LLC (Limited Liability Company)
A Limited Liability Company (LLC) is a U.S. legal structure that combines features of a corporation and a partnership, offering limited liability to its members and, by default, pass-through taxation.
Definition
A Limited Liability Company (LLC) is a U.S. legal structure first created in Wyoming in 1977 and now available in all 50 states. It combines the limited liability of a corporation with the tax flexibility of a partnership. Members (the LLC equivalent of shareholders) are not personally liable for the debts of the company beyond their contributions. By default, an LLC is fiscally transparent: profits and losses flow directly to the members' personal returns, with no tax at the entity level.
In plain English
If you are a French executive who wants to sell in the United States, sign local contracts or hire a U.S. salesperson, the LLC is often the first reflex. It can be formed in a few days, costs between 100 and 500 dollars depending on the state, and does not require you to hold a board or keep formal minutes the way a corporation does. You can be the sole member (single-member LLC) or have several. Default pass-through taxation avoids double taxation: the company does not pay federal income tax, and you report results on your personal return. Caveat: for a French tax resident, this transparency creates serious qualification issues (France does not always recognize the transparency of an LLC), and the IRS may treat the LLC as a corporation if you so elect on Form 8832.
RWM transatlantic case study
A French founder who forms an LLC in Delaware or Wyoming to host U.S. operations must choose between three tax treatments: disregarded entity (the default for a single-member LLC), partnership (multi-member) or corporation (by election). The France-U.S. tax treaty of 31 August 1994 does not explicitly address LLCs, which creates friction: the French tax authority often treats a fiscally transparent U.S. LLC as an opaque company and denies the foreign tax credit. We frequently recommend electing C-Corp treatment for the LLC via Form 8832 as soon as a French tax resident holds equity, or using a Delaware C-Corp directly. Formation goes through the filing of a Certificate of Formation with the Secretary of State (section 18-201 of the Delaware LLC Act), followed by drafting an Operating Agreement and applying for an EIN with the IRS.
Points to watch
- Single-member LLC: disregarded entity by default, but still an employer for payroll purposes.
- French tax resident on the cap table: serious risk of double taxation absent the C-Corp election.
- LLCs are unpopular with U.S. VCs, who prefer to invest in a Delaware C-Corp.
- The FinCEN BOI Report applies to nearly all LLCs since 1 January 2024.
- An Operating Agreement is required as a practical matter, even where state law does not formally mandate it.