Common mistakes and scams by "LLC providers"

Why this text exists

A whole market of coaches, “tax hacks” and all-inclusive packages has formed around the US LLC. Much of it is legitimate. But a loud part lives off the fact that the German-American tax situation is complex — and sells simplifications that cost you dearly. This article shows the recurring patterns. It is information, not legal or tax advice.

Mistake 1: “With a US LLC you pay 0% tax”

The king of half-truths. Correct is: a certain setup (single-member LLC with no US trade or business) can be tax-free in the US. But that says nothing about what falls due at home. As long as you are resident in Germany, you are subject to unlimited tax liability here; the LLC’s profits must be declared. The “0%” applies at best to the US level and is deliberately sold as an overall statement by dubious providers. For people resident in Germany it is simply false — and, at worst, the entry point to tax evasion.

Mistake 2: “The tax office won’t find out anyway”

The US does not participate in the CRS, the automatic exchange of information most other countries have joined. On that fact a fallacy is built: your LLC stays invisible. Two things are wrong with it.

First, “no CRS” is not “no exchange”. Germany and the US exchange financial account data under the FATCA agreement of 31 May 2013: German institutions report accounts of US persons via the Federal Central Tax Office (BZSt) to the IRS, and the IRS sends back data on accounts held by German residents at US financial institutions. This reciprocity is real but limited — under Article 2 of the agreement, the US side delivers essentially the holder’s identity, the account number and income credited to the account (deposit interest, US-source dividends and other US-source income), while Germany also has to deliver account balances; Article 6 of the agreement itself records that an equivalent level of exchange has yet to be reached. Whether a given account in your setup is covered depends on the details — for a pure LLC business account the answer additionally hangs on how the institution classifies the entity and the account, which is more intricate than any summary can capture, and in practice genuinely uncertain. The honest takeaway is therefore not “you will be reported” but “you cannot rely on not being reported” — and your German tax duty exists independently of whether any report ever flows.

Second, the paper trail does not depend on any US report. Payment services such as Wise, Stripe or PayPal are regulated institutions subject to the EU anti-money-laundering rules as implemented in the country whose licence they operate under — for institutions subject to German law that is § 10 of the Geldwäschegesetz; for entities licensed elsewhere in the EU, Ireland and Luxembourg among them, the local implementation of the same EU directives. The substance is identical everywhere: identify the customer, identify the beneficial owner. Anonymity is not on offer, and your German residence sits in exactly those files. And even if no report ever arrived — the tax liability exists regardless. Betting on “not getting caught” is not tax optimization, it is planning an offence.

Mistake 3: Fees for the free EIN

The EIN, the LLC’s tax number, is issued by the IRS free of charge. Some providers sell the application as an expensive add-on or create the impression it is a government fee. A service for filing may cost money — but presenting the EIN itself as a chargeable government levy misleads you. How the application works as a non-resident is in the spoke Applying for an EIN and ITIN.

Mistake 4: Overlooking the Form 5472 duty

The most expensive mistake, saved for last. A foreign-owned single-member LLC generally must file Form 5472 with a pro forma Form 1120 each year — even with no revenue, once there were reportable transactions. And the formation itself already qualifies: per the IRS instructions, amounts paid or received in connection with forming the entity and contributions to it count as reportable transactions — which is why even a “we did nothing this year” year usually still means a filing; what exactly counts in your case is one for a US tax professional. The penalty starts at USD 25,000, applies per return — so a filing gap that runs across several years multiplies it — and grows further if the failure continues after an IRS notice. Many cheap packages do not mention it because it is inconvenient. Details in the spoke Bookkeeping and compliance.

Mistake 5: Managing from Germany, but “company in the US”

Whoever effectively runs the LLC from a German living room can establish a permanent establishment or the place of management in Germany — the Fiscal Code is explicit: § 10 AO defines the place of management, and § 12 AO names it as the first example of a permanent establishment. The result is German tax liability on the profits; how the Germany–US double taxation treaty allocates taxing rights in such cases is its own chapter, and the treaty text is published by the Federal Ministry of Finance. The “Wyoming” sticker on the registration changes nothing. More in the spoke Tax liability Germany ↔ US.

How to spot dubious offers

• Return promises or tax savings as the core message — serious advice promises review, not results.
• The German side does not appear at all. Whoever sells only the US formation and hides exit tax, treaty, CFC add-back and Form 5472 sells half a picture.
• Pressure and scarcity (“this week only”, “before the law changes”).
• Government costs bundled unclearly — EIN as an expensive “fee”, registered agent overpriced.
• No names, no liability. Anonymous coaches with no tangible responsible party.
• Refusal to say “ask your tax adviser”. Serious providers say it themselves.

What a package really costs: one number, honestly framed

Warning about overpriced packages invites the obvious question: what does a normal one cost? Here is the only number this magazine can honestly offer — its publisher paid 599 euros in 2026 for his own Wyoming formation package. Read that with all its limits attached: it is a single data point, self-reported, one provider at one point in time. The provider deliberately goes unnamed here, because this article is meant to warn, not to advertise. Treat the figure as a calibration aid, not a market price. The full breakdown of formation and running costs is in the spoke Costs and ongoing obligations.

How to protect yourself

Stay sober, do the math, read primary sources (IRS, FinCEN, state registries, the German Foreign Office) — and clarify the real decisive factor, the German tax situation, with a tax adviser before you form anything. An LLC is a tool, not a magic trick. It can make sense in the right setup; as a “tax-free hack” for people resident in Germany it is a risk.

Continue in the guide

Back to the overview: US LLC guide for German emigrants.