The Wyoming LLC is the best business structure for non-residents in the United States. It provides full access to the domestic market and everything it has to offer, at a minimal cost and without creating an additional tax liability. In this article, I cover how the Wyoming LLC works, present practical use cases and explain how to register one.
The Wyoming LLC is a tax-neutral business structure offered by the state of Wyoming. Tax-neutral, in this context, simply means that the business has no tax burden of its own. Instead, its owners (members) are responsible for their share of the profits, at the personal level (or corporate if they are legal entities).
To better illustrate how this works in practice, here are a few examples:
US WY LLC + US citizen / resident owner
Unless an election to have it treated otherwise is made, the LLC will be considered tax-neutral and as such, all its income will be taxed as personal income at the owner level. In this scenario, this means that the owner will be liable for US taxation on any income generated through the LLC. This includes both US-sourced income and foreign-sourced income. Because the owner is a citizen / resident, the rates will be progressive and tax credits will be available.
US WY LLC + non-resident owner
As with the previous scenario, unless an election to have it treated otherwise is made, the LLC will be considered tax-neutral. Unlike in the previous scenario, however, the owner in this scenario is not a US citizen / resident. As such, the owner is only liable for US taxation on the LLC’s US-sourced income (ECI). This creates an interesting situation in which a Wyoming LLC can be run tax-free as long as it does not generate any US-sourced income. It is important to understand, however, that while it can be run tax-free in the US it may still be liable for taxation in other countries (such as the country of residence of the owner). This problem can be mitigated by the owner(s) moving to a territorial taxation country, a tax haven or by having the LLC owned by a holding company.
US WY LLC + multiple owners
In this scenario, US citizen / resident owners will be liable for US taxation on their share of the LLC’s worldwide income. Non-resident owners will only be liable for US taxation on their share of the LLC’s US-sourced income. As in scenario two, it is important to note that non-resident owners may still be liable for taxation in other countries.
There are of course a multitude of other subtleties involved when it comes to taxation. Many of them are covered in Zero Tax Nomad, Freedom Surfer’s flagship course.
Compliance-wise, a US WY LLC is a tax-neutral entity and as such, it has no tax burden of its own. It is up to its owners to report the LLC’s income on their personal tax return. For US citizens / residents, this simply means adding the LLC’s income to their annual return. For non-residents, this means filing a US tax return if the LLC generated any US-sourced income. If the LLC generated no US-sourced income, there is usually no need to file any return (there may still be forms to submit on an annual basis, depending on other factors, such as form 5472).
It is very easy for a Wyoming resident to self-register a US WY LLC online. For other US citizens / residents, the process will be slightly more complicated but still fairly straightforward. For non-residents, however, the process is complicated and time consuming (and it cannot be completed online). Freedom Surfer offers an all-inclusive US WY LLC registration package, designed with location independence in mind. It includes everything needed to get running, including tax advice, and the whole process can be completed in minutes, remotely. To learn more, visit our Business Registration page.
US WY LLC for US-focused businesses
A Wyoming LLC is a true US company and as such, it provides excellent access to the US market. It also provides full access to US business services, including banks, Stripe, PayPal Pro and more. A Wyoming LLC will also make the hiring of US-based employees simpler. It is important to note, however, that using a Wyoming LLC to engage in business within the United States will, in most cases, create a US tax liability. Engaging in a business within the United States in this context refers to opening an office and staffing it, renting space in a warehouse etc. It does not include having US-based clients.
US WY LLC for location independent businesses
A Wyoming LLC is the ideal structure for a location independent business which does not engage in any business within the United States. Its low starting and compliance cost gives it an edge over most other structures. It also benefits from access to a wide range of business services, including Stripe and PayPal Pro. Its tax neutral status means that its owners can make full use of their location independence by relocating their personal residency to countries where the company’s profits will not be subject to taxation, essentially allowing it to be run tax-free. Such countries include all the obvious tax havens but also Malaysia, Philippines, New Zealand, Chile, Uruguay, Israel and more.
US WY LLC for investors and day traders
A Wyoming LLC grants full access to US markets and brokerage firms, usually without creating any US tax liability. It also grants access to many of the peer-to-peer lending platforms, offering investors new ways to leverage their capital.
US WY LLC for banking and assets protection
A Wyoming LLC can also be used to gain access to the excellent banking products available in the United States. This includes miles-earning credit cards, deposit products and loan products. It can also be used to hold assets, both within the US and abroad, and provide excellent assets protection benefits.