There are fifty states to form in, but most founders who live outside the U.S. narrow it to three: Wyoming, New Mexico and Delaware. Each is a sound choice for some businesses and an unnecessary expense for others.
First, the rule that overrides everything
If your business has a physical presence in a particular state — an office, staff or inventory there — you will generally need to register in that state anyway. Forming somewhere else then means paying two states. The comparison below assumes you operate remotely.
Wyoming
Low formation cost, a modest annual report fee and a strong reputation with banks and payment platforms. A popular default for online businesses and service companies.
New Mexico
Among the cheapest to keep: New Mexico does not require an annual report for LLCs. The trade-off is that it is less familiar to some banks and investors.
Delaware
The standard for companies planning to raise venture capital — though investors usually want a Delaware C corporation, not an LLC. For an LLC, Delaware charges a flat annual tax that makes it the most expensive of the three to maintain.
How to decide
- Will you raise money from U.S. investors soon? Consider Delaware.
- Do you want the lowest ongoing cost? Look at New Mexico.
- Do you want a low cost with wide recognition? Wyoming is the usual answer.
- Do you have a physical presence somewhere? Form there.
The state you choose does not change your federal tax position. A foreign-owned LLC is taxed by the IRS the same way whichever of these three it is formed in.
This post is general information, not legal or tax advice. Rules change; confirm your own situation with a qualified professional before you file.
