US tax for an owner abroad · A term for founders abroad
What is an independent contractor?
Someone who provides services on their own terms rather than as an employee; paid without payroll, and reported on Form 1099-NEC if in the US.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 59 of 105 in the glossary, filed under I.IRS: independent contractor or employee?
Independent contractor, for a founder abroad.
A contractor controls how and when the work is done, uses their own tools and can work for others; an employee doesn't. The IRS looks at control, and some states, California in particular, apply a stricter test. The label in the contract doesn't decide it; how the work actually happens does.
The difference decides whether the company owes payroll taxes and follows employment law, and for a foreign-owned company whether it has taken on a US presence. US contractors on genuine contractor terms don't create one; US employees can. Each US contractor paid $2,000 or more in a year gets a Form 1099-NEC.
The W-9 and the 1099-NEC are set out in paying a 1099 contractor from a foreign-owned LLC.
Sources: IRS: independent contractor or employee?.
Read next · guide · 3 minHiring US contractors from abroad: the W-9, the 1099-NEC, and the line you must not crossWhat founders ask next.
- Can my foreign-owned LLC hire US contractors?
- Yes, paid from its US account, with a W-9 on file and a Form 1099-NEC each January for anyone paid $2,000 or more by bank transfer or cheque.
- What if I need a US employee?
- That means payroll registration, state employment rules and a US presence. Most foreign-owned companies use an employer of record until they're ready.
03 · See also
- US tax for an owner abroadForm 1099-NECThe form a US company files for each US contractor it paid $2,000 or more in a year, due to the contractor and the IRS by 31 January.Read the term
- US tax for an owner abroadUS trade or businessRegular, continuous business activity in the US that makes a foreign person's connected income taxable there; decided by facts, not where you formed.Read the term
- US tax for an owner abroadDisregarded entityA single-member LLC the IRS ignores for income tax, treating its income as the owner's; it still files Form 5472 if the owner is foreign.Read the term
- US tax for an owner abroadPass-through taxationTax treatment where a company pays no income tax itself and its profit is taxed to its owners, as with an LLC or a partnership.Read the term
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