 2 blocks:
- Setup cost: The setup cost is from 1000-2000 USD
- Maintenance cost: The annual cost for company maintenance is also from 1000-2000 USD
Hong Kong LLC pays out to shareholders:
You can pay yourself dividends as a Hong Kong business owner. This is being taxed 0% in Hong Kong and dividend taxes are applied in your country of residency.
Hong Kong LLC’s advantages and disadvantages
There are 3 advantages of Hong Kong LLC:
- Low taxes in particular if you have no clients in Hong Kong
- Payout as dividend which is not possible with US LLC
- The tax slip of your Hong Kong company can be provided.
The disadvantages of Hong Kong LLC are the following:
- The reputation of Hong Kong LLC may not be as high as US LLC in front of clients in the EU.
- If you have clients in Hong Kong, you may need to pay corporate tax.
- If your EU clients want IBAN numbers, they may be hard to obtain.
Hong Kong LLC’s most suitable target groups
Hong Kong LLC is suitable for people who:
- Want to do business with China but need a stable banking infrastructure
- Live in a tax-friendly country (Vietnam, Portugal, Spain) and want to optimize taxes with Hong Kong LLC
- Are digital nomads and have no residency to be taxed at.
5 – US LLC alternative: Cyprus LLC vs US LLC
Cyprus LLC structure: taxes, costs, dividends
Cyprus LLC taxes
Cyprus LLC has three kinds of tax:
- Corporate tax: is 12.5% and one of the lowest in the EU
- Income tax: is up to 35%
- Dividend tax: is 0% in Cyprus as a non-dom.
Cyprus LLC costs
The costs for Cyprus LLC can be divided into two blocks:
- Setup cost can be up to 5000 USD
- Maintenance cost can be up to 3000-5000 USD per year
Cyprus LLC pays out to shareholders:
Most people who have Cyprus LLC also live in Cyprus. They try to keep their CEO income very low (500-1000 USD per month) in order to keep the income tax at a low rate.
At the end of the year, they pay themselves dividend tax, which is then not taxed.
Cyprus LLC’s advantages and disadvantages
The advantages of Cyprus LLC are
- It is in the EU and it can make B2B invoicing easier
- If you choose Cyprus as your country of residency, this can be one of the tax-friendliest places in Europe
The disadvantages of Cyprus LLC are
- High setup and maintenance cost
- You have to live in Cyprus 2 months per year to keep your non-dom status
Cyprus LLC’s most suitable target groups
Cyprus LLC is the best for people who live in Cyprus and want to obtain a long-term visa to live there. In terms of tax optimization, it will not be as efficient as US LLC as digital nomads.
However, a US LLC would probably taxed as income if you live in Cyprus and this would be taxed up to 35%.
There could be another way to further optimize your tax as a business owner in Cyprus. You could have an offshore company in Hong Kong and save up to 4% on corporate taxes. We will discuss this topic further in a different article.
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