The USA is a great jurisdiction for offshore company establishment – especially if you know which state to choose! And it does not lose its popularity in 2023 as you still have an opportunity to pay low (or zero) taxes here on your income worldwide and simultaneously enjoy the high reputation of your company for business partners. The post is focused on the best US states that offer the most advantageous conditions for foreign entrepreneurs.
Wish to know more about the best states to form an LLC in the USA? Please follow the link and explore our portal. We write about different jurisdictions for business and banking, asset protection, investments, and much more. You can also book a free session with our expert to discuss your plans and choose the best solution that exists in the market. Opportunities come and go, so the best way is to talk to us and discover the latest options available! You are welcome to delegate all the administrative procedures to us if you want to, and we will open a US company for you on a turnkey basis.
US LLC: Main Benefits
The main considerations when you form an offshore company include not only tax benefits but also accessibility of financial products, the reputation of the jurisdiction, and many other things that may be critical for you (like the ease of doing business).
Here are the main reasons why entrepreneurs flock to the USA to set up a company:
- The US is a well-reputed jurisdiction, and the startups and offshore LLCs formed here enjoy a high status.
- US companies have privileged access to top-notch banking services for small and medium-sized businesses in reliable banking institutions. International companies can use Stripe, Braintree, and other similar platforms.
- The LLC that uses a pass-through taxation system minimizes its taxes to zero, which is astounding for a solid jurisdiction like the United States! It does not mean that taxes do not exist at all, however: LLC members are taxed as partners in a partnership, that is they pay taxes as individuals in the country of their tax residence.
- Some US states have adopted special provisions to ensure the confidentiality of the LLC members’ personal information (Wyoming and New Mexico are among these). The only information accessible is the designation of the registered agent, while the names of LLC founders recorded in company registries are not disclosed to third parties,
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Minimizing Tax on Worldwide Income
There are certain requirements to be met if you want your company to pay zero taxes on its income derived outside the USA:
- Non-tax resident status. Shareholders and founders should not be US residents, and the company cannot generate its profits in the USA.
- No American employees. If you want to avoid paying taxes, you’d better not hire local staff.
- No physical presence in the country. Your company is advised to have no physical office in the USA.
- Income is generated outside the United States. You cannot sell your products or services to US citizens and residents without paying taxes.
Best States for your LLC
Here are the key considerations to be taken into account when you choose a suitable state for your LLC:
- Incorporation cost. The cost of LLC formation differs from state to state, and it usually includes a one-time state fee and remuneration payable to the agent.
- Confidentiality. Not every US state has privacy regulations in place, and it will not be absolute in any case. Your personal data will be kept by your registered agent, and regulatory or law enforcement agencies will have the right to request and receive such data to be audited and inspected.
- Annual franchise tax. This tax is imposed by some states to make sure your LLC complies with the laws and holds its reputation high. Non-payment of the tax may entail LLC removal from the national company registry.
If you want to know the top three US states in terms of confidentiality level, these are New Mexico, Delaware, and Wyoming: they protect the identity of company beneficiaries from disclosure to the public. Still, you cannot have absolute anonymity as your registered agent should have the information about beneficiaries and provide it to government authorities upon request.
Let’s see what it looks like in practice:
- In New Mexico, the data on company members/managers is not provided to any official, including the company registrar. If we consider the absence of fees, corporate taxes, or annual reports, this seems to be an ideal state for your business.
- In Delaware, the public records contain information about the company founder and the registered agent, but not about LLC members/managers. You can have almost complete privacy by using a professional director.
- Nevada and Wyoming allow the use of nominees, which is the reason why they are extremely popular with foreign entrepreneurs seeking privacy. If the public records contain the nominee’s name only, no information on the business founder will be publicly available.
If you seek to set up an almost completely anonymous LLC, some supervisory bodies may refuse to assign EIN unless they verify the identities of beneficial owners or founders. However, this data will never become publicly accessible.
US States to Be Avoided
Some states are not the best choice for company formation based on the data of extensive research. They were once popular, but have lost their appeal due to high business incorporation costs:
- California imposes a high franchise tax for LLC registration (up to 800 US dollars).
- Nevada was once an excellent destination. However, you are now obliged to pay not just registration fees but also 150 US dollars when you submit an initial list of company officers and 200 US dollars more for a business license you will need to obtain before you can start business operations.
- The registration fees in New York are not that high, but you are required to publish an article about company incorporation in a local newspaper, which means that you will have to pay a few hundred dollars more.
Need more practical information? Please click on the above link to get it. Remember that the best way to set up a US company and save on costs is to rely on a good registered agent, and we can provide one. Talk to us right now!