Should You Have an LLC as a Digital Nomad?

If you’re embracing the digital nomad lifestyle — or are planning to join the growing number of location-independent professionals in the future — you’ve likely wondered whether forming an LLC is a good idea for your situation.

While an LLC can offer advantages in terms of liability protection and tax benefits, there’s nothing about this business structure that makes it inherently valuable to a digital nomad. Instead, your decision should be based on specific factors like your income level, risk exposure, and long-term business goals.

In this Should You Have an LLC as a Digital Nomad guide, we’ll explore the key considerations of forming an LLC while living the nomadic lifestyle in order to help you decide if it’s the right move for you.

Should I Form an LLC as a Digital Nomad?

While the standard benefits of an LLC are relevant to your decision, your interest in forming one as a digital nomad will likely extend far beyond just basic liability protection or wanting to appear more professional.

In fact, many of our digital nomad readers are interested in forming an LLC for one of two main reasons:

• To make tax savings while working and living abroad 
• To qualify for digital nomad visas they otherwise wouldn’t

Unfortunately, however, LLCs are unlikely to help you out very much in either of these regards. 

For instance, since US citizens are required to “pay estimated tax in the same way as those residing in the United States” — regardless of where in the world they’re living — the tax burden faced by digital nomads is largely determined by where they live, rather than whether or not they have an LLC.

This is because some countries (e.g., Spain) will also require you to pay local taxes on your income, while others (e.g., Mexico) have tax treaties with the US to avoid this double taxation.

Similarly, forming an LLC in order to get around requirements for applicants to be a W-2 employee for the sake of some digital nomad visas also isn’t very viable as typical LLCs aren’t able to hire members (i.e., you and any other owners) as their employees.

Factors to Consider 

As demonstrated above, there are no inherent benefits associated with forming an LLC just because you’re a digital nomad.

As such, the decision of whether or not to form an LLC as a digital nomad should largely depend on your specific circumstances, including:

How Likely You are to Face Legal Disputes in Your Industry

If you’re in a high-risk industry — like consulting, software development, or content creation — having the liability protection of an LLC becomes far more valuable as clients are more likely to sue for issues like missed deadlines and negligence (often for more serious amounts too).

However, if you’re primarily involved in low-risk work like freelance writing or virtual assistance instead, setting up an LLC for your operations is unlikely to be worth the hassle. 

The Amount of Income You Generate

Going hand in hand with the previous factor is the amount of income you make — as the more you earn, the more you could potentially lose if faced with any liabilities or lawsuits.

That being said, high income alone isn’t a sufficient enough reason to form an LLC; you’ll need to weigh this up alongside the amount of liability your business exposes you to when deciding if this makes sense.

Your Intentions to Scale the Business

If you plan to eventually hire employees, have any business partners, or significantly scale your business in future, an LLC will likely be worth looking into as it provides a solid foundation for this growth.

Among other reasons, this is because this legal structure will make it possible to hire US-based employees, open business bank accounts, and establish credibility with larger clients — all of which become essential as your business expands beyond solo operations.

Whether You Will Need Business Credit

The final key factor to weigh up when considering whether to set up an LLC is if you expect to need business financing in the near future — for example, if you’ll need to make significant investments in equipment, software, or marketing.

Since LLCs are separate legal entities, they make it far easier for you to secure this financing as you can build business credit independently from your personal credit history. Similarly, lenders are also often more willing to offer more favorable lending terms to businesses because they appear more credible. 

Can You Start an LLC as a Digital Nomad

Several of our readers have asked us about whether they could have an LLC being based outside of the US. The good news for digital nomads considering this path is that LLC formation is highly accessible.

You don’t need to be a U.S. citizen (or even a permanent resident) to form an LLC here, as anyone of legal age can create one, regardless of their nationality.

While there are no strict limitations on who can own an LLC in the US, there are some practical considerations to keep in mind, with the main ones being:

State-Specific Rules

Since the rules surrounding the formation and treatment of LLCs can vary greatly depending on the state you choose, you’ll need to carefully research and consider your options before getting started.

For example, while LLCs in Mississippi are quite cheap due to incredibly low initial filing fees ($50) and no annual fees, the opposite is true in California — where LLCs must pay an annual franchise fee of $800.

Sadly, cost isn’t the only factor to weigh up when making this decision, as states can also vary in their business friendliness due to variations in other regulations (e.g., taxation levels and privacy laws).

Registered Agent

Another limiting factor to bear in mind is that you’ll need a physical business address located in the US state you choose before you can form an LLC. 

Since you likely won’t have a permanent physical presence there as a digital nomad, you’ll have to work with a registered agent service in your chosen state — which will increase your costs slightly due to the annual fee they charge.

Professional Certifications

If you offer a specialized professional service that requires certification (e.g., accounting services or legal consulting), you’ll need to hold the relevant U.S. qualification or license before you can establish an LLC based in this country.

It’s worth noting, however, that variations in regulations regarding professional licensing can mean that the strictness surrounding this requirement varies greatly based on your industry and the state you choose to form in.

Tax Identification

As a non-resident without a Social Security Number (SSN), you’ll need to obtain an Employer Identification Number (EIN) before you can set up your LLC.

While neither citizenship nor residency is needed to obtain this form of tax identification, it’s an extra step you’ll need to factor into your decision.

Should You Have an LLC as a Digital Nomad FAQs