US Business Tax
Guide for NRIs

Choosing Your Business Entity

The entity you choose determines your tax treatment, liability protection, compliance burden, and ability to raise capital. For NRIs, immigration status adds another dimension — non-resident aliens face restrictions that resident aliens (H-1B, L-1, Green Card) do not.

State of Formation

Most NRIs choose Delaware (favorable business laws, privacy, Court of Chancery), Wyoming (no state income tax, low fees, strong privacy), or the state where they operate. Delaware charges a $300/year franchise tax for LLCs. Wyoming has a $60/year annual report. California charges an $800 minimum franchise tax regardless of income — avoid forming in CA unless you operate there.

For a detailed comparison, see LLC vs S-Corp vs C-Corp for NRIs. Use our Entity Comparison Calculator to model the tax impact.

Getting an EIN (Employer Identification Number)

An EIN is your business's tax ID number — the equivalent of an SSN for your entity. You need it to open a business bank account, hire employees, and file business tax returns.

How to Apply

• Online (IRS.gov) — instant issuance, but requires the responsible party to have an SSN or ITIN. Available Monday-Friday, 7am-10pm ET.
• Phone — call IRS at 267-941-1099 (not toll-free), Monday-Friday 6am-11pm ET. Best option for NRIs without an SSN. EIN issued during the call.
• Fax (Form SS-4) — fax to 855-641-6935. Response in 4-5 business days.
• Mail (Form SS-4) — mail to IRS, Attn: EIN Operation, Cincinnati, OH 45999. Takes 4-6 weeks.

Step-by-step walkthrough: How to Get an EIN as an NRI.

Tax Filing by Entity Type

Single-Member LLC (Disregarded Entity)

Not a separate tax entity — income and expenses reported on Schedule C of your Form 1040. Net profit is subject to both income tax and self-employment tax (15.3%). This is the simplest structure but offers no SE tax savings.

LLC Taxed as S-Corp

Files Form 1120-S (S-Corporation return) and issues a Schedule K-1 to you. You must run payroll and pay yourself a reasonable salary (subject to payroll taxes). Distributions above salary are not subject to self-employment tax — this is where the savings come from.

C-Corporation

Files Form 1120 and pays corporate income tax at a flat 21%rate. Dividends paid to shareholders are taxed again at the individual level (qualified dividends at 0/15/20%). This "double taxation" makes C-Corps less attractive for small businesses. However, C-Corps offer advantages for retained earnings, stock-based compensation (ISOs), and raising institutional capital.

Filing Deadlines

Self-Employment Tax

Self-employment tax is the business owner's equivalent of payroll tax — it funds Social Security and Medicare. As a sole proprietor or single-member LLC, you pay both the employer and employee shares:

• Social Security: 12.4% on net earnings up to $176,100 (2025 wage base)
• Medicare: 2.9% on all net earnings (no cap)
• Additional Medicare: 0.9% on net earnings above $200,000 (single) / $250,000 (MFJ)

Total: 15.3% on the first $176,100, then 3.8% above that. This is in addition to income tax. You can deduct the employer-equivalent half (7.65%) as an above-the-line deduction on your 1040.

Use our Self-Employment Tax Calculator to estimate your liability. For strategies to reduce SE tax, see S-Corp Election for NRIs.

Payroll Taxes

If you have employees (including yourself in an S-Corp), you must withhold and pay payroll taxes:

File Form 941 quarterly (due April 30, July 31, October 31, January 31) and Form 940 annually (due January 31) for FUTA. Payroll deposits must be made on a monthly or semi-weekly schedule depending on your total tax liability. Late deposit penalties range from 2% (1-5 days late) to 15% (10+ days late).

Estimated Tax Payments

Pass-through business income (LLC, S-Corp, partnership) flows to your personal return. Since there's no employer withholding on this income, you must make quarterly estimated payments to avoid underpayment penalties.

Quarterly deadlines: April 15, June 15, September 15, January 15. Safe harbor: pay at least 100% of prior year's tax(110% if AGI > $150K) or 90% of current year's tax to avoid penalties.

For C-Corps, estimated tax is calculated using Form 1120-W and paid in four installments of 25% of the annual estimated tax.

Use EFTPS (Electronic Federal Tax Payment System) for all business tax payments — it's free, tracks your payment history, and is required for corporate estimated taxes. See Quarterly Estimated Payments for NRI Businesses and our Quarterly Tax Calculator.

Bookkeeping Basics

Good bookkeeping is not optional — it's required by the IRS and protects your LLC's limited liability status. Commingling personal and business finances is one of the fastest ways to lose liability protection ("piercing the corporate veil").

Essential Practices

• Separate bank account — open a dedicated US business checking account. Mercury and Relay are popular with NRI founders (online setup, no minimum balance).
• Accounting method — most small businesses use cash basis (income recorded when received, expenses when paid). Accrual is required only if gross receipts exceed $30 million.
• Monthly reconciliation — match bank statements to accounting records every month. Catch errors early.
• Receipt retention — keep records for at least 3 years from the filing date (7 years for capital assets). Use apps like Dext or HubDoc for digital capture.
• Software — QuickBooks Online ($30-$90/month), Xero ($15-$78/month), or Wave (free). All are cloud-based and accessible from India.

For NRIs managing US books from India, see Bookkeeping & Accounting Requirements for US LLCs.

Sales Tax for E-Commerce

US sales tax is state-level only — there is no federal sales tax. Since the 2018 South Dakota v. Wayfair Supreme Court decision, states can require out-of-state sellers to collect sales tax if they have economic nexus: typically $100,000 in sales or 200 transactions in the state during a year.

Do You Need to Collect?

• Marketplace sellers (Amazon, Shopify, Etsy) — the marketplace collects and remits sales tax on your behalf in most states under marketplace facilitator laws. You typically do not need to register separately.
• Own website sales — you must register, collect, and remit sales tax in states where you exceed the economic nexus threshold.
• 5 states have no sales tax: Oregon, Montana, New Hampshire, Delaware, and Alaska (partially).
• SaaS/digital goods — taxability varies by state. Some states tax SaaS, others don't. Research state-specific rules.

For compliance tools and state-by-state details, see US Sales Tax for NRI E-Commerce Sellers.

Contractors vs Employees

Worker classification has significant tax and legal consequences. Misclassifying an employee as a contractor can trigger back taxes, penalties, and lawsuits.

Key Differences

Hiring Contractors in India

Many NRI business owners hire developers, VAs, or other contractors in India. For foreign contractors performing services entirely outside the US:

• Collect Form W-8BEN from the contractor (establishes foreign status).
• No Form 1099-NEC is required for foreign contractors.
• No US tax withholding on payments for services performed outside the US.
• The payment is a fully deductible business expense.

For full details, see Hiring Contractors vs Employees: Tax Implications.

What Happens When You Leave the US

Your US business entity survives your departure — it continues to have US tax filing obligations. But your personal tax status changes, which affects how the business is taxed:

Plan your business structure transition before departing. See our Cross-Border Tax Planning Guide for exit strategies.

Common Mistakes

Deep-Dive Articles

This guide covers the essentials. For in-depth coverage of each topic, explore our focused articles:

Frequently Asked Questions