Somewhere in a forum thread about getting paid by American clients, someone always suggests opening a US LLC. It is not bad advice exactly, it is incomplete advice: an LLC is a real legal entity with real maintenance obligations, and for a lot of freelancers it solves a problem they do not actually have.
This page compares the two mechanically: what forming and running a US LLC as a non-resident actually involves, against what using a merchant of record involves, so you can tell which one matches your situation instead of copying someone else's setup.
| US LLC (non-resident) | Merchant of record | |
|---|---|---|
| Entity required | Yes, a new US company you own and maintain | No; you invoice through an existing US company |
| Ongoing filings | Annual state report, plus Form 5472 with a pro forma Form 1120 every year | None |
| US bank account | You open and maintain one yourself | Not needed; payout goes directly to you |
| Bookkeeping | Separate books for the LLC | Your own income records only |
| Cost structure | Formation, plus ongoing state and registered-agent obligations regardless of revenue | One platform fee of 10% per paid invoice; with a partner or promotional code, 7%; nothing for an unpaid invoice |
| Best fit | High volume, a US-facing business, product sales | Service invoices at any volume, no US entity wanted |
US LLC versus a merchant of record
What opening a US LLC involves
A US LLC is a real company, and a non-resident can form one in most states without living in the US or holding a visa. That is also where the simplicity ends: forming the entity is the first of several ongoing obligations, not the last one.
- Formation: filing articles of organization in a chosen state, and drafting an operating agreement.
- A registered agent: every state requires a physical in-state address that can receive legal and tax mail on the LLC's behalf, year-round.
- Annual reports: most states require a yearly filing to keep the LLC in good standing, on top of any state franchise or business taxes.
- Bookkeeping: separate books for the LLC, kept in a form that satisfies both state requirements and IRS recordkeeping rules.
- A US bank account: opening one as a non-resident usually means either traveling to a US branch in person or using one of the newer providers that serve non-resident founders remotely, and re-verifying periodically.
- IRS filings: a foreign-owned single-member LLC is treated as a disregarded entity for tax purposes, but it still has to file Form 5472 together with a pro forma Form 1120 every year, and missing that filing carries its own penalty regardless of income.
What using a merchant of record involves
A merchant of record does not create anything for you to maintain. You register once, pass identity verification, and describe the client and the work; from that point the platform's existing US company issues the invoice and collects the payment.
- No entity to form or dissolve, no registered agent, no annual state filing.
- No separate bookkeeping requirement beyond your own records of income.
- No US bank account to open: payout goes to you directly by USDT, SWIFT, SEPA or Wise, depending on your country.
- A fee applies per paid invoice; nothing is charged for an invoice that is never paid, and there is no monthly subscription.
When an LLC is actually the right call
An LLC earns its overhead in specific situations, not as a general rule. It is worth the maintenance when your US-facing revenue is high enough that the ongoing obligations are small next to it, when you plan to build an actual US presence, hire, or hold contracts under a company name, or when you are selling a product rather than invoicing for services, since product sales often involve sales-tax registration and payment processors that expect a US business entity.
Freelancers issuing a handful of invoices a year to one or two clients rarely reach that threshold. The LLC's obligations do not scale down for a small freelancer: a single annual report and a Form 5472 are the same amount of paperwork whether the entity earned a lot or a little.
Neither path changes your tax residency or your filing obligations at home. Both are US-side questions about how a client pays you, not a substitute for understanding your own country's rules.
Can a non-resident open a US LLC to invoice US clients?
Yes, most states allow it and residency or a visa is not required to form the entity. What it does not remove is the ongoing maintenance: a registered agent, annual reports, bookkeeping and IRS filings continue every year regardless of how much the LLC earns.
Does a foreign-owned LLC have to file US taxes even with no profit?
A foreign-owned single-member LLC is treated as a disregarded entity, but it still has an annual filing obligation, Form 5472 together with a pro forma Form 1120, separate from whether any US tax is owed. Missing that filing carries its own penalty regardless of income.
Is a merchant of record the same as an LLC?
No. A merchant of record is a company you use, not a company you own; it invoices your client and pays you out, and you never have to form an entity, appoint a registered agent, or open a US bank account of your own. An LLC is a business you form and are responsible for maintaining.
Which is cheaper, a US LLC or a merchant of record?
It depends on volume. An LLC carries fixed obligations that do not shrink with revenue, while a merchant of record charges one fee per paid invoice and nothing when there is no invoice, as shown in the payout calculator. Below a certain volume, the fixed path tends to cost more in time and mandatory filings than a per-invoice fee does.
Can I use a merchant of record and open an LLC later?
Yes, the two are not mutually exclusive across time. Many freelancers start with a merchant of record while volume is unpredictable, and only look at forming an LLC once their US-facing revenue and plans justify the maintenance.
Do I still pay tax at home if I use a US LLC or a merchant of record?
Both arrangements are about how a client pays you, not about where you are tax resident. Your own country's tax obligations continue under either path; neither one changes your tax residency.
An LLC is the right tool when you are building something bigger than freelance invoicing: a US-facing business, a product, a team, or contracts substantial enough that a registered agent and an annual report are rounding errors next to the revenue. For that reader, the entity is worth owning.
For a freelancer whose actual need is a client that pays like a normal vendor, a merchant of record does the part the client cares about, a domestic invoice with a W-9 on request, without an entity to maintain afterward. PANORAMA payments is built for that second case: no LLC, one fee per paid invoice, nothing owed when there is not one. Invoicing a US client without a company covers the mechanics in more detail before you decide either way.