Many foreign founders choose Delaware or Wyoming when forming their U.S. company. These states are popular because they are business-friendly, efficient, and don’t impose state-level corporate income tax in the same way larger states like California or New York do.
However, even if you form in Delaware or Wyoming, you may still face state obligations you can’t ignore. Knowing what these are is essential for avoiding penalties and keeping your business in good standing.
This guide explains what state taxes and fees apply in Delaware and Wyoming, when you may still owe taxes in other states, and how foreign founders can stay compliant.
Delaware State Obligations
Delaware is the most common state for incorporation, especially for startups planning to raise capital. While it doesn’t impose a state corporate income tax on companies that don’t operate physically in Delaware, it does require annual franchise tax payments and, for corporations, an annual report.
For LLCs formed in Delaware, the main obligation is the Delaware LLC Franchise Tax. This is a flat fee of $300 due by June 1st each year. No annual report is required for LLCs. If you miss the deadline, the state imposes a $200 penalty plus 1.5% interest per month until paid.
For corporations formed in Delaware, the obligations are more involved. Delaware corporations must file an annual report and pay franchise taxes by March 1st each year.
The tax can be calculated two ways: the authorized shares method or the assumed par value method. Many startups with a high number of authorized shares but little revenue face high franchise taxes unless they calculate carefully.
This is why many corporations work with their registered agent or Delaware service company to prepare this filing. Bookmate does not handle state-level franchise tax filings but focuses on federal compliance, so you should rely on your registered agent or incorporation service for this requirement.
Example
A founder from Singapore forms a Delaware C Corporation to attract venture capital. Even if the company has no U.S. employees and no revenue, it still owes a franchise tax and must file an annual report with Delaware by March 1st.
Ignoring this can result in penalties and even the loss of good standing, which investors will see when conducting due diligence.
Wyoming State Obligations
Wyoming is popular for foreign-owned single-member LLCs because it has low costs, strong privacy protections, and no corporate income tax. But that doesn’t mean there are zero obligations.
Every Wyoming LLC must file an annual report with the Secretary of State. The cost depends on assets located in Wyoming. The minimum fee is $60 per year, due by the first day of the anniversary month of formation.
For example, if your Wyoming LLC was formed on May 10th, your annual report is due every year by May 1st. If you miss the deadline, your LLC risks administrative dissolution.
Example
A founder from Germany sets up a Wyoming LLC to sell digital products online. Even though the company operates entirely outside Wyoming, the annual report must still be filed, and at least $60 paid each year.
This filing is usually handled through your registered agent or directly through the Secretary of State’s website.
What If You Do Business in Another State?
Forming in Delaware or Wyoming does not eliminate your responsibility to pay taxes in other states where you actually do business. The concept that triggers this is called nexus. If your company has employees, an office, or significant sales in another state, you may owe taxes there even if your business was legally formed elsewhere.
For example, if your Delaware corporation hires an employee in California, you may need to register as a foreign corporation in California, file tax returns there, and pay California state taxes. Similarly, a Wyoming LLC with a warehouse in Texas will likely owe Texas franchise tax.
Foreign founders often misunderstand this point. Forming in a tax-friendly state only helps with that particular state’s rules—it does not shield you from obligations in states where your business has real operations.
Penalties for Non-Compliance
Each state enforces penalties differently. In Delaware, failing to pay franchise taxes can result in late fees, interest, and eventually the company being declared void. In Wyoming, missing annual reports can cause the Secretary of State to dissolve your LLC. Once dissolved, reinstating your company can be expensive and time-consuming.
For foreign founders seeking investment, losing good standing in your formation state is a serious problem. Investors check state records, and a company that is not in good standing is far less attractive.
Who Handles State vs. Federal Filings?
This distinction is critical. State filings—such as Delaware franchise tax or Wyoming annual reports—are typically handled by your registered agent or incorporation service. Bookmate does not file state franchise taxes or annual reports.
Federal filings, on the other hand, are where Bookmate specializes. We handle corporate income tax returns (Form 1120), partnership returns (Form 1065), and foreign reporting forms like 5472 and 5471.
State compliance keeps your company legally alive; federal compliance keeps you safe from IRS penalties. Both matter, but they are managed through different channels.
Real-World Comparison
Consider two scenarios:
- A Canadian founder forms a Wyoming single-member LLC to sell software. They pay the $60 Wyoming annual report each year but have no other state obligations.
Federally, however, the LLC must file Form 5472 with a pro forma 1120 each year because it is foreign-owned. Bookmate ensures the IRS filings are completed correctly, while the registered agent handles the Wyoming annual report.
- A startup founded by entrepreneurs in India forms a Delaware C Corporation. Each year, they file a Delaware annual report and pay franchise tax by March 1st through their registered agent.
At the federal level, Bookmate prepares and files Form 1120 for the IRS. If the company later hires an employee in California, the corporation will also need to register and file in California, adding another layer of compliance.
How Bookmate Can Help
Bookmate helps foreign founders understand the difference between state and federal obligations. While we do not handle Delaware or Wyoming state filings directly, we ensure you know when they are due and what must be paid.
More importantly, we take care of your federal IRS filings, from Form 1120 for corporations to Form 5472 for foreign-owned LLCs.
Every company’s obligations differ depending on structure, ownership, and business activity. That’s why personalized advice matters.
Learn more at trybookmate.co or book a free consultation today.
Final Thoughts
Delaware and Wyoming are excellent choices for foreign founders, but they come with their own state-level requirements. Paying attention to franchise taxes and annual reports keeps your company in good standing.
At the same time, staying compliant with federal IRS requirements is essential to avoid costly penalties. By understanding where state obligations end and federal obligations begin, you can operate your U.S. company with confidence.
