Wyoming vs Delaware vs New Mexico LLC: Best State for Foreign Founders

Three states, three different bets

If you live outside the US and want to form a US LLC, the three states you keep seeing recommended are Wyoming, Delaware, and New Mexico. They are not interchangeable. Each one optimizes for something different — privacy, investor credibility, or pure low cost — and picking the wrong one will cost you for as long as your LLC exists.

Most foreign founders running an Amazon FBA store, a SaaS, or an agency do not need Delaware. Most who want to raise US venture capital should not pick Wyoming. And New Mexico, while genuinely cheap, has tradeoffs that get glossed over.

The three states at a glance

Numbers below reflect 2026 state filings. Add a registered agent fee — typically $50–$200 per year — to all three, since no foreign founder can serve as their own registered agent.

Wyoming: why it is the foreign-founder default

Wyoming has done more than any other state to court non-US founders. The state legalized LLCs first (1977), maintains member privacy by not requiring owner names on public filings, and keeps annual cost predictable: $60 minimum every year on the first day of your formation anniversary month, paid as the state license tax.

You file an annual report in Wyoming, but it is short — confirm your registered agent, your principal office address, and your Wyoming asset value. If your LLC has $300,000 or less in Wyoming-located assets, the fee stays at the $60 minimum. Filing takes ten minutes online at wyobiz.wyo.gov.

Where Wyoming gets criticized: if you actually operate a physical business in another US state — a warehouse you own, a hired US employee, a brick-and-mortar location — you must register your Wyoming LLC as a "foreign LLC" in that state, meaning a second filing fee, a second annual report, and a second registered agent. For foreign founders running internet-only businesses with no US physical presence, this concern does not apply.

Delaware: only worth it if you are raising money

Delaware's reputation comes from its corporate law tradition. The Court of Chancery is a specialized business court with over a century of case law, no juries, and judges who understand corporate disputes. Venture capital firms, US institutional investors, and acquirers expect Delaware entities. If you are building a startup that will raise from US VCs, Delaware is not optional.

For everyone else, Delaware is just expensive. The flat $300 annual tax is due June 1 every year, with a $200 penalty plus 1.5% monthly interest if you miss. There is no annual report for LLCs — just the tax payment. The state does not tax LLC income earned outside Delaware, so a foreign founder operating internationally is not exposed to Delaware income tax, but you owe the $300 every year just to keep the entity in good standing.

One nuance: many foreign founders confuse Delaware's LLC annual tax with the corporate franchise tax that applies to C-Corps. The C-Corp franchise tax can run from $400 to hundreds of thousands depending on authorized shares. LLCs always pay the flat $300 — predictable, but not cheap.

New Mexico: cheapest in the country, with caveats

New Mexico has the lowest combined cost of any US state for forming and maintaining an LLC. The Articles of Organization fee is $50, and after that LLCs taxed as pass-through entities — which is the default unless you affirmatively elect corporation status — owe nothing recurring to the state. No annual report. No franchise tax. Member privacy is comparable to Wyoming. On paper, it is unbeatable.

In practice, three things hold New Mexico back for most foreign founders:

• Bank and platform recognition. US banks and payment processors (Mercury, Wise, Stripe, PayPal) handle Wyoming and Delaware LLCs constantly. New Mexico LLCs sometimes face additional verification or, occasionally, declined applications, even though the entity is perfectly legal.
• Less practitioner familiarity. US accountants see Wyoming and Delaware constantly, New Mexico rarely. Not a legal problem, but friction when you need help.
• The $0 advantage shrinks fast. Add a New Mexico registered agent at $100–$150/year and your effective cost is $100–$150, not $0. Wyoming with the same agent runs $160–$210.

If you are extremely cost-sensitive and want minimum compliance, New Mexico delivers. For most foreign ecommerce sellers and service-business owners, the modest savings do not outweigh Wyoming's better banking ecosystem.

Decision tree: which state for which situation

BOI reporting: the 2025 rule change foreign founders missed

For two years, every article about US LLCs warned about FinCEN beneficial ownership reporting. That guidance is now outdated. On March 26, 2025, FinCEN published an interim final rule exempting all domestic-formed entities — including LLCs formed by foreign founders in Wyoming, Delaware, or New Mexico — from BOI reporting. Only entities formed under foreign law and registered to do business in the US still report.

What stays the same regardless of state: federal tax

The state you pick changes state-level compliance only. Your federal obligations as a foreign-owned single-member LLC are identical in all three states:

• Apply for an EIN with the IRS using Form SS-4 (no SSN required for foreign owners).
• File Form 5472 with a pro-forma Form 1120 every year your LLC has reportable transactions with you, the foreign owner — including your initial capital contribution and any distributions. Penalty for not filing: $25,000 per form per year.
• Keep books and records sufficient to support the 5472 disclosures.
• If you have US-source effectively connected income, file Form 1040-NR.

A Wyoming LLC, a Delaware LLC, and a New Mexico LLC owned by the same foreign founder file the same federal returns. Picking New Mexico to save $60 a year while skipping the $25,000 federal Form 5472 filing is the most expensive mistake a foreign founder can make.

Worked example: Berik picks Wyoming for Amazon FBA

Berik lives in Almaty, Kazakhstan. He sells consumer electronics on Amazon FBA, projecting $180,000 in 2026 revenue with $54,000 net profit. No US employees, no US warehouse he owns directly (Amazon FBA warehouses do not count as his nexus), no plans to raise outside money. He needs a single-member LLC to open a Mercury bank account, accept Amazon disbursements, and use Stripe.

The five-year cost breakdown across all three states:

Berik picks Wyoming. His reasoning: Mercury and Stripe both underwrite Wyoming LLCs without friction. The $70/year premium over New Mexico is worth the smoother banking. Delaware is overkill — he is not raising money — and the $300/year compounds into real money over a decade.

Federal-wise, Berik will still file Form 5472 plus pro-forma Form 1120 by April 15 each year, with a 6-month extension available via Form 7004 if he needs it. The state choice does not affect that filing. Read the full Form 5472 guide for foreign-owned LLCs for what gets reported.

Can I move my LLC to a different state later?

Yes, but it is more expensive than picking right the first time. Three options:

• Domestication. Some states accept "conversion" filings that move your LLC from one state to another while keeping the same EIN, bank accounts, and history. Wyoming, Delaware, and most major states allow this. Cost: $200–$500 in filing fees plus legal review.
• Dissolve and reform. Close the original LLC, form fresh in the new state, get a new EIN, reopen banking. Cheap on filing fees but disruptive — you lose transaction history with platforms.
• Register as a foreign LLC. Keep the original LLC and register it in the new state too. Doubles your annual costs and is rarely the right answer.

Pick the right state at formation. The cost of getting it wrong and migrating later usually exceeds 10 years of fee differences between the three states.

Common mistakes foreign founders make

• Picking Delaware "because it is famous" when not raising capital. The $300/year is real money over a decade with no offsetting benefit.
• Picking your home state's "equivalent" — California, New York, Texas — without realizing CA has $800/year minimum tax, NY has expensive publication requirements, and TX hits franchise tax once revenue crosses $2.47M.
• Skipping the registered agent and using a virtual mailbox. The agent must be a real entity with a physical address in the formation state, available during business hours. A mailbox is not compliant.
• Forgetting Form 5472 because the state you picked is "low compliance." The $25,000 federal penalty applies regardless of whether you formed in Wyoming, Delaware, or New Mexico.
• Choosing a "free LLC formation" service that adds $300+ in upsells — registered agent renewal, "operating agreement template," "EIN service" (free at the IRS). The state filing fee is the only mandatory cost.

Frequently asked questions

This article provides general information about US tax topics and is not a substitute for personalized advice from a qualified tax professional. Tax law changes frequently — verify current rules with a tax professional before filing or making decisions based on this content.