Which State Is Best To Form An LLC For Non US Residents? (2024)

Opening an LLC in the United States as a non-US resident can seem daunting, with many factors to consider regarding different states.

However, when it comes down to it, the differences are not as significant as they may appear.

This article will break down the key considerations and popular state options to help non-residents determine which state is best for their LLC.

The Most Popular States for Non-Resident LLCs

The four most popular states for non-residents to open an LLC are Delaware, Wyoming, Nevada, and New Mexico. Each state has its own pros and cons to weigh.

Delaware LLC for non-US resident

• - Delaware is the most popular state overall for forming an LLC, including among non-residents.

• Over 50% of publicly traded companies in the US are incorporated there.

• - The filing fees are on the lower end, around $90, but the annual fees are higher at $300 per year.

• - Delaware has a Court of Chancery that specializes in dealing with corporate disputes. This can provide more legal predictability.

• - On the downside, Delaware entities can raise red flags in some countries that view it as a "tax haven", like Brazil.

Wyoming LLCs For Non-US Residents.

• - Wyoming's filing fees are very low, around $50, and the ongoing compliance costs are around $150 per year. This makes it very affordable long-term.

• - Wyoming LLC law is similar to Delaware's. The state is also known for corporate privacy and asset protection.

• - The Wyoming Secretary of State has streamlined systems to register companies quickly and easily online.

• - No major downsides to Wyoming that have been reported. It offers a cost-effective way to form an anonymous LLC.

Nevada LLC For Non-US Residents.

• - Nevada advertises itself as an "no taxes" state, but LLCs still have to pay annual fees and comply with requirements.

• - Initial filing fees in Nevada tend to be higher, over $100 in many cases.

• Ongoing compliance is still required.

• - Nevada does not have the same level of legal precedent regarding corporate law as Delaware or Wyoming.

• But its laws are still perfectly adequate.

New Mexico For Non-US Residents.

• - New Mexico has the lowest ongoing compliance costs of the popular states for non-resident LLCs.

• No annual reports or fees are required after forming the initial entity.

• - The initial filing fees in New Mexico are very affordable as well, usually under $100.

• - New Mexico may not offer the same level of legal protections as some other states if the LLC ever gets sued.

But many non-residents prioritize the low maintenance costs.

Key Factors to Consider Choosing LLCs For Non-US Residents

Privacy & Anonymity.

All U.S. states require LLCs to name a registered agent, which is the business entity that accepts official correspondence from the state government on behalf of the LLC.

Using a third-party registered agent service allows the LLC owners to remain anonymous.

Delaware, Wyoming, Nevada and New Mexico all permit registered agents that shield the identities of the actual owners.

Initial & Ongoing Costs

As outlined above, some states have lower initial filing fees while others have lower annual costs.

New Mexico and Wyoming overall have the lowest total costs year-to-year, while Delaware ends up being most expensive over time.

However, the cost differences amount to a few hundred dollars per year, which is fairly insignificant for most businesses.

Legal Protections & Credibility.

Delaware is recognized as having the strongest corporate laws due to its Court of Chancery and over 100 years of legal precedent.

Delaware case law has set standards followed by other states. This gives added credibility and predictability to Delaware LLCs.

Nevada's corporate laws are not viewed quite as favorably while Wyoming and New Mexico laws would be adequate for most smaller LLCs.

Transfer Tax Requirements.

Some states levy taxes when assets or equity in an LLC are transferred.

Delaware has lower transfer taxes than some states, at a maximum rate of 4.5% on asset value over $500 million.

Buyers or investors may prefer Delaware from this standpoint.

Other popular states for non-resident LLCs do not have transfer taxes to be concerned about.

"Blacklisting" by Other Countries.

While anonymous LLCs protect owners' privacy under U.S. jurisdiction, entities formed in certain states are viewed suspiciously by tax agencies in other countries.

In particular, Brazil and other Latin American nations have singled out Delaware LLCs as being potential tax shelters for citizens attempting to hide foreign assets and income.

LLCs from Wyoming, Nevada or New Mexico do not carry the same negative connotation abroad.

Income Taxes.

Contrary to popular belief, registering an LLC in Delaware, Wyoming, Nevada or New Mexico does not exempt non-residents from paying federal income taxes on U.S. generated profits.

An LLC formed in any state by a non-resident with no U.S. operations or assets does not owe U.S taxes.

State corporate income tax exemptions benefit C-Corps and S-Corps more than single-member LLCs owned by non-residents.

Bottom Line on Best State for Non-Resident LLC

While the differences between the top state options may appear significant on paper, in practice they will result in fairly similar outcomes.

As long as you form the LLC through a registered agent service to maintain anonymity, utilize an address in a state tax-free for passthrough entities, and consider the long-term costs, any of the leading states will likely serve you well.

For most foreign LLC owners without complex legal or tax issues, Wyoming represents an optimal blend of affordable cost, managerial ease and legal credibility.

It edges out New Mexico due to perceived better legal protections, edges out Nevada on compliance complexity, and edges out Delaware on ongoing expenses.

Ultimately Wyoming hits the sweet spot for the majority of small or mid-sized LLCs owned by those outside the U.S.

But you cannot go wrong picking Delaware, Nevada or New Mexico either.

Other States to Consider For Non-US Residents LLCs.

While less commonly used, a handful of other states may also suit non-resident LLC needs:

Alaska - Very limited reporting and disclosures required for LLCs after formation. Low annual costs like New Mexico.

South Dakota - South Dakota does not tax certain financial companies like investment funds or holding firms.

Very strong asset protections for LLC owners against creditors.

Tennessee - Extremely fast approval timeline for new LLC registrations, as quick as 1-2 days.

Specific tax incentives offered for "qualifying" small business LLCs.

Florida - One of the simplest states for compliance and upkeep of LLCs each year.

However, the identity of the owners isn't protected on state records.

The worst states to form non-resident LLCs are those like California and New York with highly complex regulations, taxes, and expensive annual fees.

Avoid anything that increases administrative headaches without providing meaningful benefits.

Recommendations Best LLC State For Non-US Residents.

Here are final tips for non-US residents forming a domestic LLC:

• - Work with a registered agent service to create your anonymous LLC in the state chosen
• - If launching an active U.S. based business, consider forming the LLC in the state where most operations will occur
• - To minimize tax liabilities research state tax expectations carefully for LLC incomes
• - File the necessary IRS paperwork for foreign owners of U.S. companies to comply with federal obligations

Forming an LLC can be an advantageous way to structure an American company as a non-resident.

Take the time to educate yourself on the subtleties between states and determine what priorities matter most - taxes, costs, credibility, etc.

Weigh the pros and cons carefully before landing on your best state to incorporate.

With a methodical approach, you can confidently register an LLC that sets you up for success in the U.S. market without headaches down the road.

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