Wyoming, Delaware or New Mexico: which state should you choose to form your LLC in the United States?
For most nonresident founders, Wyoming remains the best choice to form an LLC in the United States, Delaware wins when you plan to raise money, and New Mexico wins when budget dictates everything. This comparison details state fees, privacy and US LLC taxation so you can decide with full knowledge.
8 min read
8 min read
You have decided to form a company in the US to house your online business, your SaaS or your ecommerce store. One question still blocks almost everyone at the moment of confirming: in which state should you register your US LLC? The United States has fifty states, but only three draw the attention of nonresident founders: Wyoming, Delaware and New Mexico.
The short answer fits in one sentence. Wyoming suits the vast majority of projects, Delaware becomes relevant as soon as investors come into play, and New Mexico is for the tightest budgets. The long answer, the one that saves you from paying a pointless franchise tax or starting over in two years, deserves a few minutes of reading.
The choice of state changes neither your US LLC taxation at federal level nor your reporting obligations to the IRS. It acts on three concrete levers: annual state fees, the privacy of the members, and your image with banks and partners. If you are starting from scratch, keep our complete guide to forming an LLC as a nonresident at hand, it puts this choice back into the overall journey.
What the choice of state really changes (and what it does not)
Many founders overestimate the importance of the state. On the federal tax side, a US company for nonresidents owned by a single person, with no income effectively connected with a US trade or business, pays no federal tax on profits, whatever the state of registration. Wyoming does not make you any less taxable than Delaware. That part plays out at IRS level, not at state level.
What the state really determines comes down to three points. First, the annual running cost, between zero and several hundred dollars depending on the state. Second, privacy, meaning whether or not your name appears in public records that can be consulted online. Third, perception, because some banks and payment platforms treat a well known state differently from a more discreet one.
Your tax position depends on your nonresident status and the absence of physical activity in the United States, not on the state you choose. The choice of state is a cost and privacy decision, not a tax decision.
Wyoming, the best value for ecommerce and freelancing
Wyoming is the state that invented the Limited Liability Company in 1977. For the vast majority of founders doing dropshipping, selling digital products, running a marketing agency or freelancing, it is the all round choice par excellence. It combines low fees, solid privacy and a clean reputation with banks.
Wyoming's concrete strengths
- Member privacy: the names of members and managers do not appear in the state's public register, only the registered agent is visible.
- Controlled annual cost: the Annual Report costs $60 a year paid to Wyoming, with no minimum franchise tax on top.
- No state income tax for LLCs, which simplifies management.
- Good banking acceptance: neobanks and payment platforms know Wyoming LLCs perfectly well.
Who is it for? It is the ideal state if you are looking for a reliable, discreet and economical structure to run a global business from Europe, North Africa or anywhere else. Once the LLC is registered, the next step is almost always opening a US business bank account suited to nonresidents, and Wyoming raises no particular obstacle on that side.
Delaware, the choice for prestige and fundraising
Delaware is the most famous state in the world for company registration. More than half of listed US companies have their legal entity there. That popularity rests on two pillars: an extremely mature corporate law and a specialised court, the Court of Chancery, which settles commercial disputes with rare predictability.
When Delaware becomes the right choice
- Fundraising: if you are building a SaaS or a startup and targeting venture capital investors, they almost always require a Delaware structure, often a corporation rather than an LLC.
- Legal certainty: the abundant case law and the Court of Chancery offer unmatched predictability in the event of a dispute between members.
- The cost: expect an annual franchise tax of $300 for an LLC, due whatever your revenue, plus the registered agent.
Who is it for? Startups preparing for investors, projects with several members, and those who value institutional credibility above all. For a solo founder selling services or products online with no plans to raise money, Delaware mostly adds fees without real benefit.
Many founders pick Delaware by reflex, seduced by the reputation. Without a fundraising plan or a multi member structure, you pay a $300 franchise tax every year for prestige your business has no use for.
New Mexico, the ultra low cost outsider
Often overlooked, New Mexico has established itself as the most aggressive option on cost for solo founders. Its killer argument is a single number: zero dollars in annual state fees. Once the LLC is formed, the state asks for neither an Annual Report nor a minimum franchise tax in the following years.
New Mexico's strengths
- $0 in annual fees: no Annual Report and no minimum franchise tax, unlike Wyoming and Delaware.
- Strong privacy: like Wyoming, the state does not publish the names of members in its online records.
- The flip side: a weaker international reputation with some traditional banks, and a slightly less dense ecosystem of agents.
Who is it for? Consultants, side project builders and founders launching a business on a minimal budget who want to bring fixed costs as close to zero as possible. The trade off to accept is slightly less recognition than Wyoming when opening certain accounts.
Comparison table: Wyoming, Delaware and New Mexico
| Criterion | Wyoming | Delaware | New Mexico |
|---|---|---|---|
| Annual state fees | $60 | $300 | $0 |
| Member privacy | Yes | Partial | Yes |
| Prestige and image | Excellent | Maximum | Standard |
| Ideal for | Ecommerce, freelancing, Amazon FBA | Fundraising, SaaS, startups | Small budgets, solo founders |
| State income tax | None | None on out of state income | None on out of state income |
Wyoming vs New Mexico head to head
The question we hear most often is not about Delaware at all: it is Wyoming or New Mexico, the two states that combine low fees, private ownership and no state income tax for a company run from abroad. Here is the direct comparison, criterion by criterion.
| Criterion | Wyoming | New Mexico |
|---|---|---|
| Filing fee | $100 | $50 |
| Yearly state cost | $60 minimum, annual report | None, no annual report at all |
| Members in the public register | No | No |
| State income tax on the LLC | None | None for a nonresident owned LLC without New Mexico source income |
| Familiarity of banks and Stripe with its paperwork | Excellent, the most common state they see | Good, occasionally a few more questions |
| Yearly checkpoint from the state | Yes, the annual report reminds you the LLC exists | None, which makes federal deadlines easier to forget |
| Best for | Most founders living abroad | Tight budgets and disciplined founders |
Over five years the gap is a few hundred dollars in favour of New Mexico. Wyoming still wins for most of our clients, for three reasons: the annual report acts as a yearly checkpoint, its documents are the ones Mercury and Stripe process every day, and it is the state where LLC Place already has its registered agent, commercial address and filing routine ready, so your LLC launches with about ten minutes of input. If every dollar counts and you keep your own calendar, New Mexico is a sound choice and we form your LLC there on exactly the same terms. Both states keep your name out of the public register, as explained in our guides to the anonymous Wyoming LLC and the anonymous New Mexico LLC.
How a US LLC is taxed for a nonresident
A widespread misconception holds that owning an LLC in the United States frees you from any obligation. That is inaccurate. If you are a nonresident, with no physical presence in the United States, and your LLC has a single member, it is treated as tax transparent, what the IRS calls a disregarded entity.
In practice, the US LLC pays no federal corporate tax as long as it has no office, no employee and no warehouse on American soil, and therefore no income effectively connected with a US business. The federal rate is 0%. However, the absence of tax does not mean the absence of a filing.
A single member LLC owned by a foreigner has to file Form 5472 every year, together with a pro forma 1120, with the IRS, even with no tax to pay. Forgetting it exposes you to a $25,000 penalty. See our Form 5472 guide for the details.
These obligations are identical in all three states. Choosing Wyoming, Delaware or New Mexico does not change them. It is a point we take care of in our annual tax compliance offer, so that the IRS side never becomes a blind spot.
Our verdict by profile
- Choose Wyoming if you want a balanced, professional and private solution for ecommerce, online services or freelancing. It is the safest default choice.
- Choose Delaware if you are preparing to raise money, a multi member structure, or a project meant to welcome American investors.
- Choose New Mexico if your absolute priority is to bring your annual costs down to zero and you accept slightly lower recognition from banks.
Frequently asked questions
Does the choice of state change my tax in the United States?
No, not at federal level. An LLC owned by a nonresident with no physical activity in the United States is taxed at 0% federally, whether you choose Wyoming, Delaware or New Mexico. The state only affects annual fees and privacy, not your federal tax rate.
Can I move my LLC to another state later?
Yes, an operation called domestication lets you move an LLC from one state to another, but it takes time and generates fees. It is almost always cheaper to choose well from the start. If in doubt, go with Wyoming, which suits almost every case.
Is New Mexico a problem for opening a bank account?
Not in any prohibitive way. American neobanks aimed at international founders accept New Mexico LLCs. The difference remains marginal compared with Wyoming, which simply enjoys slightly wider recognition among some more traditional institutions.
Do I need an EIN whichever state I choose?
Yes, the EIN is the company's federal tax number, independent of the state. You need it to open an account, activate Stripe and file your forms. Good news, it can be obtained without an SSN or ITIN through Form SS 4 filed with the IRS.
With LLC Place, complete your US LLC registration 100% remotely, for a transparent one time price, EIN and compliance included. Form my LLC
For a wider view that also covers Florida, Texas and Nevada, read our article on the best state to form a US LLC.
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