“I live in France. Is it worth setting up a US LLC?”
An entity that is a pass-through for US tax purposes is not necessarily transparent in France. Its tax treatment depends on its legal form, where its owners are resident and how, and from where, its business is carried on and managed. Setting up a US LLC while living in France does not, in itself, take you outside French tax.
In brief
France compares the US entity with French legal forms, based on its governing documents and the law of the state where it was formed, regardless of its US tax election. This classification helps determine the tax regime applicable under French law. It does not, by itself, mean that all of the entity's profits are taxable in France: the territorial scope of French taxation, where the business is carried on and, where relevant, the France–US tax treaty must also be considered.
In practice, a C corporation is generally treated as a company on both sides of the Atlantic. For LLCs and S corporations, which are pass-through entities in the United States, the French answer depends on the features of each entity. Where they are treated as companies, as a California LLC was in November 2025, the difference in treatment can lead to double taxation or timing mismatches.
Whatever its form, a company run from France may be taxed there. The choice of entity, the flows between the two countries and the French and US filing obligations should therefore be considered together, ideally before the entity is formed or before moving to France.
French classification does not follow US tax status
Since a leading decision of the Conseil d'État of 24 November 2014, French courts first identify the type of French company to which the foreign entity is comparable, in the light of all its features and the law governing it. They then apply French tax law and, where relevant, the France–United States tax treaty.
The US tax regime plays no part in that analysis. The Conseil d'État has held that a court could not rely on the way LLCs are taxed in the United States to classify them in France (CE, 27 June 2016, no. 386842). A US “check-the-box” election, by which an LLC chooses to be taxed as a corporation or as a pass-through, therefore does not determine its French treatment.
The relevant features are those that distinguish French legal forms, namely legal personality, members' liability limited to their contributions, transferability of interests and the allocation of powers under the governing documents. Depending on the outcome, the entity is subject to French corporate income tax, like a French SAS or SA, or its profits are taxed directly in the hands of its members, like those of a French partnership.
A C corporation is treated in France as a company
In the United States, a C corporation is taxed on its own profits at the 21% federal rate, plus any state tax. In France, it is generally treated as comparable to a French joint-stock company. The Conseil d'État has held, for instance, that a US company whose members were not liable for its debts and whose shares were freely transferable was comparable to a French SAS (CE, 2 April 2021, no. 427880).
For an individual shareholder resident in France, dividends are generally taxable in France when distributed, either under the flat-rate regime or, by election, at progressive income tax rates. Subject to the treaty's conditions, the France–US tax treaty generally caps US withholding tax on those dividends at 15%. US tax withheld in accordance with the treaty may give rise to a French tax credit, within the limits and under the rules of Article 24(1)(a). That credit is applied against the corresponding French tax on the income concerned, not automatically against every component of French taxation. The actual treatment depends on the shareholder's circumstances and the French tax regime applicable.
This is the structure that raises the fewest classification issues. It is not neutral, however, because the company may be taxable in France if it is managed there or carries on business there.
Is a US LLC transparent or taxable in France?
It depends on its own features, assessed entity by entity, not on its US tax status.
For US federal tax purposes, a single-member LLC is disregarded by default, so its income is its owner's income. An LLC with two or more members is taxed by default as a partnership, each member being taxed on their share of the profits, whether or not distributed. An LLC may, however, elect to be taxed as a corporation (Form 8832).
In France, classification follows French criteria. In a decision of 12 November 2025 (no. 502894), the Conseil d'État held that a California LLC whose members were liable only up to their contributions, and whose operating agreement made use of the freedom of contract available under its governing law, was comparable to a French SAS. It was therefore subject to French corporate income tax by reason of its legal form, without any need to examine the nature of its activity.
For a single-member LLC, the analysis has three steps, and no outcome is a foregone conclusion.
The French comparable. Depending on its governing documents and the law of the state of formation, the LLC may be compared with a single-shareholder SAS or a single-member SARL. For an English private limited company, the Conseil d'État chose the SARL, because the model articles it had adopted did not reflect the contractual freedom typical of an SAS (CE, 25 July 2025, no. 489925).
The entity's tax regime. If comparable to an SAS, it is subject to corporate income tax. If comparable to a SARL whose sole member is an individual, it is, absent an election for corporate income tax, taxed as a partnership (Articles 8 and 206 of the French Tax Code).
The member's taxation. In the first case, the member is taxed on the distributions they receive. In the second, the profits are taxed to the member under personal income tax, subject to the tax treaty.
These two perspectives create mismatches. The member may be taxed in the United States on profits that France will only tax when they are distributed as dividends. Using foreign tax credits then becomes difficult and double taxation can arise. The treaty contains specific rules on income derived through such entities, on which the French tax authorities have published guidance.
A US election to be taxed as a corporation often brings the two treatments into line. It has its own US consequences, however, and should be decided with the company's US adviser.
Can a French resident own shares in an S corporation?
Yes if they are a US citizen, but not if they are a nonresident alien for US tax purposes.
An S corporation is a US corporation that has elected pass-through treatment. Its profits are taxed each year in the hands of its shareholders, who receive a Schedule K-1. The regime requires, among other things, no more than 100 shareholders and a single class of stock. Shareholders may be individuals, certain trusts or estates, but not corporations, partnerships or nonresident aliens (IRS).
A French resident with no US tax ties therefore cannot become a shareholder without the company losing its S status. A US citizen living in France, on the other hand, remains an eligible shareholder. For a green card holder moving to France, the point should be checked with the US adviser, particularly if they claim French residence under the treaty.
For these shareholders, the difficulty lies in the mismatch between the two systems. In the United States, shareholders are taxed each year on their share of profits, whether distributed or not. In France, the treatment of an S corporation does not follow automatically from its US pass-through election: its legal features must first be compared with those of French entities. If it is classified as comparable to a French company subject to corporate income tax, a French-resident shareholder is generally taxed when dividends are distributed, subject to the rules applicable to their circumstances. Taxation in the two countries may therefore arise on different amounts or in different years. The treaty contains specific rules for US citizens resident in France; their application must be reviewed case by case with the CPA, ideally before moving to France.
Is it worth setting up an LLC while living in France?
Rarely as a way to pay less tax, because a company run from France may be taxed there.
The idea is widespread. An LLC formed in Delaware or Wyoming, with no business in the United States, would pay tax nowhere, since it is transparent in the United States and its member has no US activity. That reasoning overlooks the French classification and, above all, the question of residence.
Treated as a company, an LLC whose decisions are taken and whose business is carried on from France may be regarded as operating in France and subject to French corporate income tax. The reassessment is all the heavier if the activity was never declared. Depending on the facts, the French tax authorities may also find a permanent establishment in France.
Where the entity bears no tax or little tax and its assets are mainly financial, Article 123 bis of the French Tax Code may also tax the French-resident member holding at least 10% directly on its income. On the US side, an LLC owned by a foreign person may have its own reporting obligations, even with no US business.
LLC or French SASU when you live and work in France?
For a business run from France, an LLC does not, as a rule, move the place of taxation. It adds US filings and an uncertain French classification.
The question often comes from consultants and business owners who invoice US clients. As long as the work is done from France, the profits remain taxable there, whatever the form of the company. A SASU (the French single-shareholder simplified company) has a well-known tax regime and clear social security rules for its president, whereas an LLC means tracking two classifications and two sets of filings.
For a US citizen who has moved back to France, the comparison is more subtle, because they remain taxable in the United States on their worldwide income. If they benefit from the French impatriate regime through their role in their French company, closing the SASU may also put that regime at risk, since it is tied to employment in a business established in France. The comparison should be made with figures, including social contributions and US filings.
LLC or C corp for a US subsidiary?
For a French company that wants to receive dividends from its US subsidiary, a C corporation often offers a clearer framework, depending on the features of the project.
Dividends paid by a C corporation may benefit from US withholding tax reduced under the France–US treaty, subject to the holding requirements and to the conditions for access to treaty benefits. In France, they may fall under the participation exemption (régime mère-fille) where its own conditions are met.
A pass-through LLC follows a different logic. If it has a single member and has not elected to be taxed as a corporation, that member may be directly taxable in the United States on the business. In France, the LLC is classified by comparison with French legal forms. Whether its distributions qualify for the participation exemption therefore cannot be inferred from US tax transparency alone.
The choice also calls for planning intra-group services, transfer pricing (Article 57 of the French Tax Code), permanent establishment risk and the consequences of a future sale. These questions are covered in our article on choosing between an LLC and a C corporation for a US subsidiary.
Permanent establishment risk runs both ways
The France–United States treaty allocates the right to tax business profits. A company is taxed in the other state only if it has a permanent establishment there, and only on the profits attributable to it (Articles 5 and 7). An office at the company's disposal on a lasting basis, a person who habitually exercises authority to conclude contracts in its name, or a construction site lasting more than twelve months may be enough. Occasional business trips or activities of a preparatory or auxiliary character, such as storage, delivery or collecting information, do not create one on their own, and merely controlling a subsidiary does not either (Article 5).
A US company with staff in France, or whose manager carries on most of their work there, should check this point. Conversely, a French company expanding into the United States must consider federal rules and also state rules, which have their own nexus tests and are generally not bound by the treaty.
French property held through an LLC
Possible, but rarely advisable.
Several recent decisions concern LLCs owning a villa in France made available free of charge to their members or their family. The French tax authorities subjected them to corporate income tax on the rent they should have received, and the Conseil d'État upheld that approach by treating the LLC as comparable to an SAS (CE, 12 November 2025).
In addition, unless an exemption applies, an annual 3% tax is levied on the market value of French property held by certain entities (Article 990 D of the French Tax Code), and the exemptions usually require annual filings. For individuals, whether American or French-resident, other forms of ownership are generally simpler.
Which entity should you form in the United States?
The one that suits the owners, the business and the flows, reviewed from both sides of the Atlantic.
There is no ideal form, but the questions are always the same.
Who the owners are, French residents, US citizens or companies, and where they will live in the future.
Where the business is actually carried on and managed, which drives the risk of French taxation or of a permanent establishment.
Which flows are expected, whether dividends, salaries, royalties, management fees or intra-group loans.
What the plans are, such as reinvesting in the United States, bringing profits back to France, selling the business, returning to France or moving to the United States.
For a French resident with no US tax ties, a C corporation often provides the most consistent reading on both sides. An LLC may work, provided its French treatment has been assessed and, where appropriate, it elects to be taxed as a corporation in the United States. For a US citizen living in France, the analysis is different, because they remain taxable in the United States on their worldwide income. The choice is then driven by how the two systems interact.
US filings to coordinate with the CPA
A US entity has its own obligations, namely federal returns (Form 1120, 1120-S or 1065 depending on its regime), statements to its owners, information returns such as Form 5472, and state returns. US citizens living in France also have their own obligations, such as filing an annual return on their worldwide income and reporting their foreign accounts (FBAR).
Those filings are a matter for US professionals. Our role is to analyse the French treatment of the structure and the flows, to secure the French filings (foreign-source income, personal bank accounts held in the United States, the company's French returns where it is taxable in France) and to ensure that the positions taken in both countries are consistent. For US compliance, we work with CPAs and specialist firms to whom we refer our clients, and with whom we align positions.
Beaupère & Guermouche Avocats advises entrepreneurs, business owners and families who own or plan to form a US entity, as well as Americans moving to France. We work on the French classification of the structure, the choice of entity, the analysis of flows and permanent establishment risks, and coordination with their US advisers.
Frequently asked questions
Can an LLC claim the benefits of the France–US tax treaty?
As a rule, not where it is a pass-through in the United States. Under French tax guidance, a single-member LLC cannot claim treaty benefits itself. Its member can, for the income attributable to them, if the member qualifies.
Do dividends from a US subsidiary qualify for the French participation exemption?
Dividends paid by a C corporation may qualify for the French participation exemption if all the requirements of Articles 145 and 216 of the French Tax Code are met, including those relating to the parent company, the size of its shareholding and the holding period. Classification of the subsidiary as a company is not sufficient on its own. For an LLC, its classification under French tax law must first be established, and the remaining conditions checked. The exemption does not apply where the LLC is treated as a partnership subject to the regime of Article 8 of the French Tax Code.
What US withholding tax applies to dividends paid to France?
Subject to the treaty's conditions, US withholding tax on dividends paid to a French-resident individual is generally capped at 15%. The rate may be reduced to 5% for a qualifying corporate beneficial owner directly holding at least 10% of the voting rights, or to 0% in certain cases involving a qualifying holding of at least 80% for the required period and satisfaction of the other treaty requirements, including Article 30. These rates do not apply automatically. Any French treaty tax credit must be assessed separately from income tax and social contributions; under Article 24(1)(a), it is limited to the corresponding French tax on the income concerned.
Does an LLC with no US business still have US filings?
Often, yes. A single-member LLC owned by a non-US person must file Form 5472, attached to a pro forma Form 1120, for each year in which it has reportable transactions with its owner or another related party. Contributions to the LLC and distributions from it count as such transactions (IRS). The obligation therefore depends on the year's transactions, not on foreign ownership alone. Where the form is due, failure to file carries a penalty of $25,000.
General information, up to date as of 23 October 2026, which does not constitute legal advice. How a US entity is classified depends on its governing documents and the law of the state where it was formed, and must be assessed case by case.