+420 733 480 880   (EN, DE, CZ, NL)

What is a US LLC?

There is no reason to be afraid of opening an LLC in the USA - as long as you understand what you can do with it, what your obligations are and how you should pay taxes.

Limitations - what it is

  • A LLC is *not* considered a company in most cases. A company is an independent legal entity with one or more directors / shareholders.
  • A LLC is owned by 1 or more persons and / or companies. Any mix of (foreign) persons and companies is possible.
  • A LLC is seen, according to the IRS, as either sole proprietorship, a partnership, a C-corp or an S-corp. The first 2 forms are most common, and arguably, also the simplest to deal with from tax perspective if it consists of 1 or more persons.
  • A LLC can relatively easily be transferred to another person or persons.
  • You do not have to be resident in / citizen of the USA in order to have a US LCC.
  • With an LLC you can have customers abroad, use foreign currencies and even foreign bank accounts
  • A LLC is very good for digital nomads / remote workers in case they move around a lot. The idea is that the LLC (to the customers) is the stable base, and then depending in which country you are, you deal with the taxation in that particular country.

Comparison between a US LLC and a Czech Trade License / SRO

  • In case the LLC is sole-proprietorship, it is very comparabe to a Czech Trade License and is much easier, cheaper and faster to set up than an SRO
  • You don't take out salary from an LLC. You are taxed on the business profits (not dividends!)
  • More than 95% of our clients really do not need an SRO for the type of business they do. If for some reason a Trade License is not a good choice, a LLC might be
  • It is possible to have a Trade License and simultaneously be employee, have an LLC or a business abroad.
  • In most cases, an LLC requires simple single-entry accouting.
  • You'll have to comply to FBAR regulations in case you are US citizen, greencard holder, resident alien or dual citizen (that *can* be a bit tricky).
  • With an LLC you can use a business name other than your name - of course it can't conflict with an existing business
  • Getting rid of an LLC is a lot less complicated / expensive than getting rid of an SRO.
  • With an LLC you can pay other (foreign) freelancers / self-employed persons / companies
  • You can't get a Czech Business Visa based on an US LLC, but you *can* based on a Trade License.
  • Czech Tax Offices do not really know what an LLC is - and actually, it can be a good idea to have both a Czech Trade License and a US LLC.

Trade License, LLC, SRO or another Business Type - What to Choose

If you are new to Czech Republic and / or entrepreneurship - don't complicate your life with an SRO or some other legal entity abroad before you really know what you're doing!

In case you have your finger on the order button already, don't click yet. Let us first explain why you probably don't need one.

Keep it simple. When you really will be making millions (hopefully in near future), we can always look for ways to optimize - but start as self-employed person with a Živnostenský List ('Živno' for short) or LLC or both. You will not regret it.

There are plenty of expat consultants / lawyers that advise you to open a company (Czech SRO, Estonian Company, GmbH) because 'it is better', usually without specifying why. Also some LLC Registrars charge insane amounts of money for just (only) registering an LLC. Monetary gain of the seller is a common motivation, and usually they won't help you with your accounting / taxes / questions.

Business Consultation

The best thing you can do before setting up any kind of freelance activity / business / company is... to book a consultation. Really. I'll explain the different options and (most likely) will prevent you from spending your money unnecessarily. Here is the link: Business Consultation for Foreigners.

Continue to: Business Consultation for Foreigners