A Story of Big Dreams and Hidden Risks

Tom was pacing in his small London office late one evening. He had built a promising e-commerce brand in the UK, selling custom tech accessories on Shopify. His products were stylish, well-made, and had a solid UK customer base. Then a breakthrough: a US-based influencer featured his phone case on their channel, and in twenty-four hours, Tom’s site lit up with orders from the States. He felt elated, but also a knot of anxiety growing in his stomach.

He had heard advice on forming a US LLC, setting one up to handle his American sales. But he wasn’t sure what the tax implications would be. Was he just opening a gateway to revenue or to a world of cross-border complexity, double taxation, and expensive compliance failures?

That nervous curiosity brought him to Lanop Business and Tax Advisors. He didn’t want surface-level “set up an LLC and you’re done” advice. He needed depth. He needed a US LLC and Tax Guide for Selling to understand Selling to USA from UK, cross-border tax UK, how US sales tax works, and how to structure his business to scale in the States without sinking under the paperwork.

Here is the comprehensive guide Tom received, and now you will too.

Why British Sellers Use a US LLC

Forming a US LLC when you are a UK-based seller executing UK to US selling is often the first major step for cross-border growth. Here’s why many UK entrepreneurs choose this route:

Credibility & Trust: Having a US entity adds legitimacy when selling to American customers. It makes platforms more comfortable and may reassure buyers.

Banking & Payments: A US LLC enables opening a US bank account, reducing currency risk, and simplifying payment processing for US sales.

Liability Protection: An LLC shields personal assets. If something goes wrong with product liability, for example, your personal finances are safer.

Tax Flexibility: Depending on elections made with the IRS, an LLC may be treated as a “pass-through” entity or taxed more like a corporation.

But forming an LLC is just one part of the picture. How it is taxed and how you comply on both sides of the Atlantic is where the real challenge begins.

How US Tax Works for UK Sellers

When you operate a US LLC as a UK resident and sell into the USA, your income is subject to cross-border tax UK issues. The IRS classifies certain earnings as effectively connected income (ECI) if your business is considered “doing business in the US.”

What activities might trigger this classification?

• You hold inventory in a US warehouse (for example, using Amazon FBA).
• You hire contractors or workers in the US.
• You carry out significant business operations or services in the US.

If your income is classified as ECI, you'll often need to file a US federal tax return. For non-US persons, that could mean using Form 1040-NR, depending on your structure. If your LLC is treated as a corporation, you might file Form 1120 instead.

Additionally, certain reporting obligations come into play. For example, if you’re a UK-based owner of a US LLC, you may need to file Form 5472 with the IRS to disclose transactions between your UK business and your US LLC.

State-Level Sales Tax and Nexus

One of the biggest mistakes UK sellers make when Selling to USA from UK is underestimating their US sales tax obligations. These obligations arise when you establish “nexus” in a US state, and nexus definitions vary.

Here are the common types of nexus you must understand:

Physical Nexus: Triggered by having a warehouse, office, or employee in a state.

Economic Nexus: Based on how much you sell into a state, many states have thresholds, such as $100,000 in revenue or 200 transactions.

Marketplace Nexus: If you sell via a marketplace like Amazon, some states make the platform responsible for collecting sales tax, but others still require you to register.

Click-Through Nexus: If you use affiliates in a state who refer customers, you might create nexus by their activity.

Once you hit nexus, you must:

• Register for a sales tax permit in that state.
• Collect the correct state and local sales tax rate at the point of sale.
• File sales tax returns (monthly or quarterly) and remit the tax.

If you ignore it, you risk back taxes, fines, and penalties. One of the hidden cross-border tax UK-US pitfalls is misunderstanding these obligations.

Structuring and Forming the US LLC

Here’s a step-by-step breakdown of how to correctly form your US LLC when you’re a UK seller doing UK to US selling:

1. Decide Which State

Choose a state to register your LLC. Popular choices include Delaware, Wyoming, or Nevada. Each has pros and cons for cost, privacy, and legal structure.

2. Get a Registered Agent

You’ll need a registered agent in the LLC’s state, someone who receives legal documents on behalf of your company.

3. Obtain an EIN

Apply for an Employer Identification Number (EIN) from the IRS. This is essential for opening a US bank account, filing taxes, and reporting.

4. Set Up a US Address

You will need a US address for official IRS correspondence.

5. Open a US Business Bank Account

Use this account to receive payments, pay suppliers, and manage USD cash flow.

This structure is not just for show; how you set up your US LLC formation can affect your double taxation risk, your reporting obligations, and your overall profit strategy.

How the UK Tax System Sees Your US LLC

This is where things get tricky: HMRC does not necessarily treat your US LLC the same way the IRS does.

According to UK tax rules, many US LLCs owned by UK residents are tax opaque, meaning HMRC considers the LLC a separate company, not a pass-through entity.

Because of this treatment:

• You may only pay UK tax when you distribute profits from your US LLC to yourself, rather than on profits as they accrue in the US.
• When you make those distributions, they may be classified as foreign dividends, not trading profits.

This mismatch between US and UK tax treatment is a core issue in cross-border tax considerations. If you don’t plan, you could find yourself paying tax the hard way.

Avoiding Double Taxation

If you are operating a US LLC as a UK resident and doing e-commerce tax across borders, you absolutely need to design your structure to minimize double taxation. Here’s how to do it strategically:

Use the UK–US Tax Treaty:

You may be able to claim foreign tax credits in the UK for tax paid to the US, reducing your UK liability.

Election Options:

Depending on how your LLC is taxed in the US, you might elect a tax treatment that aligns better with UK reporting.

Consider a Blocker Entity:

In some cases, using a US C-Corp owned by your UK company (rather than direct ownership of an LLC) helps align the tax treatment and avoid inefficient double taxation.

Choosing the right structure is a balancing act. Factors like how much profit you retain in the US, how often you repatriate funds, and what your long-term exit strategy is will determine which path is optimal.

Withholding Forms: W-8BEN and W-8BEN-E

If you're selling through a US marketplace like Amazon, Stripe, or others, they may ask you to complete a W-8BEN (for individuals) or W-8BEN-E (for entities). These forms help you certify that you’re a non-US person/entity and potentially claim benefits under the US–UK treaty.

Here’s why they’re important:

• Correct Info Matters: If you get it wrong, platforms may withhold up to 30% of your US income.
• Treaty Claims: You’ll need to declare your UK residency and apply the correct treaty article.
• Entity vs Individual: Use W-8BEN-E if your UK business entity is receiving the income.

Mistakes here can be very costly.

Risks of Non-Compliance

Here are some serious risks UK sellers face if they try to wing it with US business UK seller operations:

• Back Sales Tax Obligations
• IRS Penalties
• Withheld Earnings
• UK Tax Risks
• Cash Flow Issues
• Double Taxation

Real-World Challenges from Social Media and Sellers

Cross-border entrepreneurs often share their struggles online, and what they say reveals real risks and real lessons:

• UK sellers forming US LLCs and dealing with IRS forms
• Confusion about filing US returns
• Questions about the US sales tax when using a US-based fulfillment
• Debates over using a UK Ltd vs a US LLC for a US-focused business

These conversations highlight a recurring theme: many UK sellers assume simplicity, but encounter complexity, risk, and confusion when scaling into the US.

Best Practice Steps for UK Entrepreneurs Expanding to the US

Here’s a tactical, prioritized plan distilled from Tom’s journey and the experience of other cross-border sellers to help you minimize risk and maximize growth:

• Set Up Your LLC First
• Run a Nexus Assessment
• Use the Right Sales Channels
• Complete Withholding Documentation
• Track Everything with Accounting Software
• File US Tax Returns Properly
• Report to HMRC
• Manage Double Taxation
• Reassess Regularly
• Work with Experts

Conclusion: Turning Ambition into Sustainable Growth

Tom’s journey from a UK-based e-commerce brand to a cross-border business selling in the USA taught him something vital: revenue isn’t the same as profit, and profit isn’t free when you cross borders. Forming a US LLC was only the beginning. The real complexity and the real opportunity were in navigating cross-border tax UK, understanding US sales tax, avoiding double taxation, and ensuring UK-IRS compliance.

If you are a UK entrepreneur seriously considering selling to the USA from the UK, this US LLC and Tax Guide for Selling isn’t optional; it’s essential. Structuring smartly, planning thoroughly, and executing with care will protect you from unexpected tax liabilities, penalties, and cash flow shocks.

At Lanop Business and Tax Advisors, we help UK sellers like you design the right US structure, handle e-commerce tax, minimize double taxation, and grow sustainably. With the right foundation, you can scale across the Atlantic with confidence, keep more of what you earn, and build a legacy, not just a revenue stream.