US tax for an owner abroad · A term for founders abroad
What is self-employment tax?
US Social Security and Medicare tax on business profit, owed by US citizens and residents; a non-resident alien generally doesn't pay it.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 90 of 105 in the glossary, filed under S.IRS: Publication 519, tax guide for aliens
Self-employment tax, for a founder abroad.
A US citizen or resident who earns business profit, including through a single-member LLC, pays self-employment tax on it to fund Social Security and Medicare, on top of income tax. It's the main reason American owners worry about how their LLC is taxed.
A non-resident alien generally isn't subject to it, the IRS says, unless a social security agreement between the US and their country says otherwise. So the sales pitch that an S-Corporation saves self-employment tax has nothing to offer a founder abroad.
Sources: IRS: Publication 519, tax guide for aliens.
Read next · guide · 5 minLLC or C-Corporation for a founder outside the United StatesWhat founders ask next.
- Does a non-resident owner of a US LLC pay self-employment tax?
- Generally no. IRS Publication 519 says non-resident aliens aren't subject to it, unless an international social security agreement applies.
03 · See also
- US tax for an owner abroadNon-resident alienFor US tax, someone who isn't a US citizen, doesn't hold a green card and doesn't pass the substantial presence test; most founders abroad are one.Read the term
- The company itselfS-CorporationA tax election that lets a US corporation or LLC pass its profit through to its owners; not available if any owner is a non-resident alien.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
- 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
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