Why Choose Delaware for a Non-Citizen LLC?

Delaware is one of the top choices for non-U.S. residents planning to form a Limited Liability Company (LLC) in the United States. This is because the state has a well-established legal framework, a business-friendly environment, and a global reputation that make it a popular option for entrepreneurs and small businesses.

Note: Non-U.S. residents are individuals whose permanent residence is outside of the country. These individuals may have American passports or Social Security Numbers, but their main domicile is outside of the United States. A non-citizen, on the other hand, is an individual who does not have an American passport, these individuals may reside within the country but are not deemed American citizens.

Understanding the basics of an LLC

LLCs are a popular type of business that combines the personal asset protection of a corporation with the flexibility and tax benefits of a partnership or sole proprietorship.

There are benefits to forming an LLC:

• An LLC provides personal liability protection to its owners. If the business faces financial difficulties, the personal assets of the members, like homes, cars, and bank accounts, are protected from the LLC’s creditors. This allows the business to take more risks without putting their personal finances on the line.
• LLCs are flexible in the ways they are taxed. They can choose to be taxed as a sole proprietorship, partnership, S-corp, or C-corp. This versatility allows the LLC owners to choose the tax treatment that best benefits their business’s needs.

Why form an LLC in the United States

There are several reasons why a non-resident would want to form an LLC in the United States:

1. Access to the world’s biggest economy: Having a US-based LLC can make it easier for foreign businesses to enter and operate in the U.S. market.
   • Imagine a Korean software development company that develops popular apps organized in Delaware. This would allow them to better market to their customers, receive payments in US dollars and attend trade shows in the U.S. more easily.
2. Increased credibility and reputation: Forming a business in the U.S. can enhance reputation and credibility. This can be valuable when seeking investment or clients in the international community.
   • Thinks of an Indian online education platform. Having a U.S.-based company can make the company seem more reputable to partners and international students besides operating entirely remotely.
3. Legal protections: The U.S. legal system offers strong protection for intellectual property rights and business contract disputes compared to other countries. By forming an LLC in the U.S., the business can take advantage of these protections.
   • A Malaysian e-commerce platform that sells handmade jewelry forms an LLC in the U.S. By forming in the U.S., the jewelry is protected, and if a rival business tries to copy designs, the Malaysian business can take action in U.S. courts.

Why a Delaware LLC is a good choice for non-residents

1. Strong legal framework: Delaware has a separate court system that specializes entirely in business disputes called the Court of Chancery. The Court of Chancery updates corporate law constantly to match the ever-changing business landscape. This court only exists in Delaware.
   • This means that if a non-resident LLC faces any legal disputes the case will be handled by those who are experts in business law.
   • A tech startup forms a Delaware LLC. A disagreement arises between the founders. Thanks to the Court of Chancery the dispute can be solved swiftly due to their expertise in corporate law.
2. Tax advantages: Delaware does not impose state sales tax, corporate income tax, or state income tax on earnings generated outside the state.
   • This not only reduces the tax burden but also lightens administrative loads.
   • A British entrepreneur opens a consulting LLC. All of their clients are based in the Middle East. This structure allows them to take advantage of Delaware’s tax benefits, maximizing profits.
3. Prestige and credibility: Forming in Delaware, a state known for its business-friendly environment and home to many large corporations, can add credibility to your business and potentially attract future investors.
   • Over 50% of all Fortune 500 companies are incorporated in Delaware.
   • A non-resident software engineer forms a Delaware LLC and pitches to potential U.S.-based investors. Being formed in Delaware adds an extra layer of professionalism, although the LLC has no physical ties in the U.S.
4. Easy process: Company formation in Delaware is straightforward and can be done remotely, so there is no need to actually be in the state to set your business up.
   • There is no need to fly to America to form your business, saving time and money.
   • A Filipino marketing agency decides to organize in the U.S. to target a new client base. By forming remotely, they can offer services quickly.

Step-by-step guide to forming a Delaware LLC as a non-resident

It is possible to form your Delaware LLC entirely remotely, making it a good choice for those based outside of the United States.

1. Choose a unique business name

The first step is to choose your company name. There are a few guidelines to follow when thinking of your name in the state of Delaware:

• Your LLC name must be “distinguishable” from the names of existing business entities on file with the Delaware Division of Corporations.
• Your LLC name must contain the words “Limited Liability Company” or one of the abbreviations “L.L.C.” or “LLC”.

After you have chosen a name for your business search the Delaware name database to confirm your name is available.

Then, reserve it online with the Delaware Division of Corporations. The name will be held for 120 days, and it costs $75 to reserve it. This can be paid by credit or debit card.

2. Appoint a registered agent

Non-residents must appoint a registered agent with a physical address in Delaware.  

A registered agent is responsible for receiving correspondence and legal documents from the government. Choosing a reliable registered agent service that is trusted and has a good track record is important, as they will be your point of contact in the state.

Some reputable options include Zenbusiness, Northwest, and Legalzoom.

When researching different services, look into cost, reviews, and any additional services they may offer. Some registered agents offer assistance with filing annual reports or reminding you of important deadlines. For help finding a Delaware registered agent, browse the list provided by the Division Of Corporations.

Our picks for best registered agent services

	Most recommended	Same-day processing Free registered agent service for one year Free domain, website, email and phone Expert support from real people	Visit Northwest
		Starts at $0 plus state fees 100% accuracy guarantee and worry-free compliance Personalized dashboard Finance and marketing tools	Visit ZenBusiness
		Perfect for multistate compliance Instant access to registered agent address Same-day e-delivery of documents	Visit Harbor Compliance

FAQs

Do I still need an EIN if I don’t want to open a U.S. bank account, hire employees and all of my business is done outside of the U.S.?

If your LLC only generates income outside the U.S., has no employees within the U.S., and doesn’t have a significant percentage of assets located within the U.S., and you don’t want to open a U.S. business bank account, you won’t need an EIN.

What is the difference between a Certificate of Formation and Articles of Organization?

It is a matter of what the formation documents are called in each state; in Delaware, they are called a Certificate of Formation, while Articles of Organization serve the same purpose in most other states.

What is an operating agreement, and do I need one?

An operating agreement is an internal document that outlines the rules, procedures, and ownership structure of an LLC. While not legally required, having one is highly recommended to prevent disputes and keep operations running smoothly.

Do I need to be a U.S. citizen to register my LLC in Delaware?

You do not need to be a U.S. citizen to register an LLC in Delaware, as the state allows foreign nationals to form and own LLCs.

If my business is entirely remote and I am based outside of Delaware do I need a Delaware business license?

You will only need a business license if you have customers and are operating in Delaware.

What are the main tax obligations for a Delaware company as a non-resident?

If your income is sourced outside the U.S. you might only be liable for the annual franchise tax. There are three main tax obligations if your income is sourced in Delaware:

• Federal income tax on U.S. sourced income of 30%.
• State income tax on Delaware sourced income (2.2%-6.6%).
• Annual franchise tax of $300.

Can I transition Delaware LLC to C-Corporation?

Yes, it is easy to convert your Delaware LLC to a C-Corp. You need to file a Certificate of Conversion and a Certificate of Incorporation with the Delaware Division of Corporations.

How long does it take to form a Delaware LLC?

Online filings are typically processed within 1-2 business days, while mailed filings can take 3-5 business days.

Which is better to form an LLC in, Wyoming or Delaware?

Both Wyoming and Delaware offer advantages, such as flexibility and privacy. Wyoming may be a better choice for businesses seeking lower costs, while Delaware may be better for those looking for the prestige associated with the state.

Is a tax ID the same as an EIN?

An EIN is also known as a federal tax identification number and is used to identify a business entity.

What is the difference between a non-resident and a non-U.S. citizen?

A non-resident is someone whose permanent residence is not in the U.S.A. Non-residents may have an American passport, which would grant them American citizenship. Non-U.S. citizens are individuals who do not have American citizenship or a passport, they may reside in the United States, but they are not deemed American.

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3. Establish a U.S. business address

Non-residents must obtain a U.S. business address. An address is needed for banking and legal matters.

Non-residents who don’t have a U.S. address have a few options:

• Registered agent’s address: Some registered agent services offer non-residents the use of their address as the official business address.
• Virtual office: These are services that provide a physical address without any actual office space. They also offer additional services, such as mail forwarding.

4. File Certificate of Formation

To officially form an LLC in Delaware, you must file a Certificate of Formation.

File online through the one-stop Delaware Division of Corporations website. The filing fee is $110. The fee can be paid online using a credit or debit card, allowing non-U.S. residents to form their business entirely from home.

5. Create an operating agreement

Although not legally required for Delaware LLCs, drafting up an operating agreement is recommended.

An operating agreement will:

• Describe the business structure
• Establish LLC member’s roles and responsibilities
• Describe how the LLC will run

Without a clear and concise operating agreement, an LLC may face operational difficulties in the future.

6. Obtain an Individual Taxpayer Identification Number (ITIN)

An ITIN is a 9-digit tax processing number supplied by the Internal Revenue Service (IRS). It is for individuals who need a U.S. taxpayer number but are not eligible for a Social Security Number (SSN).

To get an ITIN:

• Complete form Form W-7 and submit it with a federal income tax return. When completing the form, select box “b” in the “Reason you’re submitting Form W-7” section.
• You can apply for an ITIN any time during the year when there is a filing or reporting requirement.
• It can take up to 7 weeks for the application to be processed, so it is important to be organized.
• There is no way to file the W-7 online. Mail the W-7, tax return, proof of identity, and foreign status documents to: Internal Revenue Service, Austin Service Center, ITIN Operation, P.O. Box 149342, Austin, TX 78714-9342

In the future, when you have an ITIN, you will file your tax return as directed in the instructions.

7. Obtain an Employer Identification Number (EIN)

An EIN acts as a unique identifier for an LLC, much like an SSN or an ITIN for an individual. They are needed to open bank accounts, hire employees, and file tax returns.

Apply for an EIN online through the IRS website.

Provide the following information:

• LLC name and address
• ITIN
• Type of LLC (single-member or multi-member)
• Reason for applying for an EIN
• Date the LLC was started

8. File a Beneficial Ownership Information Report

From January 1, 2024, all U.S. businesses must file a federal Beneficial Ownership Information report within 30 days of formation unless they are on the exemption list provided by the Financial Crimes Enforcement Network (FinCEN).

This report details owners who own more than 25% of a business or have “substantial control.” BOI reports are free to file online and are not considered public information.

9. Obtain permits and licenses

It’s important to make sure that your business is compliant with all local, state, and federal permits and licenses. All LLCs that do business in Delaware are required to get a state business license from the Division of Revenue.

Acquiring Delaware business licenses is straightforward with the Delaware One Stop Licensing and Registration Service.

10. Open a business bank account

It is highly recommended for LLCs to open a U.S. bank account. This will allow business owners to receive payments easily and can also establish credibility with the American market.

In recent years, there has been a huge increase in the amount of online banking options that allow you to set up a business bank account online. These banks are often much more flexible and convenient than their brick-and-mortar counterparts. Three banks that allow you to open and manage a bank account entirely online are Found, Mercury, and RealyFi.

To open an account, you generally need the following:

• LLC formation documents
• EIN
• Two forms of ID: Foreign passports and driving licenses are accepted
• U.S. business address
• Additional information: Depending on the bank, they may have extra requirements like a phone number

		Tailored financial services for freelancers and entrepreneurs Automated tax savings account, estimates, and expense tracking No monthly or hidden fees for basic banking	Visit Found
		Free accounts have many features Easy-to-use mobile app Existing integrations with a variety of software	Visit Relay
		Integration with Shopify, Stripe, Paypal, Quickbooks Domestic and international wire transfers are free User-friendly mobile app	Visit Mercury

FAQs

Do I still need an EIN if I don’t want to open a U.S. bank account, hire employees and all of my business is done outside of the U.S.?

If your LLC only generates income outside the U.S., has no employees within the U.S., and doesn’t have a significant percentage of assets located within the U.S., and you don’t want to open a U.S. business bank account, you won’t need an EIN.

What is the difference between a Certificate of Formation and Articles of Organization?

It is a matter of what the formation documents are called in each state; in Delaware, they are called a Certificate of Formation, while Articles of Organization serve the same purpose in most other states.

What is an operating agreement, and do I need one?

An operating agreement is an internal document that outlines the rules, procedures, and ownership structure of an LLC. While not legally required, having one is highly recommended to prevent disputes and keep operations running smoothly.

Do I need to be a U.S. citizen to register my LLC in Delaware?

You do not need to be a U.S. citizen to register an LLC in Delaware, as the state allows foreign nationals to form and own LLCs.

If my business is entirely remote and I am based outside of Delaware do I need a Delaware business license?

You will only need a business license if you have customers and are operating in Delaware.

What are the main tax obligations for a Delaware company as a non-resident?

If your income is sourced outside the U.S. you might only be liable for the annual franchise tax. There are three main tax obligations if your income is sourced in Delaware:

• Federal income tax on U.S. sourced income of 30%.
• State income tax on Delaware sourced income (2.2%-6.6%).
• Annual franchise tax of $300.

Can I transition Delaware LLC to C-Corporation?

Yes, it is easy to convert your Delaware LLC to a C-Corp. You need to file a Certificate of Conversion and a Certificate of Incorporation with the Delaware Division of Corporations.

How long does it take to form a Delaware LLC?

Online filings are typically processed within 1-2 business days, while mailed filings can take 3-5 business days.

Which is better to form an LLC in, Wyoming or Delaware?

Both Wyoming and Delaware offer advantages, such as flexibility and privacy. Wyoming may be a better choice for businesses seeking lower costs, while Delaware may be better for those looking for the prestige associated with the state.

Is a tax ID the same as an EIN?

An EIN is also known as a federal tax identification number and is used to identify a business entity.

What is the difference between a non-resident and a non-U.S. citizen?

A non-resident is someone whose permanent residence is not in the U.S.A. Non-residents may have an American passport, which would grant them American citizenship. Non-U.S. citizens are individuals who do not have American citizenship or a passport, they may reside in the United States, but they are not deemed American.

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11. File LLC taxes

• Federal tax obligations: Non-resident owners of an LLC generally are not subject to federal income tax on earnings generated entirely outside the United States.However, the LLC may be subject to a flat 30% federal income tax rate on any U.S.-sourced income. If your country has a tax treaty with the U.S., this 30% may be reduced or entirely eliminated.
• State tax: Delaware does not tax out-of-state income, making it an attractive option for non-resident business owners.
• This is what makes Delaware an attractive option for non-resident business owners who operate their LLCs remotely and generate income from outside the state.

An example: A UK resident owns a Delaware LLC that provides web design services to clients in the European Union. No work is completed in the U.S. The federal tax returns should be straightforward, as there is no U.S.-sourced income present. Delaware won’t impose any state tax either. The focus would be on UK tax and the HMRC.

Ongoing compliance

• Unlike most states, Delaware does not require LLCs to file annual reports. However, Delaware LLCs must pay an annual franchise tax of $300 by June 1st each year. This tax can be paid online.
• Delaware requires you to renew your registered agent each year to remain in good standing and keep your business going.