Forming a US LLC as a German Founder: State Choice, EIN, Banking, and the Hinzurechnungsbesteuerung Trap

Most German founders overthink the US side of forming an LLC and completely ignore the German side. That is the wrong order of operations. The IRS paperwork is straightforward. The Finanzamt paperwork, and specifically the Hinzurechnungsbesteuerung rules for passive income, can quietly create a German tax bill on profits you never touched. Start with the German implications, then work backward to state selection and banking.

Pick Wyoming, Not Delaware, for Most German Founders

Delaware gets all the press. But unless you are raising venture capital from US institutional investors who specifically require a Delaware C-Corp, Wyoming is the better default for a German founder running an LLC.

Here is the practical comparison:

• Wyoming annual fee: $60 (Annual Report, based on assets in Wyoming, minimum $60)
• Delaware annual fee: $300 franchise tax minimum for an LLC, plus a $50 registered agent fee if you use a service
• Delaware Registered Agent: required even if you never set foot in Delaware
• Wyoming privacy: members are not listed in public filings

Wyoming's $60 floor matters when you are pre-revenue. Delaware's costs are defensible once you have investors asking for it. Before that point, you are paying a premium for a brand name.

If you are selling SaaS, doing consulting, or building a product without US institutional money on the table, Wyoming is the honest default.

Texas is worth a look if you have a physical US presence or US-based employees, but for a Berlin or Munich founder operating remotely, it adds complexity without benefit.

Get the EIN Before You Open Any Accounts

An Employer Identification Number (EIN) is your LLC's federal tax ID. You need it to open Mercury, to receive wire transfers, to file Form 5472, and to complete a W-8BEN for US counterparties.

As a German founder with no Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), you cannot use the IRS online EIN application. That tool is SSN-gated. Your two real options:

1. Fax Form SS-4 to the IRS. Fax to +1-859-669-5760. Processing takes 4 to 6 weeks. The form asks for a "responsible party," which is you. Use your German passport details.
2. Call the IRS Business and Specialty Tax Line at +1-800-829-4933. They will issue the EIN over the phone if you can answer verification questions. This only works during US business hours (7am to 7pm Eastern).

A formation service can handle this on your behalf. Either way, understand what the EIN actually is and why it matters before you start, because the IRS will ask questions about your business purpose and you should have clear answers ready.

Do not pay anyone $200 to "expedite" an EIN. There is no expedited lane. Anyone charging that fee is just faxing the same SS-4 you could fax yourself.

The US-Germany Tax Treaty and Withholding Rates

The US and Germany have had a tax treaty in place since 1989, updated in 2006. For a single-member LLC, the treaty's direct impact is more limited than founders expect, but two provisions matter.

Withholding on US-source income. If your LLC receives US-source payments (royalties, interest, certain service fees), the default US withholding rate for foreign persons is 30%. The treaty reduces this. Royalties drop to 0% under Article 12. Interest drops to 0% under Article 11. Dividends from a US corporation to a German resident go to 5% or 15% depending on ownership percentage, but this is less relevant for LLCs since LLCs do not pay dividends in the corporate sense.

The W-8BEN-E matters here. Your LLC is a disregarded entity for US tax purposes (assuming single-member). You file a W-8BEN as an individual, not a W-8BEN-E for the entity. Hand this to any US counterparty who asks for it to claim treaty benefits and reduce withholding. Here is a concise breakdown of what the W-8BEN actually does.

One thing the treaty does not solve: the LLC's pass-through income is still your personal income for German tax purposes. Every euro your LLC earns is reportable income in Germany, because Germany taxes worldwide income for German tax residents.

Open Mercury First, Then Add Wise

Mercury is the standard US business bank account for non-resident founders. It is free, FDIC-insured through Choice Financial Group and Evolve Bank, and accepts applications from foreign nationals with a US LLC. You will need your EIN, your Articles of Organization, and a passport. Mercury does not require a US address for the account holder.

Expect the application to take 3 to 7 business days. Mercury's compliance team occasionally asks for additional documentation, usually proof of business activity or a description of your revenue model. Answer specifically. Vague answers slow the review.

Wise (formerly TransferWise) is not a replacement for Mercury. It is a complement. Wise gives you local account details in EUR, GBP, and USD, which makes it much cheaper to receive EUR payments from German clients without conversion fees eating into the transfer. The combination works like this: Mercury holds your USD operating funds; Wise handles FX conversions and international transfers at mid-market rates.

For a more complete picture of account options, including Relay and Brex, see the full banking comparison for new LLCs.

---

If you want Tierro to handle your LLC formation, EIN application, and registered agent setup in one place, start your LLC here. Most German founders are done with the US side in under a week.

---

What You Must Report to the Finanzamt

Germany requires tax residents to report foreign company holdings. The two main obligations:

Anlage AUS (Attachment for Foreign Income). Filed with your annual Einkommensteuererklarung. You report your share of the LLC's profit as foreign business income. Because a US LLC is a pass-through entity, the IRS taxes the profit at your level. Germany then applies its own tax to the same income, but credits the US tax paid, under the treaty's Article 23 (relief from double taxation).

Meldepflicht under AStG Section 138. If you hold more than 10% in a foreign company, or if the direct investment value exceeds 150,000 EUR, you must notify the Finanzamt using Form BZSt-2. This is a disclosure form, not a tax form. Missing it carries fines. File it within 14 months of the end of the calendar year in which you acquired the interest.

Neither of these is exotic. Your German Steuerberater (tax advisor) should handle both routinely. The problem is that many Steuerberater are not familiar with US LLCs specifically, so you may need to explain that the LLC is a pass-through and not a corporation.

The Hinzurechnungsbesteuerung Trap

This is the one that catches German founders off guard. Hinzurechnungsbesteuerung (HZB) is Germany's controlled foreign corporation (CFC) rule, codified in Sections 7 to 13 of the Aussensteuergesetz (AStG).

The rule works like this: if you control a foreign company that earns passive income, and that foreign company pays less than 25% effective tax on that income, Germany taxes you on that passive income as if you had received it, even if you left it sitting in the US account.

For an active US LLC (consulting, SaaS, services), this is not a problem. Active income from genuine business operations is excluded from HZB.

For a passive US LLC, say one holding US stocks, earning interest, collecting royalties without active involvement, or acting as a holding vehicle, HZB applies. A single-member Wyoming LLC earning $50,000 in interest and dividends, with no US corporate tax because it is a pass-through, has an effective US tax rate at the entity level of 0%. Germany will look at that, determine the 25% threshold is not met, and add the $50,000 to your German taxable income regardless of whether you distributed it.

The fix is not complicated but it requires planning. Keep the LLC's income active. If you are building a product or running a service business, document that activity clearly. If you genuinely need a holding structure for passive assets, talk to a Steuerberater before you form the LLC, not after.

The US Filing Side: Form 5472 and the $25,000 Penalty

A single-member LLC owned by a foreign person is a disregarded entity that must file Form 5472 annually, attached to a pro forma Form 1120. This is not optional and it is not intuitive. The IRS treats the LLC as a US corporation for reporting purposes even though it is a pass-through for tax purposes.

The penalty for a missing or incomplete Form 5472 is $25,000 per form per year. The IRS has been enforcing this aggressively since 2017. Read the full breakdown of Form 5472 obligations before your first tax year closes.

The deadline is April 15, or October 15 with an extension. File Form 7004 to get the extension.

Hire a US CPA for this filing. The cost is typically $300 to $600 per year. That is not a place to save money.

A Practical Checklist

• Choose Wyoming (or Delaware if you have a VC reason)
• File Articles of Organization, appoint a registered agent
• Fax Form SS-4 or call the IRS to get your EIN
• Open Mercury with EIN plus Articles plus passport
• Set up Wise for EUR inbound payments
• File BZSt-2 with the Finanzamt within 14 months of formation
• Confirm with your Steuerberater that your income is active, not passive, to stay outside HZB
• File Form 5472 plus pro forma 1120 each April 15
• File W-8BEN with any US counterparty requesting tax documentation

The US formation itself takes a few days. The German compliance calendar is the part worth mapping out before you sign anything.