Wyoming is often advertised online as a “tax-free” state, leading many foreign founders to believe that forming a Wyoming LLC means they will not owe any U.S. taxes. While Wyoming does not charge state income tax, this does not mean you can avoid federal tax obligations.
The IRS still requires filings for foreign-owned entities, even if no money was made. Misunderstanding this distinction can lead to expensive penalties.
This article explains the truth about Wyoming LLCs and taxes, what obligations foreign founders really face, and why trying to avoid taxes by ignoring U.S. filings can backfire.
Why people think Wyoming LLCs are tax-free
Many formation companies and websites advertise Wyoming as having “no state income tax.” While that is true, it only covers state-level income taxes. It does not remove your obligation to file with the IRS at the federal level.
For foreign founders, the most common required filing is Form 5472 attached to a pro forma Form 1120 for single-member LLCs.
On top of that, Wyoming requires an annual report and franchise tax, which must be filed each year whether or not your LLC made money. The minimum fee is $60, due on the first day of your anniversary month.
In practice, this franchise tax is essentially a flat fee Wyoming charges in place of a state income tax. While the state does not levy income taxes, you still owe Wyoming this annual fee to keep your company registered and in good standing.
The difference between tax avoidance and non-compliance
It’s important to distinguish between legal tax planning and non-compliance. Structuring your company in Wyoming to take advantage of lower state costs is legal. But failing to file required IRS forms is not.
The IRS imposes a $25,000 penalty for each year Form 5472 is not filed by a foreign-owned single-member LLC. For multi-member LLCs, late or missing Form 1065 filings trigger penalties of $220 per partner, per month, up to 12 months.
In other words, forming in Wyoming does not shield you from IRS reporting. Ignoring filings only increases your costs.
What taxes foreign founders may actually owe
For most foreign-owned Wyoming LLCs, the LLC itself does not pay U.S. income tax directly. Instead, the IRS wants visibility into transactions between the LLC and its owner. That’s why Form 5472 is required, even with no income.
However, in some cases, foreign founders may have personal U.S. tax obligations. If the IRS determines that you are engaged in a U.S. trade or business—for example, if you are physically present in the U.S. while providing services, or if you store inventory in U.S. warehouses—you may also need to file Form 1040-NR as an individual.
To do this, you need an ITIN, which can be obtained through partners like theitin.com.
This does not mean that every Wyoming LLC owner pays U.S. income taxes. It depends on whether your activities rise to the level of being “engaged in a U.S. trade or business.” But regardless of taxes owed, the filings themselves are still mandatory.
Common misconceptions
- “No income means no filing.” False. Even a single owner contribution to the LLC bank account counts as a reportable transaction.
- “Wyoming doesn’t have income tax, so I don’t need to file anything.” False. Federal filings are required, and Wyoming still requires its $60 annual report.
- “I can wait until my business makes money to start filing.” False. The IRS expects filings from the first year your LLC exists.
Example: A foreign-owned Wyoming LLC with no clients
A founder in Spain forms a Wyoming single-member LLC in 2024. She wires $2,000 into the company account to keep it open. The LLC earns no revenue that year. Because the contribution is a reportable transaction, the LLC must file Form 5472 with a pro forma 1120.
The founder must also file a Wyoming annual report and pay $60. If she ignores both, she risks a $25,000 IRS penalty and the state dissolving her LLC.
Why compliance is better than avoidance
Trying to avoid taxes by ignoring filings usually costs more in the long run. Once penalties are assessed, they are hard to reverse. Compliance, on the other hand, is straightforward and relatively inexpensive.
Filing Form 5472 with a pro forma 1120 ensures you stay in good standing with the IRS. Filing the Wyoming annual report ensures your LLC remains active with the state.
How Bookmate helps
Bookmate helps foreign founders separate fact from fiction when it comes to U.S. compliance. We:
- File Form 5472 with a pro forma 1120 for foreign-owned single-member LLCs.
- Prepare Form 1065 for multi-member LLCs, including K-1s, K-2s, and K-3s.
- File Form 1120 with 5472 attached for corporations.
- Guide founders on when Form 1040-NR may apply personally.
We don’t apply for EINs or ITINs directly, but we recommend formation companies for EINs and partner with theitin.com for ITINs.
Final thoughts
Forming a Wyoming LLC is a smart choice for many foreign founders, but it is not a way to avoid taxes. Federal IRS filings and Wyoming state filings are still required, even with no income. Compliance is always cheaper and safer than trying to avoid U.S. reporting.
Bookmate helps foreign-owned businesses stay compliant so founders can focus on growth without worrying about IRS penalties.
Learn more at trybookmate.co or book a consultation today.
