Why LLCs don't work in Europe
The US LLC (Limited Liability Company) is beloved for good reason: quick to set up (same-day in Delaware), minimal capital requirements, pass-through taxation, flexible governance, and strong legal precedent. It's the default choice for US startups, freelancers, and digital businesses.
The problem is that an LLC is a US legal structure. It does not exist in EU law. A Delaware LLC operating in Germany is a foreign company — it must register as a foreign business entity, comply with German regulations for foreign companies, and navigate a patchwork of tax treaty rules. This is not impossible, but it is expensive and structurally awkward.
| Factor | US LLC (Delaware) | EU Inc (proposed) |
|---|---|---|
| Legal jurisdiction | US state law | EU-level framework |
| Min. capital | None (no requirement) | €1 (proposed) |
| Incorporation time | Same day (online) | 48 hours (target) |
| EU market access | As a foreign entity (complex) | Full legal recognition in all 27 states |
| Tax treatment | Pass-through (US default) | Corporate entity (EU tax rules apply) |
| Notary required | No | No (proposed) |
| Cross-border EU hiring | Foreign entity complications | Single EU entity, hire in any state |
| Available now | Yes | No — earliest 2029 |
The tax treatment difference
This is the biggest structural difference and it matters enormously for US founders thinking about EU operations.
A US LLC is typically a pass-through entity for US tax purposes — income passes to the members and is taxed at the individual level. This is attractive in the US but creates complications in Europe: most EU countries do not recognise pass-through taxation for foreign LLCs. Germany, for instance, may treat a US LLC as a corporation and tax it accordingly — which means you're potentially dealing with double taxation.
EU Inc would be taxed as a corporate entity in the EU, similar to a GmbH or SRL. This is simpler to deal with from a European compliance perspective, even if it means no pass-through treatment.
The LLC question comes up constantly when I talk to US founders entering Europe. The usual advice is: "set up a Delaware LLC for US operations, then a separate EU entity (GmbH, BV, or SRL) for European ops." This dual-entity structure works but creates complexity: intercompany agreements, transfer pricing issues, and two compliance calendars. EU Inc would simplify the European half of this equation — but won't eliminate the need for a US entity if you have US operations and US investors.
What US founders actually do today
Most US-backed European startups follow one of these structures in 2026:
- Delaware C-Corp + EU subsidiary — popular for US VC-backed companies. C-Corp for US investors, EU subsidiary for European operations.
- Netherlands BV — the Dutch BV is the most VC-friendly EU structure, especially for US investors familiar with it. Minimum capital €0.01, strong legal system, English-language legal environment.
- UK Ltd — post-Brexit, less popular for EU market access but still used by founders comfortable with English law.
- Irish Ltd — popular for US tech companies for tax reasons, less common for startups.
- German GmbH — for founders targeting the German market specifically.
EU Inc would add a sixth option to this list — potentially the most attractive one for founders who need pan-European presence without committing to a single national jurisdiction.
For non-EU founders: EU Inc's biggest advantage
The current Commission proposal explicitly states that EU Inc will be available to non-EU founders. You do not need to be an EU citizen or resident to incorporate one. You do need to have the company's registered office and real administrative centre within the EU.
This is significant. Currently, a US or UK founder wanting EU market access must navigate which of 27 national systems to use, often based on where they happen to know a lawyer. EU Inc would offer a single, standardised answer.
The Delaware comparison
Delaware is often described as the "EU Inc of the US" — a single state whose corporate law is so well-developed and respected that companies incorporate there even if they have no operations in Delaware. EU Inc aspires to something similar: a single framework whose legal clarity and simplicity makes it the default choice regardless of which EU country you primarily operate in.
The difference is that Delaware achieved this through market forces over 100 years. EU Inc is trying to achieve it through legislation in 5 years. Whether it works depends on adoption rates, and those depend on whether investors, banks, and lawyers embrace the new structure.
| Analogy | Delaware (US) | EU Inc (proposed) |
|---|---|---|
| Governing law | Delaware state law | EU Regulation |
| Physical presence needed | No (registered agent) | No (fully digital) |
| Why chosen over alternatives | Legal clarity, investor familiarity | Cross-border recognition, simplicity |
| Time to establish dominance | ~100 years | TBD |
Frequently asked questions
Can I convert my US LLC to an EU Inc?
No — these are two entirely different legal structures under different jurisdictions. You cannot "convert" a US LLC to an EU Inc. You would need to close or maintain the LLC and separately incorporate an EU Inc. The two can coexist as separate entities with an intercompany relationship.
Can I use an EU Inc to raise from US investors?
This is an open question that won't be answered until EU Inc is actually in market. US VCs are generally unfamiliar with European corporate structures. An EU Inc might be more legible to a US VC than a German GmbH or Italian SRL — but it's genuinely unknown whether US term sheets and investment documents will be adapted for EU Inc by the time it launches.
What's the best EU structure for a US founder today (before EU Inc)?
For most US founders entering Europe in 2026: a Dutch BV or Irish Ltd if you want English-law familiarity; a German GmbH if your primary market is Germany; a French SAS if France is your focus. The BV is generally considered the most startup-friendly current option for US-backed companies.
Will EU Inc have pass-through taxation like an LLC?
No. EU Inc will be taxed as a corporate entity in whichever EU member state it operates in. There is no pass-through proposal. This is a fundamental structural difference from the US LLC model.
Building in Europe? Stay ahead.
Join the waiting list — get notified when EU Inc launches and what it means for your structure.
Join the Waiting ListSources
- European Commission proposal COM/2026, IP/26/614 — March 2026
- Delaware Division of Corporations — LLC formation statistics
- Invest in Holland — Dutch BV guide for international founders
- IRS — Treatment of foreign entities for US tax purposes