One of the most popular forms of business organization for digital nomads and entrepreneurs is an LLC in the United States. However, the regulations vary from state to state, which can have both advantages and disadvantages. The following article will explain which US state is most suitable for your LLC and why. However, all information is for non-residents only, which means that you are neither a US citizen nor a green cardholder.
Why Form an LLC in the USA at All?
There are many advantages to set up an LLC as a non-resident in the USA. On the one hand, American LLCs enjoy a good reputation, which is very convenient for customers to be able to deduct bills for instance in their tax declaration. In addition, many American states make it very easy to form an LLC without high costs or effort and with the possibility of paying zero taxes. Since there is competition between the American states as to how many LLCs they form, prices and maintenance costs are low and some states even have temporary special offers where they offer discounts of up to 60% on formation.
Lear all you need know about in our Ultimate US LLC Guide for [NON-RESIDENTS].
Set up Your Business Address
Before you can form your own LLC, you must have a fixed business address and a mailing address in each state. However, the addresses for the three states recommended in the article do not have to be in the same state where you will later establish your LLC. This means that you can use an address from friends or relatives, or use a virtual address service if you do not have any friends in the USA. There are many different providers for this, but we have had countless good experiences with anytimemailbox. All you need is your passport or ID and a valid utility bill from any address in the world. For a detailed guide on how to set up your business address, please check here.
Relevant Criteria You Should Consider When Forming an LLC
When it comes to deciding in which state you want to form your LLC, there are three criteria that are most relevant. First, the states differ in the amount of the one-time filing fee that is required to form the LLC. The differences here are not very big and now and then states offer discounts through special offers. Secondly, the States differ according to the level of annual fees. It is essential that you pay the fees, otherwise, the LLC will be dissolved and your business would be jeopardized.
Especially if you want to set up an LLC for a long time, low annual fees can play a big role in the choice of the state. The third relevant criterion is that some states guarantee anonymity. Anonymity in this context means that the owners of LLCs are not published, but the IRS must of course know the name for the formation and tax reasons. Usually, the tax rates of the states are the most important criterion for the choice of the location of the LLC. As a non-resident, your LLC will only be taxed on US-sourced income, which is discussed in greater detail in our detailed LLC article.
Which States Are Candidates for Formation and How Do They Differ?
Three states come into question when it comes to the formation of an attractively priced, anonymous LLC.
- Delaware
In Delaware, the formation of an LLC costs $90 state filing fee. The annual fees for the LLC are with 300$ quite high. However, in Delaware it is not necessary to list the members of the LLCs, only a registered agent and an organizer must be registered. If you want to remain completely anonymous you can find third-party providers who can take over this role for you. Some of those third-party providers charge a lot of money for their services. Incfile is a reliable company that does that for free. You still have to pay the filing fee which goes directly to the state in which you form your LLC.
- New Mexico
New Mexico has a state filing fee of $50 for LLCs and does not charge annual fees, making the state very attractive to entrepreneurs. Furthermore, no information about members of the LLCs is requested, nor are annual reports required. Almost complete anonymity in New Mexico can only be guaranteed through third party providers, similar to Delaware.
- Wyoming
The state filing fee in Wyoming is $100, while the annual fee is relatively low at $50. Concerning anonymity, Wyoming has the advantage that a so-called nominee service can be used, through which a nominee is publicly issued as owner of the LLC instead of the real owner. A problem in Wyoming is that it is not very populated, so it can be difficult to find providers for services such as a virtual mail address.
Here again the conditions of the three states in a concise table:
| State | Filing fee | Annual fee | Anonymity |
|---|---|---|---|
| Wyoming | $100 | $50 | ✅ |
| Delaware | $90 | $300 | ✅ |
| New Mexico | $50 | $0 | ✅ |
However, choosing the state that suits you best is only the first of many steps on the way to your own LLC. Next, you will have to find a name for your LLC which is not yet assigned. For this purpose, there are registers in which you can search for the names. All links to the registers, as well as a step-by-step guide on how to open your own LLC cheaply and quickly, can be found here.
Summary
Now you should have an overview of which states are most suitable for establishing an LLC, depending on the factors that are most important to you. From my experience of opening countless LLCs for online entrepreneurs, I would advise you to form an LLC in New Mexico, because no other state offers this service without annual fees and possible anonymity. However, there are of course many other details that play a role, which I could not cover in this article. If you would like individual advice on which state is best suited for your company, please do not hesitate to contact us.