Starting a business can be exciting, but it can also be a little confusing, especially when choosing the right structure. One of the most popular and flexible options for new business owners is the LLC, or Limited Liability Company. But what exactly is it, and why do so many non-US resident entrepreneurs go with this route?
Whether you’re freelancing, selling online, or launching your first startup, understanding what an LLC is (and what it isn’t) can help you make smarter decisions for your business.
Let’s break it down in simple terms. When you're ready to take the next step, Adro can help you open a business account and access the US market.
What is an LLC?
LLC stands for Limited Liability Company. It's a business structure in the United States that combines the flexibility of a sole proprietorship with the protection of a corporation.
Think of it like this: an LLC gives you the freedom to run your business the way you want, while keeping your personal assets (like your savings or car) separate from your business finances.
Here’s what makes an LLC simple and appealing:
- Limited Liability Protection
If something goes wrong in your business, like a lawsuit or debt, your assets are usually protected. That means your home or personal bank account is safe.
- Flexible Structure
You can run your LLC alone (called a single-member LLC) or with partners (multi-member LLC). You also get to choose how you want to be taxed, either as a sole proprietorship, partnership, or even an S-corp.
- Less Paperwork
Compared to corporations, LLCs have fewer rules and filing requirements, making it easier to manage.
- Great for Small Businesses and Startups
Many freelancers, side hustlers, consultants, and international founders choose LLCs because they’re simple to set up and manage.
Why Many Businesses Choose an LLC
If you’re wondering why so many small business owners go with an LLC, it really comes down to one thing: it makes life easier. An LLC gives you legal protection without making you feel like you need a law degree to manage your company.
Here’s why entrepreneurs love the LLC structure:
- Personal Protection
Your savings, car, or home are protected if your business faces legal trouble or debt. This is called limited liability, one of the main reasons people choose LLCs.
- Tax Flexibility
LLCs usually don’t pay taxes as a business (unless you choose to be taxed differently). Instead, the income "passes through" to you, and you report it on your tax return.
- Simple to Run
No need for a board of directors, shareholders, or complicated meetings. You focus on running your business, not managing corporate rules.
- Open to Many Types of Businesses
Whether you’re a freelancer, online store owner, consultant, or startup founder, an LLC can usually fit your business model.
- Attractive for International Founders
Many entrepreneurs outside the US form LLCs to get easier access to US clients, payment systems, and even US business accounts like Adro’s business account.
Things to Keep in Mind (Pros and Cons)
While LLCs offer a lot of great benefits, it’s also important to know the full picture. Here are some simple pros and cons to help you decide if an LLC fits your business:
Pros of an LLC
- Easier Access to US Payment Systems
Forming an LLC helps international founders open US business bank accounts, receive USD payments from clients, and use US payment processors that often require a legal business entity.
- More Professional Image
Having “LLC” in your business name can build trust with customers, partners, and vendors, especially in the US market.
- Ownership Flexibility
LLCs allow ownership by individuals, companies, and even other LLCs, which makes it easier to structure partnerships and joint ventures.
- Privacy in Some States
Certain states (like Wyoming and New Mexico) allow LLC owners to stay anonymous, which helps protect privacy for some business owners.
- Simple Profit Distribution
LLC owners can split profits however they agree, without needing to issue stock or follow complicated ownership structures like corporations.
Cons of an LLC
- Self-Employment Taxes
By default, LLC owners may need to pay self-employment tax on profits (covering Social Security and Medicare). But take note, non-US resident owners that register an LLC may or may not need to pay taxes, depending on where and how they earn their income and their tax classification, single or multi-member LLC. Just because you have an LLC does not automatically mean you have tax obligations
- State-Dependent Rules
Formation costs, annual fees, and reporting requirements vary by state. Some states (like California and New York) are more expensive than others.
- Limited Fundraising
If you plan to raise large amounts of investment from venture capital or issue stock, a corporation may be a better fit.
- Less Anonymity
In many states, LLC ownership information becomes part of public records.
LLC vs. Other Business Structures
Before you start your LLC, it helps to know how it stacks up against other common business types. Let’s break it down:
Sole Proprietorship
What it is
The simplest business type. You and your business are legally the same.
Pros
A sole proprietorship is the simplest way to start a business. It usually doesn't involve much paperwork in most states, which makes it very easy to get going. You also have complete control over how your business runs.
Cons
If you don't set up your business properly, your personal assets, like your house or savings, might be in danger if your business owes money or gets sued.
Also, it can be hard to open a business bank account or work with some companies in the US if you don't have a formal business structure.
Corporation (C Corp)
What it is
A fully separate legal entity from its owners, with shareholders, directors, and formal structures.
Pros
Consider forming a corporation if you intend to seek significant investments, as venture capitalists frequently favor this structure. Corporations also simplify the process of issuing stock or shares and offer robust legal safeguards.
Cons
Forming a corporation presents several disadvantages, including an increased administrative burden requiring more paperwork and stricter regulatory compliance. Additionally, corporations typically face higher operating expenses compared to other business structures.
A significant drawback is the potential for double taxation, where profits are taxed at the corporate level and then again when distributed to shareholders as dividends.
S Corporation (S Corp)
What it is
A special type of corporation that avoids double taxation while still offering limited liability.
Pros
An LLC offers pass-through taxation. Additionally, some owners may experience payroll tax savings.
Cons
C-corporations face stricter regulations and compliance compared to LLCs, including limitations on shareholders, who must be US citizens or residents. They also require more extensive initial filings and ongoing maintenance.
LLC (Limited Liability Company)
The Balanced Option
Limited Liability Companies (LLCs) have many good things about them. They can protect your things if the business has debts or gets sued. The business's profits and losses can go straight to the owners without extra taxes for the company itself.
Setting up an LLC is usually easy. You can have different kinds of owners. Even people who don't live in the US can start an LLC. Also, LLCs can easily use business accounts in the US, like the ones Adro offers.
Final Thoughts
Choosing the right business structure is an important step, and for many people, an LLC offers the perfect balance of protection and flexibility.
An LLC might be a great fit if you want to keep your assets safe from business risks, while still having a simple way to manage your company. It's also a popular choice for international founders who want to serve US clients, get paid in USD, and work with US payment processors. On top of that, LLCs offer pass-through taxation, so you can avoid being taxed twice like some corporations.
And once you’ve set up your LLC, you’ll likely need a US business account to start receiving payments and managing your funds. Open your US business account with Adro and manage your LLC finances easily, securely, and 100% online, no matter where you are in the world.
Disclaimer: This article is for educational purposes only and should not be considered legal or tax advice. Please consult a professional for help with your specific situation.
