Wyoming vs Delaware for Non-Citizen LLCs: Which Is better?

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by How to Start an LLC Team
Last updated: June 17th, 2024

Wyoming and Delaware are popular choices for LLC owners because they are known as business-friendly states. Which is best for you? The answer likely depends on the type of business you’re planning to operate and your priorities. Read on for a comprehensive comparison.

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Choosing the right state to form a limited liability company (LLC) is a pivotal decision for entrepreneurs and small business owners, and it can be even more important for non-resident LLCs.

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Why it matters where LLCs are formed

It may seem like all the states are created equal, especially for someone who doesn’t live in the country. But the truth is that where a Limited Liability Company (LLC) is formed plays a critical role in determining its legal framework, tax obligations, and operational flexibility. Each state in the U.S. has its own laws governing LLCs, from formation costs, to privacy protections, to reporting requirements, and tax structures.

While each LLC is always subject to federal law, most of the day-to-day decisions in an LLC will be based on state law instead. This means that where you form your LLC is a serious consideration.

Privacy considerations for non-resident LLCs

When non-residents form LLCs, privacy becomes a significant factor in deciding where to incorporate. Many business owners prefer to keep their personal information confidential to protect against identity theft, unwanted solicitation, or even political and competitive targeting.

Different states have varying regulations regarding the amount of personal information that must be disclosed on public records when forming and maintaining an LLC. Wyoming and Delaware take different approaches to this issue.

Wyoming

Wyoming is often hailed as a privacy haven for business owners due to its favorable laws around confidentiality. In Wyoming, LLCs are not required to list members or managers on the formation documents filed with the state. This anonymity extends to the annual reports.

Additionally, the state does not share information with the Internal Revenue Service beyond what is federally required, offering an extra layer of privacy.

Delaware

Delaware, while also a popular choice for forming an LLC due to its well-established corporate laws and court system, has a slightly more relaxed approach to privacy.

The state requires that the names and addresses of LLC members be disclosed upon formation if the LLC is managed by its members rather than a designated manager. However, if an LLC opts for management by one or more specific managers, only the managers’ names and addresses need to be listed in public documents.

About BOI Reporting

While Wyoming and Delaware each have rules regarding public disclosure of LLC members, LLCs in each state will have to adhere to federal Beneficial Ownership Information (BOI) regulations. This means that LLCs (and other entities) have to share information about any beneficial owners of the business with the Financial Crimes Enforcement Network, including full names and dates of birth.

BOI information is not publicly accessible, it is used only by FinCEN to monitor businesses and prevent financial crimes.

Tax advantages for non-resident LLCs

One of the biggest reasons entrepreneurs choose an LLC as their business structure is the tax benefits. LLCs are typically “pass-through” entities, meaning they do not pay taxes on profits themselves; instead, profits and losses pass through to the individual members’ tax returns. While this is true at the federal and state level, each state has different tax structures that can mean the tax obligations vary widely – which is true of Wyoming and Delaware.

Wyoming

Wyoming is well known for its favorable tax policies, making it an attractive state for forming an LLC. The state imposes no corporate or personal income taxes, which means that income from an LLC will not be taxed at the state level, regardless of where the LLC members reside. 

Taxes that are imposed, such as sales and property taxes, are relatively low when compared to other states. The sales tax is 4%, while the average effective property tax rate is well below the national average at 0.55%.

LLCs in Wyoming will still need to pay federal taxes, including income taxes. But by avoiding state income taxes, Wyoming business owners can see significant savings.

Delaware

Similar to Wyoming, Delaware does not directly tax any income from an LLC at the state level, either as personal income tax or a corporate tax. This feature is particularly beneficial for non-resident owners whose business activities are based elsewhere, allowing them to avoid additional state income taxes on LLC earnings.

However, Delaware LLCs must pay an annual franchise tax of $300 each year, which is a flat fee or a fee based on the number of corporate shares the company has, depending on the entity type. Despite this fee, Delaware’s lack of income tax, sales tax, inventory tax, and personal property tax still makes it financially attractive.

Legal system and asset protection for non-resident LLCs

The legal framework in a state influences how well an LLC can shield its members’ personal assets from business liabilities and creditors. Additionally, certain states have specialized courts that deal with business disputes, providing expert resolution environments that can be a decisive factor for many businesses.

Wyoming

Wyoming allows the establishment of what are known as “asset protection trusts,” which can shield an individual’s assets from creditors, and Wyoming LLCs benefit from similar protective measures.

One of the key features is that creditors must use something called a “charging order” if they need to collect on any debts. This means that if an LLC member has debt, the creditor cannot seize any assets from the LLC itself. Instead, they would need to intercept any distributions from the LLC to the member, without interfering with the LLC’s management.

Delaware

Delaware’s legal system is particularly advantageous for LLCs due to its sophisticated approach to corporate law.

The Delaware Court of Chancery is renowned for its expertise in corporate matters, providing a specialized forum for resolving business disputes. This court does not use juries but instead utilizes judges with extensive knowledge of business law, which can lead to more predictable and expert outcomes in legal disputes.

Like Wyoming, Delaware offers strong asset protection features. It also limits creditors to the charging order as their only remedy against a member’s interest in an LLC.

Steps to form a non-resident LLC

In most states, the process to form an LLC is straightforward and quick, even for non-resident LLC owners. However, there are slight differences based on location. Whichever step you choose, here are the beginning steps you need to get started.

1
Choose a name for your LLC

The name for an LLC must be legally distinguishable from other business names already registered within the state; there may be other naming requirements in each state as well. Once you’ve chosen your name, it needs to be registered to secure it for your business.

Wyoming

  • Must explicitly include “LLC,” “L.L.C.,” or “Limited Liability Company.”
  •  Name checks and reservations can be done online through the Wyoming Secretary of State’s office.

Delaware

2
Appoint a registered agent

We highly recommend using a registered agent service like the ones listed below.

  • Same day filing service
  • Affordable pricing
  • Strict ethical code
  • Set up LLC without hassle
  • Take you through all steps
  • Start your LLC worry-free

A registered agent is a designated person who is responsible for receiving legal documents, service of process, and government correspondences on behalf of the LLC. 

While people with an address in the United States can form an LLC, a registered agent must have a physical address in the state where the LLC is formed. For non-resident LLC owners, this means a registered agent service may be used to meet the requirement.

Wyoming

  • The agent must be either a resident of Wyoming or a business entity authorized to do business in Wyoming, with a physical address in the state (P.O. Boxes are not allowed).

Delaware

  • Delaware requires that the registered agent be located within the state, and available to handle legal notices during normal business hours.

3
File formation documents

The document that officially forms an LLC has different names in different states, but services the same purpose. This document will contain required information about the LLC, like its name and location, and is submitted to the state to formally register the business.

Wyoming

  • In Wyoming, this document is referred to as the “Articles of Organization.”
  • The filing can be done online via the Wyoming Secretary of State’s Business Center, or by mailing in documents. There is a filing fee of $100, or $102 if done online.

Delaware

4
Draft an operating agreement

An Operating Agreement is a document that outlines the LLC’s ownership, operating procedures, and financial arrangements among members. This internal document is not mandatory in all states but is crucial, particularly in non-resident LLCs who may be less familiar with the U.S. business and legal system. Having an operating agreement in place ensures all members are clear on the management, profit, and tax expectations for a U.S. company.

Owners can write their own agreements with an online template, or hire legal advisors to help. It will not need to be filed with the state, but should be kept on file.

5
Obtain necessary business licenses and permits

While a few industries are licensed federally, states and municipalities decide the majority of these requirements; for example, professions like lawyers and cosmetologists are licensed by the state where they work. Licenses can be required unilaterally, based on the type of business, by location, or for certain occupations.

Wyoming

  • Wyoming LLCs do not require a universal business license. This means that licensing requirements will be dictated by factors like location and profession or industry.
  •  Any LLC that sells goods or provides taxable services must collect sales tax and remit it to the Wyoming Department of Revenue, along with $60 for processing.
  • The Wyoming Department of Administration & Information oversees occupational licensing, which is required for some professions.
  • Each city, county, and/or town can also require their own licensing and permits.

Delaware

  • Delaware requires all LLCs to obtain a general business license, which can be done through Delaware’s Business First Steps Portal. This license is $75 for the first location, and $25 per year for any additional location.
  •  You can also find a list of professions and industries that require state licensing here.
  • Each city, county, and/or two can also require their own licensing and permits.

6
Register with the IRS

The Employer Identification Number (EIN) is a nine-digit ID similar to a Social Security Number for a business. LLCs are not required to have an EIN by default, but they are highly recommended, no matter which state your LLC is located in. This number is issued by the Internal Revenue Service (IRS) and serves several essential functions:

  • The EIN uniquely identifies a business entity, helping to separate and protect the owner’s personal identity.
  •  It is used for tax reporting purposes with the IRS, including employer taxes.
  • Most banks require an EIN to open a business banking account.

The process to apply for an EIN is straightforward and free, including for non-residents. Businesses can apply online through the IRS website, by fax, or mail.

Non-resident aliens and green card holders

For non-resident aliens without a green card, obtaining an ITIN is an essential step in managing their U.S. tax obligations, particularly if they receive passive income from investments or operations in the U.S. that are subject to taxation. Green card holders, meanwhile, are often eligible for an SSN, which fulfills similar requirements as the ITIN for personal taxation and identification.

7
Open a business bank account

While not mandatory, opening a dedicated business bank account is a critical step for any LLC, serving to separate the business’s finances from the personal finances of its owners. This separation is vital for financial clarity, legal protection, and overall business credibility; it also ensures that the liability protection of an LLC remains intact.

  • Non-resident owners may have more challenges in opening a bank account for an LLC in the U.S.:
  • Typically, non-residents must provide more documentation than U.S. citizens. This might include a passport, foreign address proof, U.S. address proof (if applicable), and their ITIN or EIN.
  • Some banks may require the account opener to be physically present in the U.S. at some point during the account opening process. However, an increasing number of banks and financial institutions are offering remote or online account opening processes, especially for foreign business owners.
  • Understanding U.S. banking regulations, including compliance with the Foreign Account Tax Compliance Act (FATCA), is crucial. Non-residents should be aware of their home country’s treaties with the U.S. regarding taxation to avoid double taxation.

For non-residents, we recommend Relay, Found, and Mercury.

Costs to form a non-resident LLC

The majority of LLC costs are dependent on the needs of your business, not the state where it is formed. However, some fees do differ between states.

Administrative fees

The primary cost for any LLC is the formation filing fee. In Wyoming, the Articles of Organization filing fee is $100 by mail and $102 online. In Delaware, there is a $110 filing fee no matter how it is done. Additional application and licensing fees will vary by industry, location, and other factors.

Delaware does have a $75 business license fee, while Wyoming has a $60 fee to apply for a sales tax license.

Registered agent fees

Both Wyoming and Delaware mandate that each LLC has a registered agent on behalf of the business. While this agent can be the business owner or any other individual, they need to have an address within the state, which can be difficult for non-resident LLC owners.

Many will choose a registered agent service, who acts on their behalf and keeps the company in good standing, for a fee. Typically, this can cost $50 to $300 per year.

Optional service fees

LLCs may choose to pay for professional services, like a legal advisor or a CPA for tax help, which will vary based on the services and needs of the business. CPAs often charge between $500 and $2,000 for consultations and advice on business structures, but you will need a personalized quote for exact costs.

Wyoming vs. Delaware for non-resident LLC

When deciding between Wyoming and Delaware for forming your non-resident LLC, the choice largely depends on your specific business needs and priorities.

Wyoming is particularly attractive for its cost-effectiveness and privacy protections. It offers low startup and annual costs, no state income or franchise taxes, and allows LLC members to remain anonymous in public filings. These features make it ideal for small business to medium-sized businesses looking for simplicity and privacy.

On the other hand, Delaware is favored for its legal environment and corporate prestige. It boasts a well-established Court of Chancery known for its expertise in handling complex corporate disputes, which can be a significant advantage for businesses that may face legal challenges. Additionally, the state’s reputation as a corporate hub can lend considerable credibility and trustworthiness to any business and it also has low taxes.

FAQs

What is the best state for legal protections for LLCs, Wyoming or Delaware?

Both states offer strong legal protections for LLCs, but they cater to different needs. Delaware is renowned for its legal system and the Court of Chancery, making it ideal for handling complex corporate litigation. Wyoming offers strong asset protection laws and is particularly favorable for protecting personal assets from business liabilities.

Is Wyoming or Delaware better for non-resident LLC owners?

The best state to form an LLC as a non-resident will depend on your priorities. Wyoming has more financial benefits, including no state income taxes and lower annual fees. For those concerned with the legal environment, Delaware may be preferred because of their Court of Chancery. Both states are good fits for LLC owners for differing reasons.

Can I open a bank account for an LLC as a non-resident?

Non-residents are able to open a U.S. bank account on behalf of their LLC, but it can present challenges. Some banks will require the owner to be there in person to open the account and present their identification and verification documents. You should also consider the bank’s requirements around international transfers and currency conversion.

Are there differences in the processing times for LLC formation between Wyoming and Delaware?

Wyoming and Delaware boast quick processing times for LLC formations, often completing registrations within a few days. Online filings can accelerate this process, offering immediate confirmation in Delaware and nearly instant service in Wyoming. Non-residents should take into consideration extra time for mailing and international banking.

Can a non-resident form an LLC in Wyoming or Delaware without a U.S. address?

Both Wyoming and Delaware allow non-residents to form an LLC without a U.S. address. Non-residents must appoint a local registered agent in the respective state who can receive legal documents and official communications on their behalf.

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