Best State for a Non-Resident LLC: Wyoming, New Mexico, Delaware

Does the state change a non-resident LLC owner's federal tax?

No. A US LLC wholly owned by one foreign person files the same federal return whichever state it was formed in: a pro forma Form 1120 (a corporate return filled in only to carry Form 5472) with Form 5472 attached, for each year it has a reportable transaction with its owner or another related party, including money the owner puts in or takes out. For a calendar tax year it is due April 15 of the following year, extendable on Form 7004 (Form 1120 instructions). The IRS instructions apply to any US LLC the IRS disregards for income tax (a disregarded entity) that one foreign person wholly owns, whatever its state, and a missed or substantially incomplete Form 5472 costs $25,000, far more than any gap between state fees.

Whether the owner owes US federal income tax depends on what the business does in the United States, not where it was formed. A foreign person generally owes US tax on business income when engaged in a US trade or business, for example by performing services in the United States or selling inventory through US activity (IRS). A tax treaty with the owner's country can generally exempt business profits not attributable to a US permanent establishment (IRS Publication 519). The owner claims it on their own US return with Form 8833 attached; leaving the form off can cost $1,000, or $10,000 for a corporation (Form 8833). See when foreign owners owe US tax.

What the formation state does change:

• the formation fee and the yearly fee, tax or report;
• the registered agent you must keep there;
• what its public record shows about the people behind the LLC;
• whether that state taxes the LLC's revenue or income.

The choice stops being simple when the LLC will store inventory, hire staff or rent space in a US state, take investors, have two or more owners, or when an owner plans to move to the United States. Before choosing, gather: where customers are, where any goods will be stored, where anyone working for the LLC will be, how many owners there will be, and whether you plan to sell shares to investors.

Wyoming, Delaware, New Mexico, Florida, Texas or Nevada: what does each cost?

By state charges alone, New Mexico costs least to form and its posted LLC Act lists no yearly report; Texas has no yearly fee below its franchise tax threshold; Delaware and Nevada cost the most to keep. Charges below are for a small LLC with no assets or activity in the state; a registered agent is a separate, private fee everywhere.

Sources: Wyoming fee schedule and FAQ; Delaware fee schedule, annual tax and 18-1107; New Mexico LLC Act, 53-19-63; Florida fees, annual report and 605.0212; Texas Form 205, franchise tax and information reports; Nevada NRS 86.561 and 86.263 and NRS 76.100 and 76.130.

Read the rows with these conditions:

• New Mexico: the posted LLC Act lists no annual report, but no current state page confirms it. The New Mexico guide explains how to confirm before relying on it.
• Texas: the Public Information Report is due even when no franchise tax is. Missing it can cost the LLC its right to do business and make members personally liable for certain debts (Comptroller).
• Florida: if a corporation owns the LLC, directly or indirectly, add a yearly Florida corporate return, even if owning the LLC is that corporation's only Florida activity (Florida Department of Revenue).
• Registered agent: each state requires one with a street address in that state (Delaware; Wyoming; New Mexico; Florida; Texas; Nevada). An owner abroad usually hires one, so get a quote; see registered agents.

Each state's detail is in its own guide: Wyoming, Delaware, New Mexico, Florida, Texas and Nevada. For every state's first-year bill, see LLC cost by state.

Can another state tax my LLC, not just the one I formed in?

It can, when the LLC does business there. Inventory, staff or an office in a state can require the LLC to register there as an out-of-state LLC and file that state's taxes, on top of the formation state's yearly charge. New Mexico, for example, treats a business location, resident employees or property in the state as enough presence to tax (New Mexico Taxation and Revenue). Texas imposes franchise tax on each taxable entity formed in Texas or doing business there (Comptroller), and treats a retailer using a warehouse or storage place in Texas as engaged in business there for sales and use tax (Tax Code 151.107). A tax treaty does not by itself remove state taxes: US treaties generally cover federal income taxes only (US Model Tax Convention, Article 2). See registering in another state.

The six states also differ in what they tax:

• Wyoming has no individual or corporate income tax (State of Wyoming).
• Nevada has no individual income tax (Nevada Department of Taxation); its commerce tax applies only when Nevada gross revenue exceeds $4,000,000 in a fiscal year (Nevada Department of Taxation).
• Texas charges no franchise tax at or below $2,650,000 of annualized total revenue, but the information report is still due (Comptroller).
• Florida asks no separate return of a single-member LLC disregarded for federal tax, but a corporate owner, or an LLC taxed as a corporation, files a Florida corporate return (Florida Department of Revenue); see the Florida guide.

Does the formation state decide where I collect sales tax?

No. Sales tax follows where buyers are and where goods sit. A seller with a physical presence in a state, such as stored inventory, generally must register there whatever its sales; a seller without one must register once sales into a state reach that state's threshold, which is $100,000 in most states (Streamlined Sales Tax Governing Board). Forming in a state without a sales tax does not remove another state's. See when you must collect sales tax.

Wyoming or Delaware LLC for a non-US resident: when is Delaware worth it?

For a one-person LLC with no investors, the difference that shows every year is cost: $400 a year against Wyoming's $60 minimum, with the same federal filings (Delaware; Wyoming).

Delaware is worth comparing when you plan to raise money by selling shares. Stock is issued by a corporation, while an LLC has membership interests, and Delaware's corporation statute lets a corporation issue classes and series of stock with different voting, dividend and other rights (8 Del. C. 151). An LLC can elect to be taxed as a corporation (IRS Publication 3402), but it stays an LLC with membership interests; issuing shares takes a conversion to a corporation under state law (6 Del. C. 18-216). If investors are already in view, decide the entity first. See a Delaware C corporation for a non-resident founder and LLC or corporation from abroad.

New Mexico or Wyoming LLC for a non-resident?

Both cost little; the difference is the yearly filing. New Mexico charges $50 to form, and its posted LLC Act lists no annual report, though no current state page confirms it. Wyoming charges $100, then at least $60 a year with an annual report. Neither formation filing asks for owner names; the federal filing is the same. See the New Mexico and Wyoming guides.

Will a bank or payment platform care which state the LLC is in?

No federal rule makes the formation state matter: a bank identifies each person who owns 25% or more of the company and one person who controls it (FinCEN). Each bank and platform sets its own document list, so have the filed formation document, the IRS letter assigning the EIN and each owner's passport ready. See US business address and bank account and a US company for payment platforms from abroad.

Which state keeps an LLC owner's name off the public record?

None promises anonymity. Wyoming, Delaware and New Mexico formation filings do not ask for owner names; Florida, Texas and Nevada filings name at least one manager or member. What each state's filings show:

The IRS still learns who the foreign owner is: Form 5472 reports the owner (IRS). A company formed in any US state is now exempt from federal beneficial ownership reporting (FinCEN); see who still files a BOI report.

Which state fits an online business run from abroad?

With no US staff, office or stock, the state mainly sets yearly cost and paperwork; goods, staff or an office in a state bring that state's rules too. Match your case:

Example

Illustrative amounts in US dollars; state charges only, registered agent fees left out.

A consultant in Spain with US clients

She works only from Spain and has no US staff or stock. A Wyoming LLC costs $100 to form, then $60 a year from the year after formation: $220 in state charges over three years. A Delaware LLC costs $110 to form, then $400 each June 1 for the prior year: $910 paid over three years, with the third year's $400 due the next June 1. Either way, the LLC files Form 5472 with a pro forma Form 1120 for each year with a reportable transaction, and a missed one risks a $25,000 penalty.

A seller in Vietnam with goods in a Texas warehouse

He formed a Wyoming LLC and ships about $200,000 of goods a year from a Texas warehouse. Wyoming's $60 yearly charge continues. Texas may also treat the LLC as doing business there: registration, a Texas sales tax permit, and a yearly franchise filing. Stock in a US warehouse may also bear on whether he owes US income tax; see when foreign owners owe US tax.

Two founders in France expecting venture money

They plan to sell shares to investors within a year. An LLC with two owners would be a partnership for US tax by default. A Delaware corporation, with room for share classes, is a structure to price before forming anything.

Different for you?

• You live in a US state: compare your home state first in which state to form in.
• You will hold inventory, staff or an office in a US state: check registering in another state, then get business formation help to choose the state with that activity in view.
• You expect investors: read a Delaware C corporation for a non-resident founder and decide the entity with business formation help before filing.
• The LLC will have two owners: by default it files a partnership return each year; see an LLC owned by two non-residents and get cross-border tax help before the first year closes.
• You plan to move to the US: see moving to the US with your company and get cross-border tax help to plan the move.
• You live in mainland China: see a US company for a China-resident founder.
• Your LLC already exists and missed Form 5472: see missed foreign-owner filings and penalties and get cross-border tax help.