US LLC for Swiss residents: what the IRS and the Swiss tax authorities each expect

Owning a US LLC while living in Switzerland is common, and perfectly legal. The difficulty is that Swiss law has no exact equivalent of an LLC: it has partnerships, which are transparent for tax, and companies, which are taxpayers in their own right. An LLC has features of both. This guide sets out what the IRS expects, how the Swiss Federal Supreme Court has classified LLCs, and what that classification changes for you.

In short:

• In the US: your single-member LLC files Form 5472 with a pro forma Form 1120 every year it has a transaction with you (the money you put in counts). You personally file a Form 1040-NR only if you carry on business in the United States or had US tax withheld.
• In Switzerland, the leading case is the Federal Supreme Court judgment 2C_894/2013 of September 18, 2015, about a Wyoming LLC. The court used a "pragmatic mix of methods" in which the LLC's tax treatment in the US is a decisive element. An LLC that is transparent in the US was treated as a partnership in Switzerland.
• For you, that usually means the LLC's business profit is taxed in your hands as income from self-employment, which can also bring self-employed social contributions (AHV/AVS).
• The question is not fully settled: an older practice note of the Swiss Tax Conference (2011) compared an LLC to a Swiss GmbH, and cantonal practice can differ. If the LLC were treated as a company and managed from Switzerland, it could itself become liable to Swiss profit tax.
• Get the Swiss classification confirmed with a Swiss tax adviser or a ruling from your cantonal tax office before you rely on it.

---

The US side: what the IRS expects

From the US point of view, nothing depends on where you live.

• Your LLC is a disregarded entity. A US LLC with one owner is "disregarded as an entity separate from its owner" by default. It pays no US corporate income tax.
• It still files Form 5472 every year with a reportable transaction. Because it is owned by a foreign person, it is treated as a corporation for this one purpose. It files Form 5472 attached to a pro forma Form 1120, by fax or mail, by April 15. The line-by-line guide shows every box, and a missing year costs a $25,000 penalty.
• A personal Form 1040-NR only in some cases. If you work from Switzerland, with no office, employee or dependent agent in the United States, you are generally not engaged in a US trade or business and have no US personal return to file. See the 1040-NR guide.
• With US clients and platforms, you give a Form W-8BEN in your own name, not a W-9, as the W-9 instructions require for a foreign owner of a disregarded entity. Details in the W-8BEN entry.

---

The Swiss side: partnership or company?

What the law says

The federal direct tax act (LIFD/DBG) has two relevant rules:

• Article 49 paragraph 3: foreign legal entities, and foreign partnerships taxable under article 11, "sont assimilées aux personnes morales suisses dont elles se rapprochent le plus par leur forme juridique ou leur structure effective", in other words compared with the closest Swiss entity.
• Article 50: a legal entity is taxable in Switzerland on the basis of personal attachment "lorsqu'elles ont leur siège ou leur administration effective en Suisse".

The text of the act is on Fedlex.

What the Federal Supreme Court decided

In its judgment 2C_894/2013 and 2C_895/2013 of September 18, 2015 (full text), the court dealt with a taxpayer living in the canton of Thurgau who held 50% of a Wyoming LLC. Its reasoning:

• If the civil law of the state of formation already denies the entity legal personality, it cannot be a legal entity for Swiss tax either.
• In other cases, the court follows a "pragmatischen Methodenmix" (a pragmatic mix of methods): it starts from a comparison of the foreign entity with Swiss entities, but also takes into account "die steuerliche Behandlung im Ausland als entscheidendes Element", the entity's tax treatment abroad as a decisive element.
• Applied to that LLC, which was transparent for US tax, the result was treatment as a partnership. The payments the member received were taxed as income from self-employment, as the cantonal tax office had decided.

Swiss commentators note that the court has confirmed this approach in several later judgments (for example 2C_123/2014 of September 30, 2015 and 2C_1018/2015 of November 2, 2017).

Why the question is not fully closed

• In 2011, the Swiss Tax Conference (the association of the federal and cantonal tax administrations) published practice guidance comparing an LLC with a Swiss GmbH (Sàrl), which would make it a company. That guidance is not binding, and part of the doctrine considers it outdated on this point since the 2015 judgment.
• Cantonal decisions vary at the margins. In 2022, the Zurich tax appeals court treated loss-making LLCs as companies so that their losses could not be deducted by the members, an outcome that has been criticised.
• A multi-member LLC, an LLC that elected to be taxed as a corporation in the US (Form 8832), or one that only holds investments can lead to different answers.

What each classification means for you

For a founder who runs a service business from Switzerland through a single-member LLC, the partnership treatment is the usual starting point. Confirm it for your case before you file, ideally with a tax ruling.

---

Who does what

We prepare the US side and give your Swiss adviser what they need: the LLC's profit and loss, balance sheet and the transactions reported on Form 5472.

---

Official sources

• Federal Supreme Court, 2C_894/2013 and 2C_895/2013, September 18, 2015: classification of a Wyoming LLC.
• Federal direct tax act (LIFD/DBG), Fedlex: articles 10, 11, 49 and 50.
• Instructions for Form 5472 and Form W-9: the US side.

---

Frequently asked questions

Is it legal to own a US LLC while living in Switzerland?

Yes. The questions are about tax: how Switzerland classifies the LLC, where and how its profit is taxed, and what you declare in your Swiss return.

Is my LLC transparent for Swiss tax, like in the US?

According to the Federal Supreme Court's 2015 judgment, an LLC that is transparent for US tax is generally treated as a partnership in Switzerland too. Its profit is then taxed in your hands. Older guidance and some cantonal decisions point the other way in specific situations, so have your case confirmed.

Do I pay AHV/AVS on my LLC's profit?

If the LLC is treated as a partnership carrying on a business, the court treats your share of the profit as income from self-employment, and self-employed social contributions can apply. Ask your compensation fund or a Swiss adviser how it applies to you.

Do I still have to file Form 5472?

Yes. The US obligation does not depend on Swiss classification. As long as the IRS treats the LLC as a foreign-owned disregarded entity, it files Form 5472 with a pro forma Form 1120 for every year with a reportable transaction.