LLC vs Sole Proprietor: What’s Best If You’re Going Global?

Thinking of moving abroad while running your own business? It’s an exciting step, but there’s more to remote work than just a visa and a Wi-Fi connection. One crucial factor is your business structure. Even if you’re sipping coffee in Bali or working from a café in Lisbon, the IRS still has its eye on your income.

Choosing between an LLC or Sole Proprietorship could significantly impact your taxes, liability, and even the way your clients perceive you. If you want to set up a remote-friendly, U.S.-based LLC fast, scroll to the end for a tool we recommend to get started. Otherwise, read on to find out which business structure best suits your goals, lifestyle, and income flow.

What Is a Sole Proprietor? (Pros + Cons)

A sole proprietorship is the simplest and most common type of business structure. If you’ve started freelancing or consulting without filing any legal paperwork, congratulations! You’re already a sole proprietor by default.

Here’s a breakdown of what this means:

✅ Pros

No Setup Required: It’s free and requires zero paperwork to get started.

Simple Tax Reporting: Your business income is reported on your personal tax return (Schedule C) each year.

Great for Testing the Waters: Ideal if you’re just starting out, working part-time, or running a side hustle with minimal expenses and low income.

❌ Cons

No Liability Protection: You and your business are legally the same entity. If something goes wrong (like being sued or unable to pay business debts), your personal assets (house, savings, etc.) could be at risk.

Limited Professionalism: Some clients, especially international or corporate ones, might view it as less professional to work with someone operating without a formal business entity.

Banking Challenges: Opening a business bank account or accessing financial tools like Stripe can be harder without a legal entity.

For some, the simplicity of a sole proprietorship makes sense. But as you grow, it’s worth considering an LLC for the added protection and perks it provides.

What Is an LLC? (And Why It’s Nomad-Friendly)

A Limited Liability Company (LLC) is a next-level business structure that creates a separate legal entity for your business. This means your personal and business assets are legally distinct, offering you stronger protection and functionality.

Here’s why it appeals to remote workers and digital nomads:

✅ Benefits

Liability Protection: Your personal assets are shielded from business liabilities. For instance, if someone sues your business, your savings and property stay untouched.

Client Trust: An LLC elevates your credibility. Clients are more likely to see you as a serious business owner when you invoice them under an LLC.

Business Banking Benefits: Opening accounts with tools like Mercury or Wise becomes significantly easier with an LLC, enabling smoother international transactions.

Flexibility in Tax Structure:
By default, LLC profits are reported on your personal taxes (pass-through taxation).However, you can elect for your LLC to be taxed as an S Corporation to potentially save on taxes.

Global Compatibility:
Running your freelance, eCommerce, or digital business while abroad is entirely legal with a U.S.-based LLC. Platforms like Shopify, Stripe, and PayPal are easy to set up with this structure.

The bottom line? If you’re invoicing clients, running e-commerce operations, or simply want more financial control, an LLC is often the better choice.

LLC vs Sole Proprietor: The Decision Matrix

Deciding between a Sole Proprietor and an LLC isn’t always simple, so here’s a side-by-side comparison to help:

If liability protection, professionalism, or accessing financial tools like international payment processors matter to you, an LLC starts to make a lot of sense.

Living Abroad? Here’s the Catch

Before you get too excited about life as a globe-trotting entrepreneur, remember that U.S. taxes follow you wherever you go. Here’s what to keep in mind:

The IRS Knows Where You Are:

Even if you’re living abroad, you’re still required to file U.S. taxes. The Foreign Earned Income Exclusion (FEIE) can help reduce double taxation, but it doesn’t eliminate every tax obligation.

Proving Income for Visas:

Many countries (like Portugal’s D8 visa or Spain’s freelance visa) require proof of stable self-employment income. Having an LLC simplifies this process since it’s more recognized as a legitimate income source.

Global Clients Prefer Legal Entities:

If you plan to work with international clients, they may insist on working with a proper legal business entity for contracts and transactions.

Setting up a U.S.-based LLC can solve several hurdles, especially if you’re earning over $2,000/month or working on platforms requiring legal structures.

When an LLC Is 100% Worth It

Here are a few scenarios where an LLC becomes a no-brainer:

Consistent Income: You’re earning over ~$2,000/month from clients or sales.

Platform Access: You want to keep using U.S.-based tools like Shopify, Stripe, or PayPal without limitations.

International Transactions: You work with international clients who require professional invoicing and contracts.

Business Deductions: You’d like to optimize your taxes and deduct business-related expenses.

Want to get started? We recommend LegalZoom for setting up a U.S.-based LLC. Their service is fast, reliable, and remote-friendly. 

👉 Set Up Your LLC Today with LegalZoom

Keep It Simple. Start Smart.

You don’t need a complex setup to take your remote business global. But you do need a structure that protects your income, time, and freedom.

Whether you stick with a sole proprietorship for now or upgrade to an LLC, the key is aligning your business structure with where you’re headed. When in doubt, choose the leanest setup that will grow with you.

✅ Set up your LLC today with LegalZoom (Affiliate Link) 

🧳 Download our Free Relocate Ready Starter Kit for a full checklist on tax-friendly setups and visas