The question lingers! “How to Choose the Right State for your LLC as a Pakistani non-US resident?” You might be wondering now that you have decided to start an LLC as a non-US resident specifically from Pakistan, which state should be the ONE for you? Isn’t it?
Well, that depends on a number of factors but I have selected a couple of states to give you a head-start and make you familiar with what counts as an ideal state.
Let’s cut to the chase and help you understand how you as a Pakistani can register an LLC in the US without your physical presence.
What counts as an ideal state?
It is really simple and no-brainer if you know what you are looking for in a state as some have perks for certain business types and some are adverse to other ventures.
If I were you, I would first take a look at my business strength and compare it to the following list that I have created of perks and downsides. For instance, if I was starting from scratch, I would be inclined to choose a state with no income tax or franchise tax.
This would help me get on my feet without tumbling down to step one and regret my decision. This may sound silly, but it is a crucial step and would help me in the long run.
Before that, I would like to mention that we at Scounts, are available to open your LLC in the US at any time. We guarantee you that our services will be top-notch, and everything will be as seamless as possible to ensure a smooth and swift process. You can start the process anytime by filling out the Proposal Form.
Delaware:
The cost of filing for an LLC is $110 and a relatively high franchise tax of $300 is to be paid annually. What sets Delaware apart from the rest is its laws and court system appealing to investors and stakeholders.
It has some of the most business-friendly laws in the US and the Court of Chancery is well-known for being effective and efficient when it comes to resolving legal disputes.
You should keep in mind that Brazil, at the moment of my writing, has listed it as a tax haven and essentially blacklisted it.
Pros:
- Business-friendly legal environment and the reputable Delaware Court of Chancery
- No state corporate income tax for businesses outside Delaware
- Straightforward and relatively quick LLC formation process
Cons:
- Annual franchise tax of $300 for franchise and $75 for annual State Business License
- Some member and manager information may be accessible to the public
- Only beneficial for Corporations such as Apple and IBM – selling shares in the stock market
Wyoming:
The cost of filing for an LLC will be $100 and annual fees to state govt will cost you around $60. Note: This is subject to change if you have more than $250,000 in your assets located in Wyoming specifically.
Wyoming is the first state in the US to allow LLC formation and its corporate structure revolutionized American business activities. If you are an individual or a business not pursuing any business activity or trade in the US, Wyoming LLC will enable you to have a location-independent LLC.
Pros:
- Strong privacy protections unlike Delaware with no public mention of member and manager
- No state corporate income tax
- Annual report license tax $60 and onwards with minimal compliance requirements
- Swift Document processing (Recommended for those in a haste)
Cons:
- Less established legal environment compared to Delaware and is not as well known as Delaware
- Limited Recognition among investors and lenders
Nevada
It has a whopping cost of $425 for filing and an annual fee of $350 for annual reports. It is renowned for its casinos and luxury lifestyle attracting tourists and expats from around the world. If you are planning to hand your LLC to a manager, your name won’t be required for public disclosure.
Pros:
- No state income tax on your LLC
- Member or manager information is not disclosed in public providing robust privacy protection
- Business-friendly environment
Cons:
- Nevada companies rank highest in fraudulent activity
- Higher formation and annual report fees than states such as Ohio and New Mexico
- Commerce tax on $4m gross revenue
Ohio
Ohio’s cost of filing an LLC is around $99 and the annual fees for your LLC will be $0 dollars. It is my personal recommendation that you choose Ohio as it is more affordable and the paperwork isn’t complex.
The less taxation the better for any single-member LLC because if you are not going to do corporate business or any trade then you wouldn’t need investors for your business.
Pros:
- No state corporate income tax, franchise tax, or personal income tax
- Strong privacy protections with limited public disclosure
- Business-friendly legal environment
Cons:
- Commercial Activity Tax (CAT) on businesses earning more than $150,000 in revenue (can be detrimental for low-profit businesses)
- Limited recognition among investors and lenders – same problem as Wyoming
Texas
Texas has a filing fee of $300 for an LLC, and its annual fees are $0 mostly but can vary based on your annual revenue.
- If your revenue is less than the minimum threshold of $2.47m then it will be zero.
- Total revenue between $10,000,001 and $20,000,000 will incur a franchise tax of 0.75% with a simple formula: Tax = Gross Revenue * 0.375% or 0.75% (retail or wholesaler – 0.375% & rest – 0.75%)
- A revenue of $20,000,001 and above will incur a franchise tax of 1.0%.
Pros:
- No state corporate income tax or personal income tax
- Large consumer market and a thriving economy
- Relatively low costs for business operations (Annual report fees is $0)
Cons:
- Franchise tax based on gross revenue can be sometimes high for a large business
- Public disclosure of some member and manager information
New Mexico
New Mexico charges you a filing fee of $50 with no annual report fees incurred on your LLC. With no annual report fees, you still need to pay a graduated income tax of 1.7% to 5.9% as an LLC member.
It is one of the few states that doesn’t require you to submit the name of the member or manager to be included at the time of filing the certificate of formation.
This state has substantially less filing fee than my recommended Ohio LLC but has its own share of drawbacks.
Pros:
- A modest filing fee and no annual report fees
- Strong privacy protection through anonymous LLC formation i.e you don’t need to mention member or manager in the filing of the certificate of formation
- No state income tax on LLCs
Cons:
- A graduated corporate tax of 1.7% – 5.9% on each LLC member even if your LLC doesn’t sell
- It doesn’t enjoy the prestige and status of established states such as Delaware and Nevada
A General Piece of Advice
When choosing a specific state, consider business needs, growth plans, and personal preferences.
- For non-US residents who prioritize privacy and low taxes, Wyoming is an ideal state.
- Delaware is a well-reputed state with a renowned legal environment attracting investors from all over the US and the world. This should be your choice if you want a secure and business-friendly environment.
- For businesses looking to tap into a large consumer market, Texas should be top of your list of ideal states.
- Ohio is my personal recommendation as it has less filing cost with no annual report fee. It is reported that some companies are biased towards New Mexico and can prevent you from certain perks. Stripe tends to reject payment processing for New Mexico’s LLCs. Ohio isn’t regularly mentioned on the list and it is safe to assume that most people don’t know about it.
My general advice to you would be that whatever state you choose; you should also consider the consequences. For example, if you are an operating business in a state, you should register there without any second thoughts.
As a Pakistani non-US resident, you should think about the size of your business, what you want to do with it, whether will you operate in the US or not, and how long would you use this LLC.
If you have an office, employees, and a physical office in the US, then you should form an LLC in that state (where your office is). This is beneficial in the long run and you would avoid any confusion or double taxation.
However, if you don’t have a physical presence, you can practically choose any state and it won’t matter as long as you can afford it. I have laid down the perks and downsides of choosing a particular state for your LLC.
Hire Us!
If you are still unsure about choosing a state, you can contact Scounts and we would love to offer you consultation and help you decide. We also provide services for LLC formation and would love to relieve you of your burden.
