What is effectively connected income (ECI)?

Effectively connected income (ECI) is income connected with a US trade or business. For a nonresident, it is the income the United States taxes like a resident's: after deductions, at the graduated rates, on Form 1040-NR.

How it works with an LLC

Your single-member LLC is a disregarded entity, so its activity is treated as yours. If that activity amounts to a US trade or business, the profit connected with it is your ECI.

Publication 519 adds a broad rule: once you are engaged in a US trade or business, all income from US sources (other than certain investment income) is treated as effectively connected, "whether or not there is any connection" with that business.

What usually is not ECI

Service income is sourced where the work is physically done. A founder who works only from abroad, with no US office, employee or dependent agent, generally has no ECI, even with American clients, a US bank account or Stripe. The other category of US income, FDAP (dividends, royalties, rents), is taxed at a flat 30% or a lower treaty rate, usually withheld at source.

The 1040-NR guide walks through the test with an example.