Want to form an LLC in the United States as a non-resident? Then you’ll want to know which American states are the best for foreign owners.
The good news for non-US residents is that you can choose any state to register your US LLC as you please. For US company formation. you literally have 50 states to choose. This is in stark contrast for US residents; they should only consider their state of residence when registering an LLC, unless there’s a valid reason to do otherwise.
Since you can freely choose from either 50 states in the United States, we will be taking a look at the best US states for starting an LLC. Additionally, we will be evaluating how each state ranks on factors such as taxes, fees, privacy and other factors. With our findings in place, you’ll have everything you need to make the best decision for your company.
As a non-resident, there are a number of advantages to setting up an LLC in the USA.
For more information on the benefits of registering a US company, please read The 9 Benefits of a US Company for a foreigner.
There are three factors to consider when determining the right State in which to form your US LLC.
Wyoming is the first state in the US to allow the formation of LLCs. Little known at the time (in the 1970s), this corporate structure has since revolutionized the way America does business. Nowadays, Wyoming is once again pioneering business-friendly legislation by allowing LLCs to operate as a Decentralized Autonomous Organization where voting is done on the blockchain.
There’s a $100 state filing fee to register an LLC in Wyoming, and the annual fee is $60, provided your company has less than $250,000 in business assets in Wyoming. In addition, there’s no state income tax in Wyoming. The members or managers of an LLC aren’t required to be listed in Wyoming state records, although Registered Agents are required to know who’s behind an LLC. However, this information isn’t public and can’t be viewed online.
When it comes to registering an online business, a Wyoming LLC is the perfect structure for a location independent business that’s not engaged in trade and business within the US. The low starting fees and compliance costs are more attractive than most other states.
Forming an LLC in Delaware will set you back $90 in state filing fees. There are no Annual Report Fees in Delaware, but there’s a relatively high franchise tax of $300. In its defense, Delaware’s laws and court system are very attractive to investors; it’s home to some of the most business-friendly laws in the United States. In addition, litigation involving the state’s corporate statutes is heard in the Court of Chancery, where cases are decided by judges rather than juries. The Court of Chancery is well-known for its expertise and efficiency in resolving disputes.
A Delaware LLC also has privacy features where you aren’t required to list the members or managers of your US LLC in the Certificate of Formation, and therefore cannot be searched in the Delaware Public Business Registry. Delaware does have a state corporate income tax, but if your LLC operates outside of Delaware, you do not need to pay.
If you’re raising venture capital or angel investments, you should form a Delaware C-Corporation instead of a Delaware LLC. If you’re unsure whether you need outside investment and just want to “bootstrap” your business for now, we advise you to first register an LLC in Delaware and later convert it to a Delaware C-Corporation if needed.
New Mexico is also one of the few US states that doesn’t require the name of the member or manager to be included in the filing of the certificate of formation. A $50 filing fee is required to register an LLC in New Mexico; however, no annual report fees are required. This fact alone makes New Mexico an attractive state for entrepreneurs. New Mexico has a corporate income tax of 4.8% (up to $500,000 in profits).
While it’s tempting to pay no annual fees, we’d be cautious as we’ve heard that certain payment processing providers such as Stripe tend to reject New Mexico LLCs more than the average. Also, New Mexico doesn’t enjoy as much “prestige” compared to states like Delaware, which can sometimes make a difference in how your business is perceived.
Below is a table comparing the most important aspects of each US state with respect to LLC formation.
You should first decide in which State to form your LLC before you register. If you want maximum privacy and control over your LLC at a relatively low price, we would recommend Wyoming: in fact, you can’t go wrong with the state that invented the LLC entity structure.
If you’re raising angel and venture capital investment, your state of choice should be Delaware C-Corporation. Remember you could always convert your LLC to a Delaware C-Corporation at a later date.
Finally, if the only thing that’s holding you back is cost, then New Mexico is an affordable option worth considering.
Remember that all US states have their pros and cons, so no state is better than the other one in all aspects - what really matters is where YOUR business needs are met.
We are glad you have made it this far, but this is just the beginning of your journey to building your online empire with a US LLC. If you have any questions and want to register a US company, please follow the rest of the articles in this guide or contact us at hello@startfleet.io.
StartFleet helps you with your US Company formation. Apartfrom helping you to register a US company we offera lot more:
Kathleen Schweitzer is an international taxation expert, providing strategic counsel to businesses with complex compliance, tax and financial issues in an effort to help them grow their business globally. She often gives lecture on U.S. tax developments, transfer pricing, taxes on the sale of goods and services, U.S. tax policy development, taxation of internet commerce and multi-jurisdictional global tax planning. Kathleen enjoys reading, photography, cooking and spending time with her husband and eleven-year-old daughter.
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