Two decisions get confused constantly: which US state you form in, and whether a US LLC is the right structure at all. This page answers the first one.
The second one is a bigger question and it has its own page: where to set up your company compares a US LLC against a local company, an Estonian OÜ, a UAE free zone and doing nothing yet. If you have not settled that, start there. If you have, this is how the state gets chosen.
I have run my own US LLC since 2019 and built more than 120 structures for founders outside the US. What follows is the reasoning I actually use, including the part where the answer is boring.
The state decides less than you think
Here is the thing that reorders everything else: for a non-resident with no physical presence in the United States, the state is a decision about cost, privacy and paperwork. It is not a decision about tax.
A single-member LLC owned by a non-resident is normally a disregarded entity. The IRS looks through it to you. There is no federal entity-level tax to optimise, and in Wyoming and New Mexico there is no state income tax on the pass-through either. Whether you form in Wyoming or New Mexico or Nevada, your federal position is identical and your tax bill at home is identical.
So when someone tells you a particular state will lower your taxes, they are either confusing you with a US resident or they are selling something. The honest version is much duller: pick the state that costs least to maintain, keeps your name off the public record, and does not create friction with banks.
No structure, in any state or any country, changes your personal tax residency. If you live in Portugal or Cyprus, your worldwide income is taxable there whatever you form. The state decides your maintenance bill. It does not decide your tax bill.
The three criteria that actually matter
Annual maintenance cost. What you pay every year to keep the entity in good standing: the state’s annual fee or franchise tax, plus the registered agent. This is the number that compounds, and it is the one most comparisons bury.
Privacy. Whether the members and managers of the LLC appear on the public state record. Some states publish them, some do not. This matters more than people expect: not for hiding anything, but because a public ownership record is a permanent, searchable, scrapeable fact about you.
Paperwork. Whether there is an annual report to file, on what date, and what happens when you miss it. Every recurring obligation is a chance to fall out of good standing while you are busy running the business.
Notice what is absent from that list: prestige, reputation among founders, what a YouTube video recommended, and where a famous company is registered. None of those change anything about your position.
Wyoming: the default
The answer in most cases we see, and for unexciting reasons.
Low formation cost, a low flat annual report fee, members kept off the public record, and (the part that is worth more than it sounds) a state name that banks, payment processors and clients recognise without a second thought. Wyoming has been the standard choice for non-resident LLCs long enough that nobody’s compliance department blinks at it.
That last point is the real argument for Wyoming over marginally cheaper alternatives. You are not buying legal advantage. You are buying the absence of friction at every subsequent step.
Choose Wyoming when: you want the option that works everywhere, you would rather not explain your state choice to anyone, and the difference of a few tens of dollars a year is not the deciding factor.
New Mexico: the cheapest and quietest
The lowest-friction option in the country for this use case, because of one unusual feature: no annual report. There is nothing to file each year and therefore nothing to forget. The registered agent still renews, but the state itself asks nothing of you.
Members are not on the public record. Formation costs less than Wyoming. For a founder who wants to form a clean entity and think about it as little as possible, it is genuinely hard to beat.
The trade-off is recognition. New Mexico is less familiar to some banks and processors than Wyoming, which occasionally means an extra question during onboarding. Not a rejection, usually: a question. Whether that matters depends on how much your banking already has going against it.
Choose New Mexico when: cost and simplicity are the priorities, your banking profile is otherwise clean, and “form it and forget it” describes what you want.
Delaware: the myth worth dismantling
Delaware’s reputation is entirely real and almost entirely irrelevant to you.
What Delaware actually offers is the Court of Chancery, a century of settled corporate case law, and the fact that venture investors and their lawyers have standardised on it. Every one of those benefits concerns disputes between shareholders. If you are the sole member of your LLC, there is no one to have a dispute with.
What you pay for that irrelevant benefit is a flat annual tax owed every year regardless of revenue, more paperwork than Wyoming, and less privacy. There is no federal tax advantage. There is no state tax advantage for a pass-through with no Delaware activity.
There is also a second-order cost that rarely gets mentioned: Delaware is where a great many shell companies live, and some banks and processors apply extra scrutiny to Delaware entities for exactly that reason. A state chosen for its respectability can, in the wrong context, produce the opposite effect.
Choose Delaware when: US investors are coming and their counsel requires it, or you need a C-Corp for a funding round. In that case you also need US startup counsel, not us. The full comparison is in Wyoming vs Delaware vs New Mexico, and if you are weighing providers built for that path, the Firstbase comparison covers it.
Florida: only with a real nexus
Florida makes sense in one situation: you have a genuine physical presence in Florida.
Otherwise the arithmetic runs the wrong way. LLC members appear on the public record. The annual report costs more than Wyoming’s. And you gain nothing that Wyoming or New Mexico does not give you more cheaply and more privately.
People choose Florida for emotional reasons: they visit, they like it, they have friends there, it feels more real than a state they have never seen. Those are not reasons to accept a public ownership record and a higher bill.
Choose Florida when: you have an office, employees, inventory or a warehouse there. That is a genuinely different situation and the state choice follows the physical reality.
What nexus actually means
Worth defining, because it is the concept that decides whether the previous section applies to you and it gets used loosely.
Nexus is a connection to a state substantial enough that the state can impose obligations on you. Physical nexus is the straightforward kind: an office, employees, a warehouse, inventory stored in the state. Economic nexus is the newer kind, mostly relevant to sales tax, triggered by crossing a threshold of sales or transactions into a state.
For most non-resident founders reading this (consultants, agencies, software businesses, course creators), there is no nexus anywhere. You have a registered agent’s address and nothing else, and the state of formation is genuinely just an administrative choice.
Two groups need to think harder. E-commerce sellers holding inventory in US warehouses create physical nexus wherever that inventory sits, which for FBA sellers can mean several states at once, and that is a sales tax question rather than a formation question. Anyone with US staff or a US office has made a real decision with real consequences and should be getting advice specific to it.
If inventory in US warehouses describes you, the sales tax side is the part that matters and it is a separate conversation from which state you formed in.
How banks read your state
Since banking is where most of these projects get stuck, it is worth saying what the state actually does to that process.
The state is a minor input, but it is not zero. A compliance reviewer looking at your application sees a state of formation alongside everything else: your country of residence, your business activity, your address, your ownership. Wyoming reads as unremarkable. New Mexico occasionally prompts a question. Delaware sometimes prompts more, for the shell-company reason above.
None of these is decisive on its own. What matters is the file as a whole and whether the pieces tell a coherent story: a business that plainly exists, an activity description a human can picture, an ownership chain that is simple to follow, and an address that is not obviously a mail drop.
Choosing the right state will not get you an account. Choosing a state that raises a question, on top of a file that already has three other questions in it, can be the thing that tips a marginal application. That is the whole of the state’s influence on banking: real, small, and only relevant at the margin. The banking file is where the actual work is.
The decision in four questions
1. Are US investors coming in the next two years? If yes, Delaware, and you need startup counsel alongside. If no, Delaware is a cost with no return.
2. Do you have a physical presence in a specific US state? Office, staff, inventory. If yes, that state, and get advice on the nexus consequences. If no, keep going.
3. Is your banking profile straightforward? Clean activity, ordinary payment rails, residence in a country banks are comfortable with. If yes, New Mexico is the efficient answer. If your banking already has friction in it, Wyoming removes one variable.
4. Would you rather never think about this again? New Mexico, because there is no annual report to forget.
For most people reading this, the honest answer is Wyoming or New Mexico, and the difference between them is smaller than the time spent choosing. If you want the reasoning applied to your specific case, the assessment walks it in a few minutes and gives you a written result.
In short
The state is a cost-and-privacy decision, not a tax decision. Wyoming is the default because it is cheap, private and frictionless. New Mexico is cheaper and simpler still, with slightly less recognition. Delaware is for funding rounds and almost nothing else. Florida is for people who actually operate in Florida.
And the decision that matters far more than any of this is the one on the previous page: whether a US LLC is the right structure for you in the first place. Getting the state right on the wrong structure is a well-organised mistake.
Explore the full guide
Frequently asked questions
What is the best state for a non-resident LLC?
For most people, Wyoming: the balance of low annual cost, privacy and a name that banks and payment processors recognise without friction. New Mexico wins on pure price and simplicity because it asks for no annual report. Delaware only makes sense if US investors are coming. Florida only with a genuine physical presence there.
Does the state change how much tax I pay?
Almost never, and this is the misunderstanding that sells the most bad advice. A single-member LLC treated as a disregarded entity pays no state income tax in Wyoming or New Mexico, and the federal treatment is the same in all fifty states. What the state decides is your maintenance cost, your privacy and your paperwork. Where you pay tax is decided by where you are tax resident.
Is Delaware better by default?
Not for a typical non-resident. Delaware's value is a century of corporate case law and courts that institutional investors expect, which matters when there are investors and shareholders to have disputes with. For a single-member LLC with no funding round, it is a flat annual tax and more paperwork in exchange for nothing.
New Mexico or Wyoming?
New Mexico is cheaper and simpler: no annual report to file, so nothing to forget. Wyoming costs a little more each year and buys you a state name that is more familiar to banks, processors and clients. Both keep members off the public record. If you want the lowest-friction option, New Mexico; if you want the most recognised one, Wyoming.
Why not Florida if I like the state?
Because LLC members appear on the public record there and maintenance costs more, and unless you have a real physical nexus (an office, employees, inventory in the state), you get nothing in exchange for either. Liking a place is a reason to visit it, not to register a company there.
Can I change state later?
Yes, by domestication where the target state allows it, or by forming new and winding down the old entity. Neither is free and both usually mean redoing your banking, so it is worth getting right the first time. If you already have an entity in the wrong state, the calculation is in switching your LLC, and quite often the answer is to leave it where it is.
Does forming in a 'tax-free' state make my LLC tax-free?
No. There is no state you can pick that removes your obligations, and no structure that changes your personal tax residency. A US LLC gives you clean operations, dollar banking and access to the US market. It does not give you exemption, and anyone selling it that way is selling you a problem with a delay fuse on it.