Best US States for Foreigners (Non-Residents) To Form an LLC

Best US States for Foreigners (Non-Residents) To Form an LLC

December 2, 2021
12
 Min Read

Want to form a 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 LLC as you please. You literally have 50 states to choose from. This is in stark contrast for U.S. residents; they should only consider their state of residence when registering a 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.

Why Form an LLC in the USA

As a non-resident, there are a number of advantages to setting up an LLC in the USA.

  • The first advantage is that American LLCs have a very good reputation.
  • Because an LLC in the US is a real US company, you now have excellent access to the entire US market and ecosystem.
  • You’ll also have unlimited access to US business services, like Stripe, PayPal Pro, banks, and so much more.

For more information on the benefits of a US company, please read The 8 Benefits of a US Company for a foreigner.

What to consider when choosing a State to form a US LLC

There are three factors to consider when determining the right State in which to form your LLC.

  1. Filing Fees - Different U.S. states have different fees for the initial formation of an LLC. Filing fees can range from $50 to $800. In some states, like New York, with archaic regulations, you must even publish notices in two local newspapers (one daily and one weekly) for six weeks within 120 days of formation. If your principal address is in New York City, publication fees alone can be over $1000!
  2. Annual Fees - To maintain your LLC, you must pay annual fees to the Secretary of State of your LLC state; these fees are usually known as Annual Report Fees and the Franchise Tax. Different states charge different rates. It’s important to know that these fees must be paid. If you don’t pay them, the LLC will be dissolved. If you plan to operate a long-term business under your LLC, affordable annual fees can be an important factor in choosing the right state for your LLC.
  3. Anonymity - In some U.S. states, there’s no public register of shareholders or members, so it’s precious for people who value privacy and anonymity. In this context, anonymity means that the owners of the LLC aren’t made public. Although anonymity of the owners of an LLC is usually provided by default, it’s not always guaranteed. Ownership of a company can be revealed through legal processes such as government investigations and litigation. Also, IRS reporting requirements and registering a company in another state to do business there would reveal the information.; but generally it’s useful to ward off nosy people or greedy spouses.

Three popular states to form an LLC for Non-resident

Wyoming

Wyoming is the first state in the U.S. 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 form an LLC in Wyoming, and the annual fee is $50, 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.

Delaware

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 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

New Mexico is also one of the few U.S. 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 form 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.

State Comparison Table

Below is a table comparing the most important aspects of each U.S. state with respect to LLC formation.

Benefits  Wyoming   Delaware  New Mexico
No State Corporate Income Tax  Yes  No  No
No Franchise Tax  Yes   No  Yes
No Annual Report Fee  No   Yes  Yes
Low Maintenance Fee  Yes   No  Yes
Low Filing Fees  Yes   Yes  Yes
Privacy  Yes   Yes  Yes
Allow Single Member LLC  Yes   Yes  Yes
No Annual Report Until the First Anniversary  Yes   No  Yes
Doesn't Share information with IRS Employees, Directors,  Yes   No  No
Officers & Agents are Statutorily Indemnified  Yes   No  No
LLC on Blockchain  Yes   Yes  No

Which US State should you choose? (Conclusion)

You should first decide 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 U.S. 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.

Need Help Setting up your US Company?  

At StartFleet we help U.S. and non-U.S. founders to set up and manage their companies in the US.

  • LLC and Corporation formation in Wyoming, Delaware, Florida and all other U.S. States
  • Over $500,000 perks from our partners
  • US Business Bank Accounts Opening
  • Expedited EIN Application
  • Stripe/Paypal application consultation
  • Shopify and Amazon FBA setup consultation
  • Customized Website Policies for your website


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