US LLC for SaaS and Software Startups
Founders who build software from outside the US often ask whether to form a US LLC to charge US customers, sign contracts and hold the product's intellectual property. An LLC can suit a bootstrapped product, but investors and tax rules can point elsewhere. This guide sets out the trade-offs. It is general information, not legal or tax advice.
Start Formation in United States →Why software founders form a US company
- US customers and business buyers often prefer to contract with a US company
- Payment providers ask for a registered business and an EIN
- The company can own the code, the brand and the contracts, separately from you
- It gives you a legal entity to sign customer terms, data-processing terms and vendor agreements
LLC or corporation
A US LLC is simple to run and taxes profits at the owner level, which suits a product funded from revenue. If you plan to raise venture capital, investors usually expect a corporation, most often a Delaware one, and some will ask an LLC to convert.
Many founders start with an LLC and move later. Talk to a tax adviser before you do, because converting has tax effects.
Intellectual property
The product's code and brand should belong to the company, not to individual founders or freelancers. That usually means written agreements assigning the work to the company, and it matters most before you sell the business or take investment.
A lawyer can draft these; a formation filing does not do it for you.
Sales tax on software
Whether software or SaaS is taxable in the US depends on the state, and states treat it differently. A state can require you to collect sales tax once your sales into it pass its threshold, and some states tax software services while others do not.
Confirm the rules for the states where your customers are, or use a tax adviser.
Privacy and data
- If you have customers in the EU or UK, their data-protection rules can apply to you wherever you are based
- Enterprise customers often ask for data-processing terms and security answers
- US state privacy laws may apply depending on your customers and your volume of data
- A US LLC does not exempt you from any of these
Income tax and yearly filings
A single-member LLC owned by a non-US person is generally disregarded, and it usually files Form 5472 with a pro forma Form 1120 each year, even without revenue. Whether the business owes US income tax depends on the source of its income and on whether it carries on business in the US, and your home country may also tax the profits.
With CORPYO
CORPYO forms US LLCs remotely in Wyoming and Delaware, and can obtain the EIN and act as the registered agent. If you are weighing a corporation for investors, take advice first. Banking, payment accounts and tax registrations are separate decisions that CORPYO does not promise. This page is general information, not legal or tax advice.
Steps to set up a US LLC for a software product
- 1Decide whether you expect to raise venture capital
- 2Choose the state and form the LLC or corporation
- 3Apply for the EIN
- 4Assign the code and brand to the company in writing
- 5Set up payments and a business bank account, where a provider accepts you
- 6Check sales tax and privacy duties, and diarise the yearly filings
Frequently Asked Questions
Should a SaaS startup be an LLC or a corporation?
An LLC is simpler if you fund the product from revenue. If you plan to raise venture capital, investors usually expect a corporation.
Can I convert an LLC to a corporation later?
Yes, and many founders do. Take tax advice first, because conversion has tax effects.
Is SaaS subject to US sales tax?
It depends on the state. Some tax software services and some do not, and thresholds apply.
Who owns the code, me or the company?
It should be the company, through written assignment agreements. Ask a lawyer to draft them.
Does a US LLC cover GDPR duties?
No. If you serve customers in the EU or UK, their data-protection rules can apply wherever you are based.
Can I get a Stripe or bank account for the LLC?
You can apply. Each provider decides, and no formation service can promise one.
Related guides
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