United States – Self-Employment

How does self-employment work for expats in the United States?

Foreign nationals are not barred from self-employment in the United States. In essence, self-employment means operating your own venture or working as an independent contractor — you answer to yourself rather than to an employer. The catch is that immigration law, not business law, determines whether you are legally permitted to work in the US at all, whether for someone else or for yourself, and not every visa category covers self-employment.

For foreign nationals, finding a viable path to self-employment means identifying and securing the appropriate visa category. Lawful permanent residents — green card holders — enjoy the freedom to work in any capacity, including running their own businesses. Those without permanent residency must work within specific visa frameworks designed to accommodate entrepreneurial activity.

No standalone visa for self-employment exists in the US system. Categories such as the E-2 treaty investor visa require applicants to demonstrate a genuine commercial enterprise rather than one created purely to support the owner’s livelihood — in other words, the business must not be “marginal.” In practice, visa options do not neatly accommodate straightforward self-employment without a broader business purpose that includes creating opportunities for others, and foreign nationals should ensure their business plan reflects this.

Freelancers, consultants, and others who work independently without registering a formal business structure are treated as Sole Proprietors for US tax purposes. They report business profits and allowable deductions using Schedule C attached to their Form 1040. The approach mirrors that of a sole trader in countries such as the UK or Australia, where personal income tax applies directly to business profits — but the US adds a separate self-employment tax layer that has no direct equivalent in many other systems.

What are the different self-employment and business structures available in the United States?

Selecting the appropriate legal structure is among the most consequential early decisions facing any founder or self-employed person in the US. The main options diverge substantially in how they handle liability exposure, taxation, and administrative demands.

Sole Proprietorship: Like an LLC, a sole proprietorship is a flow-through entity in which all business profits appear on the owner’s personal tax return. It is typically the simplest and least costly structure to operate, but it provides zero liability protection — if the business incurs debts or faces a lawsuit, the owner’s personal assets are fully exposed.

Limited Liability Company (LLC): LLCs share certain characteristics with corporations, though profits distributed to owners are not subject to corporate-level tax — avoiding the double taxation that applies to standard corporations. Because the LLC is a legally separate entity from its owners, personal assets such as bank accounts and property are shielded from business creditors. This combination of liability protection and flexible tax treatment has made the LLC the structure of choice for the majority of expat founders.

LLC tax classification: A Single-Member LLC is treated by default as a disregarded entity, meaning its profits and losses flow directly to the owner’s individual return. A Multi-Member LLC defaults to partnership treatment, requiring an annual partnership return (Form 1065). Both types can elect to be taxed as a C-corporation or S-corporation, which may deliver tax advantages depending on the business’s income profile and ownership structure.

C Corporation: The federal corporate income tax rate is currently 21%, with additional state corporate taxes levied in the state of incorporation at rates that differ considerably by jurisdiction. Unlike the pass-through treatment available to LLC owners, corporation profits face taxation at two levels: the entity pays tax on its earnings, and shareholders pay personal income tax again when those profits are distributed as dividends.

S Corporation: An S-Corp election may meaningfully reduce the self-employment tax burden for owners drawing consistent high income. An LLC can make this election by submitting IRS Form 2553 to be taxed as an S-corp, potentially lowering the overall tax bill. It is important to note, however, that S corporations carry ownership restrictions and are generally unavailable to non-resident aliens.

How do you register as self-employed in the United States?

The precise process for establishing yourself as self-employed or forming a business varies by state, but the federal-level steps are consistent. The following outlines the general sequence for a sole proprietorship or single-member LLC:

1. Confirm your immigration status permits work. Before taking any steps, verify that your visa or residency status authorises self-employment or business ownership in the US. If there is any doubt, engage an immigration attorney before proceeding further.
2. Choose a business structure. Determine whether a sole proprietorship, LLC, or corporation aligns with your circumstances. This decision is not irreversible — many founders begin as sole proprietors and transition to an LLC as the business grows.
3. Select a state for registration. Your choice of state can have meaningful consequences for taxes, legal protections, and ongoing filing requirements. Delaware is well regarded for its robust business statutes and offers no state corporate income tax for non-resident owners. Wyoming is favoured for strong asset protection, minimal fees, and no state income tax. Nevada similarly imposes no corporate or personal income tax.
4. File Articles of Organization (for an LLC) with the state. Registering an LLC involves selecting a state, choosing a business name, appointing a registered agent, and submitting the relevant formation documents. State filing fees differ and change periodically — confirm the current amount directly with your chosen state’s Secretary of State office.
5. Appoint a registered agent. Most states mandate a registered agent with a local address to receive official legal correspondence on the company’s behalf. For owners based outside the US, this is typically provided by a professional service, with annual costs generally falling between $50 and $300 (as of 2025) — verify current pricing with your chosen provider.
6. Obtain an Employer Identification Number (EIN). An EIN is a federal tax identification number required for opening business bank accounts and fulfilling IRS obligations. Foreign-owned entities cannot apply online; instead, you must submit Form SS-4 by mail or fax, use a third-party designee holding a US address, or work with a CPA who can manage the application on your behalf.
7. Register for any state or local business licences. Certain industries and localities require additional permits or licences. Check with the relevant state authority to identify any requirements specific to your sector and location.
8. Establish accounting and tax compliance processes. Because no employer withholds taxes on your behalf, you are solely responsible for managing tax payments throughout the year. Most self-employed individuals meet this obligation through quarterly estimated payments using Form 1040-ES.

Depending on the state and whether expedited processing is requested, LLC formation can be completed in anywhere from a few days to a few weeks. Always confirm current filing fees and expected processing times directly with the relevant Secretary of State office, as both change frequently.

How do you set up a company in the United States as an expat?

No federal legislation prevents foreigners from forming a US LLC. Both the IRS and state governments permit non-residents to establish and manage LLCs without being physically present in the country. The critical variables are your income source, your chosen structure, and whether your LLC is engaged in a US trade or business.

1. Choose your entity type. Foreign nationals may opt for either a C-corporation or an LLC. The overwhelming majority of expat founders select an LLC, drawn by its structural flexibility and pass-through tax treatment.
2. Select and reserve a company name. The name you choose must be distinguishable from existing registrations in your chosen state. Use the relevant Secretary of State’s online database to check availability before submitting any paperwork.
3. Choose a state of formation. As of 2026, Wyoming remains one of the most cost-effective states for LLC formation, with affordable startup and annual fees, anonymous filing options, and no state income tax — attributes that appeal especially to non-resident aliens operating online businesses. Delaware continues to attract investor-backed ventures for its established legal framework, while businesses with a physical presence in another state may need to register there as well.
4. Appoint a registered agent. A US-based registered agent in your chosen state is required to receive legal notices and official correspondence on the company’s behalf. Numerous online services offer this function for a reasonable annual fee.
5. File Articles of Organization or Incorporation. Submit the appropriate formation documents to the state, together with the relevant filing fee. Costs vary considerably — Wyoming’s LLC filing fee is among the country’s lowest (confirm the current figure at the Wyoming Secretary of State website). Delaware levies a separate annual franchise tax; consult the Delaware Division of Corporations for current figures.
6. Obtain an EIN from the IRS. File Form SS-4 to obtain your Employer Identification Number. Foreign nationals who lack a US Social Security number must apply by mail or fax rather than online. Mail processing can take several weeks, so apply early.
7. Open a US business bank account. A dedicated US business account is essential for managing transactions and maintaining clear financial records. Most banks require an EIN, evidence of LLC registration, and identification. Many non-resident LLC owners also integrate payment processors such as PayPal or Stripe to handle cross-border payments efficiently.
8. Understand ongoing compliance obligations. Foreign-owned LLCs classified as disregarded entities are required to file Form 5472 each year alongside a pro forma Form 1120 as a cover document — even in years with no income. Failure to file Form 5472 attracts penalties beginning at $25,000 per year. Retain a US-qualified CPA or attorney with international tax experience to keep your compliance current.

There is no minimum capital requirement for an LLC, nor any requirement for a local director or shareholder — a foreign national may serve as the sole owner and manager. However, if you intend to be physically present in the US and work from there, you must hold the appropriate immigration status; company formation does not itself confer work authorisation.

Can you work as a digital nomad in the United States?

The United States has not introduced a dedicated digital nomad visa. While countries such as Portugal, Germany, and Costa Rica have developed specific pathways for remote workers in recent years, the US has no comparable programme for location-independent professionals who wish to live and work on American soil for foreign clients or employers.

For those hoping to spend time in the US while working remotely, the most commonly used options are:

• Visa Waiver Program (ESTA) or B-1/B-2 visitor visa: Nationals of eligible countries can enter the US under the Visa Waiver Program for up to 90 days without a visa. The B-1 business visitor visa permits foreign nationals to enter for certain business-related activities, and freelancers or self-employed individuals in particular fields may be able to conduct limited business while on a B-1. However, receiving remuneration from US sources or carrying out substantive work for clients while admitted as a visitor is generally impermissible and poses legal risk. Seek qualified immigration advice before relying on this route.
• E-2 Treaty Investor Visa: Entrepreneurs from qualifying treaty countries can use the E-2 visa to operate a US business funded by a substantial capital investment. The visa is renewable in two-year increments provided the business remains active. While no fixed minimum investment is codified, most approved applicants have invested between $50,000 and $200,000, calibrated to the overall cost of the enterprise. This visa is tied to a genuine operating business, not merely to remote work performed for overseas clients.
• O-1A Visa (Extraordinary Ability): The O-1A visa is available to foreign nationals who can demonstrate extraordinary ability in fields such as science, the arts, education, business, or athletics, and who have received sustained national or international recognition for those achievements. It provides a route to working as an independent contractor in the US for appropriately qualified individuals.
• International Entrepreneur Parole (IEP): The IEP programme offers startup founders a temporary mechanism to live and work in the US when they do not meet the criteria for conventional visa categories. It is designed to allow entrepreneurs to concentrate on developing their companies while providing an alternative to established visa routes. To apply, founders submit Form I-941, with a filing fee of $1,200 (as of 2025 — verify at uscis.gov for the current amount). Initial parole is granted for up to 30 months, with a single additional period of up to 30 months available upon application.

The overall picture for digital nomads is that the US remains among the more restrictive advanced economies when it comes to long-term stays for remote workers. Those wishing to base themselves in the country for extended periods will typically need to qualify under one of the investor or entrepreneur visa pathways described above, or secure a different form of work authorisation. An immigration attorney can provide advice tailored to your individual situation.

What taxes and social contributions apply to self-employed expats and business owners in the United States?

The US tax framework is particularly demanding for self-employed individuals, largely because it stacks a dedicated self-employment tax on top of ordinary income tax. Unlike salaried workers — whose taxes are deducted by employers under withholding systems comparable to PAYE arrangements in the UK, Ireland, or Australia — those who are self-employed must actively manage their own tax obligations throughout the year.

Self-Employment Tax (SE Tax): This tax funds US Social Security and Medicare. Whereas employees share these contributions with their employer, self-employed individuals are liable for both halves. The combined rate stands at 15.3% of net earnings — 12.4% towards Social Security up to the annual earnings ceiling, plus 2.9% for Medicare on all net income. As of 2025, the Social Security portion applies to income up to $176,100, and an additional 0.9% Medicare surtax applies to earnings exceeding $200,000 for single filers or $250,000 for those married and filing jointly.

SE Tax filing threshold: The standard income thresholds that trigger a US tax return do not govern self-employed individuals. The IRS mandates a return from any self-employed person whose annual net earnings reach $400 or more — a threshold that is strikingly low by international standards.

Federal Income Tax: Net business profit is subject to the same progressive federal income tax rates that apply to all US taxpayers. For 2025, rates range from 10% to 37% depending on total income and filing status — consult irs.gov for current bracket information.

Foreign Earned Income Exclusion (FEIE): The FEIE and the Foreign Tax Credit (FTC) are two of the most powerful tools available to expat taxpayers. In 2025, the FEIE allows up to $130,000 of foreign earned income to be excluded from US federal income tax, while the FTC offsets US tax liability dollar-for-dollar against foreign taxes paid. Critically, however, neither mechanism reduces self-employment tax. Many expats are taken aback to discover that they can face a self-employment tax bill of thousands of dollars even when their US income tax liability is zero.

Totalization Agreements: Some self-employed expats escape US self-employment tax entirely through international totalization agreements. These bilateral arrangements, designed to prevent dual social security coverage, mean that if you pay into a social security system in a country with which the US has such an agreement, you may be exempt from the US self-employment tax on the same income. The current list of agreement countries is published at ssa.gov.

Quarterly Estimated Payments: Self-employed expats are generally required to make estimated tax payments four times a year to avoid underpayment penalties. A common practice is to set aside 25–30% of each payment received to cover the combined income and self-employment tax obligations.

Corporate Tax: The federal corporate income tax rate is 21% as of 2025. State corporate taxes are levied separately and differ significantly from one jurisdiction to another, payable in the state where the corporation is registered.

Sales Tax: Unlike many countries that operate a national value-added tax or goods and services tax, the US has no federal equivalent. Sales tax is imposed exclusively at the state and local level, with widely divergent rates and rules across jurisdictions. The concept of “sales tax nexus” may require your LLC to collect and remit sales tax in any state where it maintains employees, holds inventory, or has other qualifying connections. A US tax professional can clarify your specific obligations.

Are there any incentives, grants, or programmes to encourage expat entrepreneurs in the United States?

Rather than operating targeted government-run startup immigration schemes in the manner of Canada or Singapore, the US relies on a blend of visa pathways, federal tax provisions, and a deep private-sector ecosystem to draw foreign entrepreneurs.

International Entrepreneur Parole (IEP): The IEP programme offers startup founders a temporary mechanism to live and work in the US when standard visa categories are not accessible, enabling entrepreneurs to concentrate on building their companies. To qualify under the International Entrepreneur Rule, the entity must conduct lawful business in the United States, must have been formed within the five years immediately preceding the initial filing, and must present strong prospects for rapid growth and job creation.

EB-5 Immigrant Investor Programme: Foreign investors who commit at least $1,050,000 to a new commercial enterprise — or $800,000 in a targeted employment area or qualifying infrastructure project — and who create or preserve a minimum of ten full-time positions for US workers, and can demonstrate that their investment capital was lawfully sourced, may qualify for a direct path to permanent residency. The green card covers the investor, their spouse, and unmarried children under 21. Refer to the USCIS EB-5 page for current requirements.

EB-2 National Interest Waiver (NIW): The EB-2 NIW is a green card route that enables entrepreneurs, researchers, and business leaders to pursue permanent residency without requiring an employer to sponsor them. Applicants may self-petition provided they can establish that their work or enterprise offers meaningful benefit to the US economy or society.

Small Business Administration (SBA): The US Small Business Administration administers loan programmes, grants, and business development resources for small enterprises. Some SBA loan products are accessible to lawful permanent residents — consult the SBA website for current eligibility criteria, which are subject to change.

State-Level Incentives: Many US states independently offer incentives tailored to startup founders and foreign investors, including tax credits, designated enterprise zones, and grants for innovation-driven businesses. States such as Delaware, Texas, Florida, and New York have developed particularly strong ecosystems oriented towards attracting and nurturing entrepreneurs. Contact your target state’s economic development authority to explore the most current offerings.

Federal Tax Deductions for the Self-Employed: The home office deduction can be valuable for expats — you may deduct the proportion of your foreign residence used exclusively for business purposes. Additional deductions available to self-employed individuals include health insurance premiums, contributions to retirement plans such as a Solo 401(k) or SEP IRA, and half of the self-employment tax paid.

What are the practical challenges of being self-employed or running a business in the United States?

Even though the US presents few legal obstacles to foreign entrepreneurs, a number of practical difficulties are worth anticipating before you get started.

Banking access: Accessing US banking services is not always simple for non-residents. Financial institutions are subject to stringent know-your-customer and anti-money-laundering rules, and some impose additional documentary requirements or demand an in-person visit to a US branch before opening an account for a foreign-owned LLC. Fintech alternatives — including Mercury, Relay, and Wise Business — have gained traction among non-resident LLC owners as a result, though you should confirm current eligibility requirements directly with each provider before relying on them.

Complex tax compliance: The interplay between US tax law, self-employment tax, the FEIE, and the tax obligations of your country of residence produces one of the more intricate personal tax situations encountered anywhere in the world. Working with an expat-specialist CPA or Enrolled Agent from the outset helps ensure you benefit from applicable treaty provisions, file extensions on time, and access penalty relief where available. The consequences of failing to comply can be severe — the penalty for not filing Form 5472, for example, begins at $25,000 per year.

State-level variation: Non-resident owners must remain alert to obligations that arise at the state level. Tax laws and reporting requirements differ significantly from state to state, and some jurisdictions impose distinct filings or conditions on non-resident individuals conducting business within their borders. The compliance burden therefore depends substantially on where you incorporate and where your business activities physically take place.

Health insurance: Self-employed individuals must arrange and fund their own health coverage. Unlike countries with universal public healthcare systems — such as the UK’s NHS or Australia’s Medicare — the US offers no equivalent safety net. Private health insurance represents a material ongoing cost that must be factored into financial planning from the outset.

Immigration-business interaction: Changes to your visa or immigration status can have immediate and direct consequences for your legal right to work, manage a business, or remain in the country. Visa expiry, denial of renewal, or revocation can all affect your capacity to operate a US-based enterprise. Maintaining regular communication with an immigration attorney is especially important when your visa is linked to the business itself, as is the case with the E-2.

Invoicing and contracts: US commercial relationships are governed to a high degree by written agreements. Having properly drafted contracts in place with clients and suppliers is strongly advisable. For cross-border transactions, contracts should explicitly address payment currency, governing law, and dispute resolution mechanisms. US clients typically settle invoices via ACH transfer, cheque, or wire, while SWIFT transfers are standard for international cross-border payments.

Professional advisers: Given the intricacy of US immigration law, the layers of federal and state tax obligations, and the ongoing compliance demands, engaging both an immigration attorney and a US-qualified CPA from the very beginning should be treated as a necessity rather than a luxury.

Frequently asked questions

Can I be both employed and self-employed at the same time in the United States?

It is legally possible to hold a work-authorising visa through a US employer while also operating a separate business, but whether this is permissible depends entirely on your visa category. Certain visa types confine you to work for the sponsoring employer only, and launching a side venture could breach your visa conditions. Before combining employment with self-employment, consult an immigration attorney to confirm you would remain in lawful status.

Do I need to be physically present in the US to own and run a US LLC?

No federal laws prevent foreign nationals from forming a US LLC, and both the IRS and state governments permit non-residents to establish and manage LLCs remotely. You can own and run a US LLC from outside the country, but if you intend to work physically on US soil, you must hold the appropriate immigration status — company ownership does not itself authorise you to work in the US.

How do I handle invoicing foreign clients from a US LLC?

You may invoice foreign clients in any mutually agreed currency, but your LLC’s accounts should generally be kept in US dollars for tax reporting purposes. Payments received in foreign currencies must be converted to USD using IRS-accepted exchange rates when declaring income. Maintain thorough records of the exchange rates applied to each transaction, as this documentation may be requested during an IRS audit. A practical approach is to keep a running spreadsheet logging each payment with the transaction date, foreign currency amount, rate used, and the USD equivalent.

What happens to my business if my visa status changes?

If your visa lapses or renewal is refused, your entitlement to remain in the US and work there ends, but the LLC itself — as a legal entity — does not automatically cease to exist. You may, however, lose your ability to actively manage or perform work for the business from within the US. It is advisable to seek guidance from both an immigration attorney and a CPA before any anticipated change in visa status, so you can plan ahead.

Is there a minimum investment requirement for the E-2 visa?

No statutory minimum investment amount is prescribed for the E-2 visa, but most successful applicants have invested between $50,000 and $200,000, scaled to the overall cost of the enterprise. The investment must be “substantial” relative to the total cost of setting up the business and must represent at-risk capital. Only nationals of countries with which the US holds a qualifying treaty are eligible, and the applicant must hold at least a 50% ownership stake. Always confirm current requirements at uscis.gov.

Will the Foreign Earned Income Exclusion eliminate all my US tax as a self-employed expat?

The FEIE can shelter up to $130,000 of foreign earned income from US federal income tax in 2025, and the Foreign Tax Credit offsets US tax liability against taxes already paid abroad. What neither provision can do is reduce self-employment tax. It is a common — and costly — surprise to learn that a self-employment tax bill of thousands of dollars may still be owed even when the US income tax liability has been reduced to zero.

Do I need a US Social Security number or ITIN to run a US business?

If you have neither a Social Security number nor an Individual Taxpayer Identification Number (ITIN), you will need to obtain an Employer Identification Number (EIN), which is sufficient for most LLC formation and banking purposes. If you have taxable US income and are required to file a personal tax return, you will additionally need an ITIN, obtained via Form W-7. Foreign nationals can apply through the IRS — see irs.gov for guidance on the application process.

Are there any US states that are particularly favourable for foreign-owned businesses?

Delaware, Wyoming, and Florida are among the most commonly chosen states for LLC formation by foreign nationals, each offering distinct cost and tax advantages. Wyoming provides privacy protections comparable to Delaware, along with no state personal income tax, making it particularly attractive for LLC registration. Nevada is similarly favoured by some founders given its absence of state income tax and limited annual reporting obligations. The optimal choice ultimately depends on the nature of your business activities, where you will operate, and your preferences regarding ongoing compliance requirements.