Delaware vs Wyoming: Which State is better for a Non-US resident?
There are many advantages you can enjoy when registering a company in the USA. Such as Tax Advantages, Market Advantages (ease of access in the markets of USA), Company Reputation (not only in the USA but also all over the world), Getting a chance to be enlisted in the USA stock market (once the company goes public) and strong protection of personal liabilities. But to achieve the best possible outcome for your business, the choice of the state where you want to establish your business is crucial. Wyoming and Delaware are the most popular states to register a company. But which one is better for your business?
Why Wyoming can be a great option for registering your business:
It’s a well-known fact that Wyoming is one of the best places to establish a company. This is also backed up by the fact that a very good number of the companies dealing on Wall Street are registered in Wyoming.
It was Wyoming that invented the American LLC in 1977 which was modeled after the 1892 German company law known as Gesellschaft mit beschrnkter Haftung (GmbH). Delaware copied Wyoming's LLC and profited from it most through better marketing.
The popularity of Wyoming as a "corporate heaven" is enhanced by the very liberal Corporation Law. The law enables companies to be established quickly with the broadest possible powers permitted under the law. There are little or no restrictions on any business activities.
Advantages of Registering in Wyoming
Now let’s see what makes Wyoming LLCs and corporations unique:
1. Very Low Taxes
Wyoming has THE lowest taxes in the US. There is no state income tax. No corporate income tax. No inventory tax. No franchise tax. No gross receipts tax. No excise tax. No tax on food. The only taxes to pay in Wyoming are sales taxes, which average out to be a little over 5% depending on where you purchase your goods. Wyoming’s low taxes are a great benefit, especially for LLCs because once you’ve filed your Federal Tax Return and your Wyoming Annual Report, you’re basically done.
2. Excellent Asset Protection
When it comes to protecting you and your business’s assets, Wyoming has your back. Wyoming is one of the few states that have stringent protections on the books for single-member LLCs. The whole point of an LLC or a corporation is to not only run a profitable business but also legally shield yourself and any of your members or shareholders from lawsuits. In Wyoming, even if a creditor obtains a charging order against your LLC, it will be nearly impossible to actually enforce a judgment against your business.
3. Privacy and Anonymity
Wyoming has a very good reputation for its privacy protection policy in the whole world. Plus, their annual reports only require one person’s name and signature. The report is also just for the assets located in Wyoming. One can easily own a business anonymously in Wyoming whether it is a Corporation or LLC. For a small business owner, there is no better state than Wyoming.
4. A very low Cost of Doing Business
To start an LLC or a corporation (to form and operate a business), Wyoming charges you really low in comparison to the other states. The charge to file Articles of Organization or incorporation in Wyoming is $102. The charge for the annual report will be $52 (unless the earnings are more than the threshold which is $250k on the charges of $0.0002 per dollar of business assets).
The reason behind incorporating in Delaware
Incorporating in Delaware holds many advantages; here are the key ones:
The Delaware court method is well-recognized and highly respected: Delaware’s court of Chancery specializes in corporate disputes and instead of juries they use judges. This means that if the business is involved in litigation, it’ll get a judge with a lot of skill in complex corporate law matters. On the other hand, corporate prosecutors are usually accustomed to Delaware business law.
Delaware offers a lot of flexibility for organizing a company: Delaware corporate laws are pretty much flexible in terms of structuring a corporation and board members.
In terms of privacy: Delaware corporations are not required to show the owner’s name on the formation of documents. This creates a decent layer of privacy.
Delaware offers tax benefits: While Wyoming is growing in popularity due to their lack of state corporate margin tax, Delaware offers business-friendly tax law which helps to get rid of these tax expenses.
Among this all, Delaware tends to attract larger companies that can benefit in the long run with the legal system and court of Chancery.
Advantages of Registering in Delaware
Let’s discuss the pros and cons of forming a Delaware LLC or corporation and what makes Delaware companies unique:
1. Taxes are either Low or No
Delaware has no Sales Tax. For some of our clients that run dropshipping businesses and have suppliers in the US, this is definitely a big win for not just the business, but also for the consumers. Paying Delaware's state income tax is not needed for the people who are from different states and countries. Delaware LLCs that don’t do business in Delaware, don’t pay state income taxes. Plus, all the costs related to business and goods are also getting benefits.
2. Annual Reports for LLCs are no needed
LLCs in Delaware don’t need to file Annual Reports, they just need to pay an Alternative Entity Tax. It is a flat rate of $300 annually. The cost might seem a bit questionable, but when it just requires to sign up online and pay with no need to meet filing dates for annual reports - It may seem like a bargain.
The highest level of confidentiality is provided to an LLC and it’s a member(s) if a Delaware LLC is filed through a professional registered agent. When the company is filed properly, the only things that appear on the Delaware certificate of formation are the company name, the name and the address of the registered agent and name and signature of the authorized person. This gives the LLC an extra layer of protection.
4. The best part? Delaware Court of Chancery
The Court of Chancery in Delaware is one of the biggest reasons why it has vast popularity as a business harbor for business entities. The Court was established in 1792 to resolve all the corporate legal disputes with a judge, not a jury. The judges here only deal with corporate and business-related cases. Moreover, it’s been hundreds of years that the Court is dealing with such disputes, so in most cases, people get to know ahead of time if there is any reason to fight a lawsuit or just settle with it.
So which State is better for you?
Both Delaware and Wyoming offer great benefits to those who incorporate in their States.
Usually, Wyoming offers greater benefits to smaller companies with increased privacy and fewer taxes.
Whereas, Delaware tends to attract larger corporations that can benefit from its well-developed legal system and the Court of Chancery.
Ready to get your company registered? Register your company in the US right now, or if you have any questions you can contact us and one of our representatives will get back to you shortly.