When creating a company in America, international entrepreneurs face the stressful task of finding the best state to form an LLC. To make this challenge easier, we brought the key differences between the four states that attract more international entrepreneurs to the country: Delaware, Florida, Wyoming, New Mexico, and Texas.
Opening a company in the US requires the entrepreneur to choose one state in the country to register the business. This step can raise many questions since laws and taxes vary from state to state and according to the type of company chosen: LLC or Corp.
There are federal and state taxes, franchise taxes, and more. Keep reading and find out the best state to form an LLC and its laws, requirements, etc.
How to start a business in the USA?
Before choosing the best state to form an LLC in the US, it’s crucial to know every step needed to take your company to the next level.
The country offers advantages for entrepreneurs from all over the world. Now, to see how to start a business in the USA for non-citizens, you do not need to be in the country or have a US visa.
Even without an SSN or an ITIN, you will be able to start your international business in the US. The entire process can be done remotely, and with a few simple steps, your company will operate in one of the best economic ecosystems in the world.
For foreigners, the steps to set up a business in the United States will be:
- Choose the state for registration;
- Choose the corporate structure;
- Submit formation document;
- Select a business address (can be a virtual address);
- Hire a Registered Agent;
- Get an EIN;
- Open a business bank account.
With the help of a partner like Globalfy, opening your business in the US will be even faster and simpler. Check out our business formation service to do it all in one click, for the best price.
When it comes to choosing the best category and state to start a business in the US, it’s normal for entrepreneurs to have doubts. Consider your needs and your company’s goals when making these decisions.
To learn how to assess this, let’s talk a little more about the structures available to establish your business in the United States below.
C Corp vs. LLC: What’s the difference between the two?
A Limited Liability Company is a type of company in the United States in which all profits are distributed among partners at the end of the year. For this reason, there is no requirement to pay state income tax as a company (State Income Tax) but as an individual. Members will pay taxes after distribution.
If your choice is an LLC, it is worth considering the states that do not charge individual income taxes. That way, you don’t have to pay this fee.
However, if your company is a Corp, you will need to pay the state income tax, and the percentage varies depending on the state you choose. This category brings perks, for example, for companies that intend to be traded on the stock exchange.
The downside, however, is double taxation, as partners pay taxes at the corporate level and then when profits are distributed to shareholders, in this case, as an individual.
What’s the best state to form an LLC?
Let’s see the options for the best state to form an LLC and their taxes. Texas, Wyoming, New Mexico, Florida, and Delaware are the best candidates. The State Income Tax and the Annual Report or Franchise Tax are paid at the state level. Therefore, they must be analyzed when choosing the best state to open your company in the USA. Check out what they are below:
- State Income Tax: this taxation is paid to the state by individuals and legal entities. Depending on the rules of each location, the value may be exempt.
- Annual Report or Franchise Tax: an amount paid to renew your US business registration annually. The tax is also variable by state.
|LLC state formation fee||$125||$110 (Normal processing)||$300||$50||$100 (+$2 credit card fee)|
|C Corp state formation fee||$70||$109 (Normal processing)||$300||$100||$100 (+$2 credit card fee)|
|Individual state income tax||None||None for out-of-state residents||None||None for out-of-state residents. For State Residents: between 1.7% and 5.9%. Additional rates start at $210,000 in annual income.||None|
|Corporate state income tax (C Corporations only)||4.5% for annual income over $50,000||8.7%||None||4.8%||None|
|Annual report or franchise tax||Between $138.75 and $150||Minimum of $225||None||None||Minimum of $62. Additional fees start at $250,000 in assets|
|Sales tax||Between 3% and 6%||None||6.25%||5.125%||4%|
|Privacy||No anonymity. All business records are public||LLCs can be anonymous||No anonymity. All business records are public||LLCs can be anonymous||LLCs can be anonymous|
After all, which state is the best Delaware, Florida, Texas, New Mexico, or Wyoming?
To decide the best state to start your business in the USA as a non-citizen, you need to make an assessment based on your preferences and the company’s particularities.
For example, Florida is a state chosen by many Hispanics, because, in addition to not requiring the payment of the State Income Tax for individuals, it is a friendly state. If your company is a Corp and earns more than $50,000 per year, you will need to pay the State Income Tax for corporations at a rate of 4.5%.
Texas, in this case, may take the lead since it doesn’t have this tax on companies registered in the state. For this reason, several California entrepreneurs choose to transfer their companies’ registration there. For New Mexico LLCs the good news is that they do not need to file for Annual Reports or Franchise Tax, while the fees for Corps in the state are very low.
Delaware, on the other hand, does not charge the State Income Tax if the company does not operate in the state. In addition, it is a region that offers support for non-American entrepreneurs. For example, the Delaware Corporation Law and the Supreme Court with the Court of Chancery, are very efficient at litigating possible company lawsuits.
Meanwhile, Wyoming has the convenience of not requiring the payment of State Income Tax for individuals and corporations. The Annual Renewal is very low and can be an alternative for company owners looking to reduce expenses. The state also does not require partners or members of LLC to be disclosed, unlike Florida, where this information is made public.
Learn more about the best state to form an LLC in 2023
Despite all the benefits that attract international entrepreneurs, starting a business in the United States can be challenging! Choosing the best state to form an LLC should be made with caution and a lot of knowledge.
With a team of experts, Globalfy will help you complete this entire process in a few steps! In addition to doing everything remotely, you’ll have access to a US business bank account, accounting, and even a registered agent for a full year. Open your business in the USA without leaving your home country now!