LLC vs sole prop vs foreign co.

"Should I set up an LLC?" is the single most-asked question in our inbox. It's also the wrong first question.

The right first question is: what problem are you trying to solve? Structures are tools. Different problems, different tools. Here's how we think about it.

What each structure actually is

Sole proprietor

You, invoicing under your own name (or a trading name). No legal separation between you and the business. Simple to run, no formation cost, and in most countries it's the default the moment you start earning.

Domestic LLC (usually US)

A legal entity separate from you, but by default taxed as if it isn't ("disregarded" for US federal purposes if single-member). Adds a layer of legal separation, a business bank account, and a name that isn't yours on the invoice.

Foreign company

An entity in a jurisdiction that isn't the one you live in — UAE free zone, Estonia OÜ, UK Ltd, Hong Kong, Singapore. Usually chosen for tax treatment, credibility, or to serve a specific market.

The framework

Question 1: What's your income level?

Below roughly $50–80k a year in profit, the extra admin of an entity usually costs more than it saves. Sole prop or a simple domestic LLC is often the right answer. Above that, the math starts to matter and structure becomes a real lever.

Do not set up a UAE company because you saw a YouTube video. Set it up because your income actually justifies the annual costs, banking friction, and residency requirements.

Question 2: Where do you actually live?

Structure without residency clarity is theater. If you're still tax resident in a high-tax country, a foreign company usually does not save you tax — controlled foreign company rules, place-of-effective-management rules, and personal services income rules all reach across borders to pull the income back.

A UAE free zone company owned by someone who spends most of the year in Germany is a German company for German tax purposes, no matter what the certificate says.

Question 3: What kind of income is it?

• Pure freelance labor (you're the product): hardest to shelter. Most jurisdictions treat this as personal services income and tax it where you sit.
• Productized services, agency, SaaS, courses: more room to structure, because the income isn't purely a function of your hours.
• Investments and royalties: governed by treaty networks. The structure that helps one may hurt the other.

Question 4: Who are your clients?

US clients often prefer paying US entities. EU clients often prefer EU VAT-registered entities. Enterprise clients often require any entity at all. If a specific structure would unlock a whole client tier, that's a real reason.

Question 5: How much admin can you tolerate?

A UK Ltd is cheap and simple. A UAE free zone company has cheap headline tax but real annual costs, medical checks, visa renewals, and banking that ranges from fine to painful. Estonia is a beautiful jurisdiction on paper and a slog if you're not physically nearby.

A structure you don't maintain is worse than no structure at all.

Common real-world combos

The starter setup

US citizen, first year freelancing, under $100k: single-member US LLC, disregarded for tax, treated as sole prop on the tax return. Cheap, clean, easy to close.

The remote-worker-going-nomad setup

W-2 employee moving abroad: usually no entity at all — the employer is the entity. Focus goes to state exit, FEIE eligibility, and day-tracking.

The mid-six-figures agency owner

Non-US founder earning $300k+ from global clients while genuinely resident in a low-tax country: local operating company, sometimes paired with a holding structure. Real tax planning territory — real professional fees to match.

The "I want a UAE company" setup

Only actually works when you spend the required days in the UAE (or align residency somewhere else that also treats the UAE company well). Otherwise it's an expensive way to still owe tax at home.

What to avoid

• Copying a YouTuber's structure. They don't know your residency, your clients, your income, or your risk tolerance.
• Setting up entities before you have income. Wait until the revenue justifies the overhead. A dormant company still costs money.
• Assuming a structure fixes residency. It doesn't. Personal residency and entity structure are two separate stacks, and structure sits on top of residency, not the other way around.

The takeaway

Structure is downstream of income, residency, and clients. Get those right first, then pick the smallest, boringest legal wrapper that fits. Fancy comes later, if at all.

Educational coaching — not licensed legal, tax, or financial advice. Always confirm with a licensed professional in your jurisdiction.