A foreign owned US company is a popular choice for starting a new business or expanding an existing business. You need an Limited Liability Company if you want to start a business without being personally liable for the debts of the business.
A limited liability company (LLC) is a legal form used by individuals who want to protect themselves from potential liabilities associated with owning a business. They aren’t personally liable for debts or claims made against the business by third parties. Instead, the LLC itself disburses the funds from its bank account.
An LLC is a flexible structure that offers several advantages over other types of corporations. If you want to put your business into an LLC, you must choose the right jurisdiction.
In this article, we’ll introduce you to some of the best states where you can form a limited liability company in the US as a South African. We’ve chosen these states because of their popularity with South African entrepreneurs who want to start a new business in the US.
Select a State
You can avoid state tax problems by forming an LLC in a state where there are no state income taxes. If your business needs to be incorporated, form an LLC, or have a mailing address in a particular state, then you must form a corporation in that state.
It’s often best to first choose the state in which you want to have a mailing address for your business before deciding to form an LLC. It would be better if you form an LLC in that state.
This way you avoid having to file a registration statement for the LLC in every state you want to do business in. If your business has no such physical needs, forming an LLC in any state is more advantageous than forming in another state that imposes its own tax burden.
You should consider these three states: Wyoming and Delaware.
Wyoming has no income tax and virtually no sales tax (Wyoming has no state income tax). In general, the maximum franchise tax rate in Wyoming should be about half the minimum franchise tax rate in Delaware. Annual fees for most small businesses range from $50 to $100 per year. One drawback is that Wyoming isn’t very populous. However, it might be difficult to find service providers there. Taxation consideration aside Wyoming is very fast in terms of filing your LLC. The state of Wyoming is very friendly for South African business owners as they will answer your inquries in no time.
In general, there’s a lot of misinformation about incorporation in Delaware. However, if you want to incorporate in Delaware, there are some good things you should know. The state’s business-friendly environment is attractive to outside third parties looking to invest in companies based there. Venture capitalists prefer a Delaware C corporation to an S corporation because it offers more protection from lawsuits by shareholders who feel their rights have been violated. If there are no outside investors, Delaware may not be an option for you. In addition to the relatively high annual franchise taxes, Delaware may impose additional state income and/or gross capitalization taxes under certain circumstances. Not to mention Delaware processing time is surprisingly long enough to dissuade business oweners.
Comparing Wyoming and Delaware
Startfleet has crafted a very insightful and detailed post that makes comparing these two states in almost all aspects very easy. If you want to learn more about the differences between these two states and other states, you should check them out.
Based on this table above, It’s no surprise to me that Wyoming may be the best state for small businesses looking to form an LLC there.
After you have decided which state is good for your business growth and applied for your Employer Identification Number with the help of your registered agent, it is time to open business bank accounts for your newly formed LLC to take advantage of what is probably the best financial system in the world. I do not want to sound like a doubter, but often U.S. banks reject your application out of hand and that is extremely inconvenient after all your efforts. You, as foreign small business owner, need expert help at this stage to open your business bank account with peace of mind. Startfleet team is a good exmaple of professionalism since they have a great sucess rate in opening US business bank accounts for their South African client.
Finally, you should speak with a tax advisor who specializes in forming an LLC in the United States. Depending on the type of business you want to operate, there may be several factors that make one option better than another. You have not even mentioned the tax implications of starting your own business. It’s important to weigh the pros and cons of each state before making a decision about starting a business. Startfleet has a team of experts that specialize in LLC formation and tax consultation. If you are interested, you can seek their professional help.