Non-U.S. entrepreneurs setting up a business in the United States have to consider the various states they can incorporate in and how the choice can shape the success of their business. While U.S. entrepreneurs can pick any of the 50 states, two states tend to stand out to most foreign business owners: Wyoming and Delaware. Both have developed a reputation as the top states for business formation, and while they have developed distinct features that Wyoming and Delaware have developed to capture the attention of foreign entrepreneurs, each state has qualities that are attractive as a gateway to the U.S. economy.

Why U.S. Entrepreneurs Prefer the States

International entrepreneurs are always hunting for the right opportunities in the United States, as the country has a lot to offer. A stable economy, a solid legal system, and foreign capital are just a few of the many advantages that the U.S. has. But as a foreign entrepreneur, you have to navigate complicated business laws. This is where the simpler and flexible business laws of Wyoming and Delaware come in.

Delaware: A Traditional Powerhouse

Delaware has been considered the gold standard for U.S. business incorporation for decades. More than 1.8 million business entities, including 60% of the Fortune 500 companies, are incorporated in Delaware. Non-U.S. entrepreneurs recognize the benefits as well, which have kept Delaware at the top for decades.

The Court of Chancellery Advantage

Delaware’s Court of Chancellery is a court of equity, meaning that there are no juries; disputes are resolved by judges who specialize in corporate law. This system permits rapid and predictable dispute resolution, which is essential for international entrepreneurs. Moreover, Delaware’s business case law is the most comprehensive in the U.S., which means that business owners may predict their legal outcomes. This predictability reduces risk, particularly for international entrepreneurs who need certainty in their legal frameworks.

Corporate Flexibility and Privacy

Delaware corporations enjoy a great degree of organizational flexibility. The state also permits various classes of stock to be issued, which facilitates complex ownership and investment arrangements. Delaware is often used by non-U.S. entrepreneurs who intend to raise venture capital and are planning for an acquisition. U.S. investors and acquirers are familiar with Delaware’s legal framework, which makes acquiring Delaware corporations much easier.

Though Delaware mandates public filings disclose directors’ names, shareholders’ identities, and certain financial details remain omitted. This aspect of the state remains advantageous to foreign business proprietors. Comparison to their home countries’ disclosure regulations reveals significant deviation.

Tax Issues

Corporations registered in Delaware, yet not physically present and not conducting business operations, are not liable to Delaware corporate income tax. This creates significant savings for foreign business owners, especially those operating outside Delaware, while maintaining a corporate presence there. However, Delaware’s annual franchise tax will still apply, which ranges from $175 to $200,000 based on authorized shares and asset value of the business.

Wyoming: The Rising Star

For entrepreneurs outside the U.S. setting up Limited Liability Companies, Wyoming has emerged as a strong option, especially since Delaware is still dominant. Wyoming’s combination of low cost, tax benefits, and strong privacy against financial disclosure has made it popular among foreign business proprietors.

Unique Privacy Safeguards

Wyoming’s privacy safeguards are among the best in the country. No state requires LLC members to be included in the public record, but Wyoming offers the most LLC privacy in the United States. For international entrepreneurs needing privacy for personal safety, a competitive edge, or preference, the level of privacy Wyoming offers is unparalleled.

No State Income Tax

Wyoming is one of the few states to has no corporate or personal income tax. For non-U.S. entrepreneurs owning pass-through entities like LLCs, no state-level taxation is applied to business profits as well. Additionally, the state does not charge a franchise tax, making Wyoming one of the most affordable states to incorporate a business.

Low Formation and Maintenance Costs

Wyoming is one of the most affordable states to form and maintain a business. Annual fees are very low, usually around $60 for LLCs, and there are no minimum capital requirements. For bootstrapping international entrepreneurs or those looking to enter the U.S. market, Wyoming is a great state to incorporate in because there are a lot fewer barriers to entry.

Asset Protection

As the first state to enact LLC legislation in 1977, Wyoming has had the most time to strengthen legislation concerning the most robust asset protection Wyoming offers. Wyoming applies charging order protection, meaning in most cases, creditors lose the right to get LLC assets or force the LLC to sell its assets, and instead, they get limited rights to distributions that the member would have received. This asset protection is particularly useful to non-U.S. entrepreneurs, who may have to deal with different liability frameworks in their countries.

Choosing Between Wyoming vs. Delaware

Choosing between Wyoming and Delaware usually depends on the structure of the business, the industry, and the business’s long-term goals.

Pick Delaware if:

• You’re setting up a corporation and not an LLC
• You’re looking for venture capital and plan to get institutional investments
• You’re in an industry where Delaware incorporation means respect
• You’re likely to have problems with corporate governance situations that need complex solutions
• You appreciate a great quantity of corporate case law

Choose Wyoming if:

• You’re setting up an LLC
• You need to have privacy
• You want your startup and your minimal maintenance to have a low cost
• You operate a small or medium-sized business
• You need good and strong protection for your assets
• You do not want to pay taxes on your income at the state level

For International Entrepreneurs

Even if Wyoming or Delaware is your state of choice, as an international entrepreneur, there are still a few practical considerations to keep in mind, as follows:

Registered Agent

All businesses in Wyoming and Delaware have to have a designated representative with a physical location in the state. There are many businesses that provide this service for international entrepreneurs. They charge between $50 $300 a year.

Banking and EIN

You will need an Employer Identification Number (EIN). You can get an EIN without a social security number, but as a non-resident, it will be hard to open a U.S. bank account. Some banks require you to be there in person, while others are more open to international entrepreneurs.

Compliance and Ongoing Requirements

Every state needs its annual report and fee paid. While higher fees in Delaware might suit its intricate corporate framework, Wyoming offers minimal compliance, which is very appealing for remote non-U.S. businessmen.

The Verdict

Non-U.S. businessmen’s choices for starting U.S. businesses are largely constrained to Wyoming and Delaware, which is for good reason. Corporations in competitive fields still target Delaware for incorporation. Wyoming is now the first choice for LLCs due to its cost, privacy, and protection.

It is a matter of your specific needs and plans. Starting in one state and restructuring later is a common practice among international entrepreneurs. The most important point is using a state that understands your needs to build your presence in the U.S. Delaware is an older choice, but Wyoming is an up-and-coming option.