If you are a non-US entrepreneur looking to form an LLC in the United States, you have probably been told one of three things: "use Delaware," "use New Mexico because it's anonymous," or "use Wyoming because it's cheap." All three statements are incomplete, and two of them will cost you significantly more than you expect.
This article is a complete, no-nonsense breakdown of the three most popular LLC states for non-resident foreigners. I have formed dozens of LLCs across all three states for clients ranging from e-commerce operators to fund managers. Here is what actually matters.
The Three Contenders
| Criteria | Wyoming | Delaware | New Mexico |
|---|---|---|---|
| Formation cost (state fee) | $100 | $90 | $50 |
| Annual renewal | $60/year | $300/year (franchise tax) | $0 (no annual report) |
| Registered agent (annual) | $50-100 | $100-300 | $50-100 |
| State income tax | 0% | 0% (for non-DE income) | 0% (for non-NM income) |
| Charging order protection | Yes (strongest in the US) | Partial | No |
| Privacy (public records) | Members not listed | Members not listed | Members not listed |
| BOI/FinCEN reporting | Required (all states) | Required (all states) | Required (all states) |
| Banking compatibility | 90%+ acceptance | 85%+ acceptance | 70% (some fintechs flag NM) |
| Court of Chancery | No | Yes (specialized business court) | No |
| Best for | Non-residents, e-commerce, services | VC-backed startups, institutional investors | People who want cheapness above all else |
Why Delaware Is Wrong for Non-Residents
Delaware has the best corporate law in the United States. Its Court of Chancery provides specialized business dispute resolution. Its case law is extensive. For a US-based venture-capital-backed startup, Delaware is the obvious choice because investors and law firms expect it.
But you are not a VC-backed startup. You are a non-resident operating a digital business. Here is why Delaware is the wrong choice for you:
1. The franchise tax is not optional
Delaware charges a $300/year franchise tax regardless of your revenue. This is on top of your registered agent fee. A Wyoming LLC costs $60/year in state fees. Over 5 years, that is $1,200 in unnecessary costs for zero additional benefit.
2. Registered agents cost more in Delaware
Because Delaware is the most popular state for incorporation, the registered agent market is more competitive but also more expensive. Expect $150-300/year versus $50-100 in Wyoming.
3. You do not need the Court of Chancery
The Court of Chancery handles complex corporate disputes: shareholder lawsuits, fiduciary duty claims, merger disputes. If you are a solo entrepreneur running an e-commerce brand or a consulting firm, you will never set foot in this court. You are paying a premium for a legal infrastructure you will never use.
4. Charging order protection is weaker
If a creditor obtains a judgment against you personally, they can try to go after your LLC's assets. In Wyoming, the law provides that a charging order is the exclusive remedy. This means the creditor can only receive distributions when and if the LLC makes them. They cannot force a distribution, dissolve the LLC, or seize assets. In Delaware, the protection is partial: courts have, in some cases, allowed additional remedies beyond charging orders.
Why New Mexico Is Dangerous
New Mexico is marketed as the "privacy state" because it does not require annual reports and does not list members in public filings. This attracts people who want to stay invisible.
The reality is more nuanced:
1. BOI reporting killed New Mexico privacy
Since January 2024, all US LLCs must file Beneficial Ownership Information (BOI) reports with FinCEN, regardless of the state. This means your name, date of birth, address, and ID photo are on file with the federal government. New Mexico's "privacy" is now limited to state-level public records. At the federal level, you are fully transparent.
2. No charging order protection
New Mexico does not provide charging order protection comparable to Wyoming. If you are sued, your LLC's assets are more vulnerable. For anyone building meaningful wealth through their LLC, this is a dealbreaker.
3. Banking friction
Some fintech providers and banks view New Mexico LLCs with suspicion. The state's reputation as a "privacy haven" triggers additional compliance scrutiny. Wise, Mercury, and Relay have all been known to require additional documentation for NM LLCs that they do not require for Wyoming or Delaware entities.
Why Wyoming Wins for Non-Residents
Wyoming is not glamorous. It is not the "sexiest" state. But for a non-US entrepreneur, it is the only choice that ticks every box:
- Lowest total annual cost ($60 state + $50-100 agent = $110-160/year)
- Strongest asset protection (charging order as exclusive remedy)
- Best banking acceptance (Wise, Mercury, Relay, Airwallex, Payoneer all work with WY LLCs)
- No state income tax on non-ECI income
- Privacy at the state level (members not listed in public filings)
- Business-friendly legislation that is actively updated in favor of LLC owners
The Compliance Requirements You Cannot Ignore
Regardless of which state you choose, all non-resident LLC owners must comply with federal requirements. Failing to comply can result in penalties that dwarf the cost of the LLC itself.
| Requirement | What It Is | Deadline | Penalty for Non-Compliance |
|---|---|---|---|
| Form 5472 + Pro Forma 1120 | Annual report of transactions between the LLC and its foreign owner | April 15 (extendable to Oct 15) | $25,000 per form, per year |
| BOI Report (FinCEN) | Beneficial ownership declaration | Within 90 days of formation (existing LLCs: Jan 1, 2025) | $500/day |
| EIN Application | Employer Identification Number (tax ID) | Before opening bank accounts | None (but you cannot operate without it) |
| State Annual Report | Renewal of LLC with the state | Anniversary of formation (WY), June 1 (DE) | Administrative dissolution |
"The $25,000 penalty on Form 5472 is not theoretical. The IRS has assessed it. It is automatic if you fail to file. I have seen clients come to me with 3 years of unfiled 5472s. That is $75,000 in penalties before we even start."
The Annual Cost of Running a Wyoming LLC (Realistic)
| Item | Annual Cost |
|---|---|
| Wyoming state renewal | $60 |
| Registered agent | $50-100 |
| CPA filing (Form 5472 + 1120) | $400-700 |
| Virtual address (if needed for banking) | $150-300 |
| Total annual maintenance | $660-1,160 |
Compare this to Delaware: $300 (franchise tax) + $150-300 (agent) + $400-700 (CPA) + $150-300 (virtual address) = $1,000-1,600/year. The difference compounds over time.
When Delaware IS the Right Choice
To be fair, there are specific scenarios where Delaware is the correct choice:
- You are raising venture capital from US-based investors (they will insist on Delaware)
- You are forming a C-Corp (not an LLC) for a US-market startup
- You have co-founders and need the extensive body of Delaware case law for dispute resolution
- You are creating a holding company for US real estate
If none of these apply to you, Wyoming is the answer.
Summary: The Decision Matrix
| Your Profile | Best State | Why |
|---|---|---|
| Non-resident, e-commerce, digital services | Wyoming | Cheapest, strongest protection, best banking |
| VC-backed startup targeting US market | Delaware | Investor expectations, Court of Chancery |
| Solo freelancer, minimal revenue | Wyoming | Lowest cost, no franchise tax |
| Multi-entity structure (holding + operating) | Wyoming | Charging order protection, low per-entity cost |
| Privacy-focused, no banking needs | New Mexico | Cheapest formation, no annual report (but weak protection) |