When foreign founders set up a U.S. company, two states usually come up as top choices: Wyoming and Delaware. Both are known for being business-friendly, but they serve different types of entrepreneurs.
Wyoming is known for low fees and simplicity, while Delaware is favored by venture capitalists and startups planning to raise money. For foreign-owned companies, the choice also impacts how much you’ll pay in state fees and what compliance filings are required.
This article compares Wyoming and Delaware LLCs from the perspective of foreign founders, with a focus on taxes, filings, and long-term considerations.
Costs and state-level obligations
Wyoming has no state income tax. Instead, every Wyoming LLC must file an annual report and pay a franchise tax each year. The tax is based on assets located in Wyoming, with a minimum of $60.
The annual report is due by the first day of the anniversary month of formation. Even if your company had no revenue, this fee must be paid.
Delaware also does not impose state income tax on LLCs. Instead, Delaware LLCs pay a flat $300 franchise tax each year. The fee is due by June 1. Corporations in Delaware have more complex (and often more expensive) franchise tax calculations, but for LLCs, the $300 is fixed.
In both states, missing these payments can cause your LLC to lose good standing and eventually be dissolved.
Federal filing obligations
Regardless of whether you choose Wyoming or Delaware, your federal IRS obligations are the same. If your LLC is foreign-owned, you must file:
- Form 5472 with a pro forma 1120 if you have a single-member LLC.
- Form 1065 if you have a multi-member LLC, along with K-1s, and usually K-2s and K-3s if foreign owners are involved.
- Form 1120 if your company elected to be treated as a corporation, with 5472 required if foreign shareholders own at least 25%.
These filings apply whether you formed in Wyoming, Delaware, or any other state.
Privacy protections
One of Wyoming’s biggest appeals is privacy. Wyoming does not require LLCs to publicly disclose members or managers in their state filings. Delaware requires more disclosure in its annual reports, though ownership details are still more private than in many other states.
For foreign founders who value simplicity and anonymity, Wyoming often feels like the easier option. For those who plan to work with investors, Delaware’s reputation may outweigh the extra disclosure.
Investor preferences
Investors, especially U.S. venture capital firms, overwhelmingly prefer Delaware. That’s because Delaware has a well-developed body of corporate law, courts that specialize in business disputes, and a system designed for issuing stock and raising funds.
If you expect to raise significant capital, Delaware is usually the right choice.
On the other hand, if your business will remain closely held, such as a consulting firm, small e-commerce operation, or software agency, Wyoming is often the more cost-effective option.
Example: Two foreign founders, two goals
A founder in Canada wants to set up a U.S. LLC to sell digital products online. She doesn’t plan to raise outside investment. For her, a Wyoming LLC is the better fit—lower fees, strong privacy, and straightforward compliance.
Another founder in Singapore is building a SaaS startup and hopes to raise money from U.S. venture capital firms. For him, Delaware is the logical choice. The higher $300 annual fee is worth it for easier access to investors and the legal infrastructure they expect.
How Bookmate helps
Bookmate helps foreign founders stay compliant regardless of where they form their LLC. We:
- File Form 5472 with pro forma 1120 for single-member LLCs.
- File Form 1065 with K-1s, K-2s, and K-3s for multi-member LLCs.
- File Form 1120 with 5472 attached for corporations.
- Guide founders on how their choice of state affects only state-level costs, not federal IRS requirements.
We don’t handle state annual reports or franchise taxes directly, but we guide clients on what to expect so they don’t miss important deadlines.
Final thoughts
For foreign entrepreneurs, the choice between Wyoming and Delaware comes down to your goals. If you want simplicity, low costs, and privacy, Wyoming is often the best choice. If you want to raise investment and work with U.S. venture capital, Delaware is the stronger option. Either way, you’ll still need to handle your federal IRS filings.
Bookmate ensures that no matter which state you choose, your federal compliance is handled correctly so you can avoid penalties and focus on growing your business.
Learn more at trybookmate.co or book a consultation today.
