How to Start an LLC as a Non-U.S. Resident in Delaware

While not required by Delaware law, drafting an operating agreement is highly recommended for LLCs, including non-resident LLCs. An operating agreement outlines the management structure, ownership interests, voting rights, and operational procedures of the LLC. It helps clarify the rights and responsibilities of the LLC’s members and managers and can prevent disputes in the future. For complex businesses, you may seek legal counsel when drafting an LLC operating agreement.

Some things you may want to consider before drafting this document are:

• Will the LLC be member-managed or manager-managed?
• Is this a single-member LLC or a multi-member LLC?
• How will profits be managed and taxed?

Opening a U.S. business bank account as a non-resident LLC owner is crucial for financial management and maintaining LLC protections. It also simplifies transactions, enables access to U.S. banking services, and lends credibility to your business.

Consider the following when opening your account:

• Research and select banks that are accustomed to working with international clients and understand the specifics of non-resident business operations.
• Documentation requirements may include your LLC’s official formation documents, Employer Identification Number (EIN), and personal identification, such as a passport.
• Determine whether you need to be present in the U.S. to open the account or if it can be done remotely. Look into RelayFi, Found, and Mercury for remote banking options.

While Delaware LLCs are known for being a cost-effective option when starting a business, there are some upfront expenses to consider. This includes mandatory filing fees, as well as recommended and optional costs.

• Incorporation fees: The primary, and mandatory, cost for forming an LLC is the filing of your Certificate of Formation. The filing fee for a Delaware company registration is $110. For an additional $50, this process can be expedited within 24 hours, or for $100 it can be processed the same day. There are also additional fees for things like certified copies of your formation documents.
• Registered agent fees: All LLCs are required to designate a registered agent in Delaware to receive legal documents and official correspondence on behalf of the company. This person can be the business owner or an associate, but they must have a physical address within Delaware. For foreign owners, a registered agent service can act on your behalf. Registered agent services typically cost between $100 to $300 annually.
• Various application fees: When forming your LLC, there are a number of permits and licenses you may need to apply for before operations begin. These costs vary by state and locality, but should be taken into account early on. You may also choose to pay for documents like a Certificate of Good Standing.
• Professional services: Many LLCs, especially those owned by non-residents, will choose to work with tax and legal professionals before forming their business. These services can help draft an operating agreement or be sure that your business is in compliance with all tax laws. Costs will vary by service, but may be important for your business.

Costs associated with formation of your LLC in Delaware won’t changed based on where the owner is located. However, non-U.S. resident owners will likely choose to spend more upfront on some costs that are important for compliance. These may include:

• Registered agent services to fulfill the requirement of a Delaware address.
• Legal representation to ensure compliance with all laws.
• Additional tax payments to home countries and other entities.
• Tax guidance from a CPA or other professional.
• Higher administrative costs around communication, documentation, and compliance efforts.
• Costs for international banking, currency exchange, and cross-border transactions.

These costs are all important to consider when deciding to form an LLC in Delaware as a non-U.S. resident.

Any LLC in the USA will need to meet a certain set of tax obligations; for those owned by a non-U.S. resident, there may be additional federal tax implications based on treaties with your home country. But when it comes to state taxes, Delaware is very friendly to all LLCS. Below are the main state tax obligations to be prepared for.

• Annual franchise tax: Non-U.S. resident LLCs operating in Delaware are subject to the state’s annual franchise tax, which is based on the company’s authorized shares or the value of its assets in the state. The minimum franchise tax is $300 per year, with additional fees based on capitalization.
• Income tax reporting: Non-U.S. resident LLCs may be required to report income earned within the United States to the Internal Revenue Service (IRS). While Delaware does not impose a state-level income tax on LLCs, non-resident owners must ensure compliance with federal tax laws and regulations governing foreign-owned business entities.
• Withholding taxes: Depending on the nature of the LLC’s business activities and income sources, non-U.S. resident LLCs may be subject to U.S. withholding taxes on certain types of income, such as dividends, interest, royalties, and rental income.
• Sales and use tax: Non-U.S. resident LLCs engaging in business activities that involve sales of goods or services in Delaware may be required to collect and remit sales and use taxes to the state. Understanding sales tax nexus rules and registration requirements is essential for compliance with state tax obligations.
• Employment taxes: If a non-U.S. resident LLC has employees working within the United States, it may be responsible for withholding and remitting payroll taxes, such as federal income tax, Social Security tax, and Medicare tax, as well as complying with employment tax reporting requirements.

When considering where to establish a Limited Liability Company (LLC) as a non-resident in the United States, Delaware consistently stands out as a top choice due to its favorable business climate and unique advantages.

• Business-friendly legal environment: Delaware has a well-established and respected legal system with specialized courts, like the Court of Chancery, dedicated to resolving business disputes. This extensive body of corporate law provides clarity and predictability, making it a favorable environment for businesses of all sizes and industries.
• Streamlined incorporation process: Delaware offers a highly efficient and streamlined process for LLC formation, allowing those without U.S. residency to establish their businesses quickly and with minimal bureaucracy. Online filing options and expedited processing services further simplify the process, so that business owners can focus their efforts on their own operations and not paperwork.
• Flexible operating agreements: Delaware’s LLC laws provide a lot of flexibility in crafting operating agreements which are not required but recommended. These documents allow non-resident owners to customize governance structures, management arrangements, and profit-sharing mechanisms to suit their specific needs and preferences. Delaware’s flexibility means that business owners can remain in control of their organization.
• Privacy protections for business owners: Delaware offers robust privacy protections for business owners, allowing them to maintain anonymity and shield personal information from the public domain. Non-residents can utilize nominee services or appoint trusted representatives to maintain confidentiality while doing business in the state.
• Tax advantages and predictability: Delaware’s tax law is known for its simplicity, predictability, and favorable treatment of LLCs. The state imposes no sales tax on intangible assets and has no corporate income tax for income that is not US-sourced income. Additionally, Delaware provides clear guidelines on tax obligations, offering non-resident LLC owners peace of mind and certainty in their tax planning strategies.

Entrepreneurs from around the world are drawn to the United States to start their businesses, especially in states like Delaware. There are a wide range of benefits to making this choice – here are just some:

• Access to the American market: The U.S. boasts the world’s largest consumer market, offering unparalleled opportunities for business growth and expansion that most other places cannot.
• Legal protection and stability: The U.S. legal system provides robust protections for intellectual property rights and contracts, which is especially powerful for innovation-driven industries.
• Enhanced credibility: Establishing an LLC in the U.S. can improve credibility and legitimacy, instilling confidence in customers, partners, and investors by signaling a commitment to compliance with U.S. regulations and standards.
• Tax advantages: Certain states, such as Delaware, offer favorable tax environments with low corporate taxes and business-friendly policies, enabling non-resident entrepreneurs to minimize tax liabilities and maximize profits.
• Global market positioning: Starting an LLC in the U.S. strategically positions non-resident businesses in the global marketplace, facilitating long-term success and prosperity.