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US Company: Delaware or Wyoming?
11128 viewingAmerica is not only a superpower state and a world leader, but also a jurisdiction that provides an opportunity for literally everyone to build a business, while providing favorable tax conditions.
Registering a company in the USA can be a good idea for both a start-up business, start-ups, and for those already operating in another country. After all, entering the American market makes it possible to reach more than 300 million new customers and trade with the leading powers of the world. Moreover, the United States, unlike European jurisdictions, does not participate in the automatic exchange of tax information, which preserves the maximum confidentiality of local businessmen.
America currently holds the largest part of the global offshore financial services market at nearly 22% and provides a wide range of secret and duty-free services to non-residents, both at the federal and state levels.
But, the most disposable states for doing business in the United States are Delaware and Wyoming. These states are the most friendly to the corporate environment at the legislative level, and offer the most loyal business conditions, which is worth talking about in more detail.
Delaver – state of freedom and independence
The state of Delaware is popular for registering startups, IT businesses, and gambling activities. This state is also attractive to many in terms of entering the stock market, IPO. But, it will be profitable only in the case of full business outside the United States. This system is very similar to offshore companies, which are not taxed, provided there is no local commercial activity. It also works in the case of the state of Delaware, which, apart from that, has no VAT or sales tax on goods.
Advantages of registering a company in Delaware:
- The founding documents do not contain the personal data of the participants or managers of the LLC company. Only registered agent data in Delaware is publicly available.
- Free structure of the company, one person can act as President, Vice President, Secretary and Treasurer.
- A Delaware incorporated corporation operating outside the United States does not pay sales tax, income tax, or intangible income tax.
- No minimum capital requirement.
- Company incorporation in Delaware is possible from anywhere in the world.
- There is a clerical court that specializes in considering business disputes on the basis of equity.
If, however, the company plans to conduct local business or conduct commercial activities in the United States, it is worth considering more profitable options for registering a company, in particular, in Wyoming.
Wyoming – equality state
The State of Wyoming is good for both small businesses and those who are interested in expanding their activities, for example, entering the American and global markets. Also suitable for those who plan to trade within the country. After all, all companies registered in Wyoming do not pay corporate tax at the state level, which reduces the tax burden. Also, if there is a sale of goods in the state, the company is obliged to pay a very loyal sales tax – 4%.
Compared to Delaware, Wyoming has lower annual maintenance fees and no franchise fees, which also makes it even more attractive to investors.
Advantages of registering a company in Wyoming:
- Personal data of participants (shareholders and directors) are confidential.
- No state income tax for corporations or LLCs, and no personal income tax.
- Low annual fees: franchise tax and registered agent commission.
- You don’t have to live in the US to set up a company in Wyoming.
- Flexible management structure, it is not necessary to be a member or owner of the company to have 100% management.
- Shares or membership in a company can be exchanged for services, real estate, etc.
- The financial statements of the company are not shared with any third party agencies or bodies.
Comparison of the states of Delaware and Wyoming
| Delaware | Wyoming | ||
| Legal entity name requirements | – ends with the word club, association, corporation, company, foundation, fund, institute, incorporated, society, syndicate, union, or limited, or the abbreviation corp., co., inc., ltd. | – must be distinct from other state-registered U.S. and foreign companies;
– the name indicates the legal form of the company LLC,L.L.C.,LC,L.C., Ltd.Co., Limited Co., Ltd. Company, etc. |
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| Disclosure of information in the charter | -the number of directors depends on the number of shareholders;
-there are no requirements for indicating the names, countries of residence, age of directors, managers. |
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| Remote company opening | For non-residents, it is possible to open a company remotely. A mandatory requirement is a registered agent in the selected state, who will always be in touch. | ||
| Exchange of information with the IRS | Collects corporate income tax information for exchange with the IRS. | Shares with the IRS only information provided by companies with real in-state assets. | |
Tax burden by states:
The US tax system has three levels: federal, state and local, so depending on the state, the tax burden can vary significantly.
| Tax | Delaware | Wyoming |
| Corporative Income tax | 8,7%, 0% – for profit outside the country | 0% |
| Personal Income Tax | 10%-37% | |
| Franchise tax | 300$ per year | 0% |
| Sales tax | 0% | 4% |
| Federal tax | 21% | |
Comparison by type of property on the example of Delaver:
After determining the US state, you need to choose which legal form of the company will be most suitable for your business. Below is a general description of the two most suitable forms for non-residents: Corporation (C-Corp) and Limited Liability Company (LLC).
| C-Corp | LLC | |
| Short description | C-corporation is an analogue of the Ukrainian joint-stock company. As a rule, this form is chosen by fast-growing startups seeking public funding. The best form of ownership if it is expected to attract a large number of shareholders. When doing business outside the United States, it functions as an offshore mechanism. | Limited Liability Company is a partnership. Owners (members) can be individuals or legal entities of any type from anywhere in the world, and their number is not limited. An LLC is best suited for incorporating a small business in the US. |
| Number of shareholders and founders | Registration of LLC and C-Corp requires the same minimum number of shareholders and founders (from 1 or more), has no restrictions regarding the minimum amount of authorized capital. | |
| Managment structure | Duty to maintain a formal governance structure. Shareholders elect a board of directors to appoint officers for day-to-day management. | It is not necessary to appoint a director or manager. No formal governance structure is required. The company can be managed both by members of the company and by appointed managers. The manager does not have to be a member of the company. |
| Type of taxation | The corporation pays tax on business income at the corporate tax rate: flat federal tax + state tax.
If the income is not received in the United States, then there will be no taxation in the United States. The state of Delaware provides for the need to pay a franchise tax. |
Depending on the choice of the founder, there are two options for taxation:
– single (personal) taxation – profit or loss is transferred directly to the founders / members and tax on the income of individuals is paid. – as a corporation (flat federal tax + state tax).
The state of Delaware provides for the need to pay a franchise tax. |
| Owners | Shareholders may be non-residents. | Founders (partners) may be non-residents. |
| Reporting | It is necessary to submit annual reports to state and fiscal authorities. There is a need to maintain a register of shareholders. | Annual reports to state and fiscal authorities. Non-residents report taxes only in their country of residence. The profit is distributed among the founders and is considered their personal income. |
| Founders meetings | Mandatory annual formal meetings of the board of directors and shareholders and keeping minutes of meetings. | It is recommended to record and register changes and formalize advisory boards. |
| Responsibility | The member’s liability is limited to the amount of capital contributed unless it acts as a guarantor of the corporate debt. The statutory limitation of personal liability of directors of shareholders, employees and officers of members means that the legal obligations of the business cannot become personal debt obligations of members, even if the member participates in management. The company is responsible for all legal proceedings. | |
| Disclosurebeneficiaries | Exists. Each corporation must file a franchise tax payment and must list the names and addresses of the company’s directors and one officer. | Not provided. When registered through a registered agent, the Delaware Corporations Department does not request, receive, or store any information about the members and managers of the company. |
Both Delaware and Wyoming have their advantages, so if you are still choosing which US state will be the most beneficial for you to incorporate your company, contact our lawyers for advice.
We will help you choose a state, form of ownership, type of taxation and register a company in one of the American states.