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Taxes for foreign LLCs in the USA - What you need to know

Taxes for foreign LLCs in the USA - What you need to know

Word definitions

The taxation of companies in the USA follows a common logic across most states. Typically, states collect annual franchise or business fees from businesses that are incorporated there. These are often referred to as "Franchise Tax„, „Annual Report Fee" or "Business License Fee" and serve as consideration for the company being legally recognized and protected in that state. The amount of these fees varies depending on the state and Type of company considerable.

Franchise tax or franchise fee for LLCs

The so-called franchise tax or franchise fee for LLCs and corporations in the USA can be understood as a kind of accreditation or licensing fee.

Essentially, companies pay this annually recurring tax or fee to the respective federal state in which they are legally registered and "licensed". This effectively buys them the "privilege" and legal protection of being recognized as a company in that state and being allowed to do business there.

The franchise tax is often a flat-rate tax or is assessed on the basis of certain factors such as nominal capital, company assets or share value. It serves as a source of revenue for the federal states and is a prerequisite for companies to officially exist and operate there.

The franchise fee is comparable with:

  • A license fee for state approval
  • An accreditation or registration fee
  • An "admissions" or registration tax for companies

Many federal states see the payment of this tax/fee as consideration for the legal recognition and legal support of companies. In this respect, the franchise tax can be seen as a kind of accreditation fee for business operations.

Especially for Limited Liability Company (LLC)

As an entrepreneur with a non-domestic Limited Liability Company (LLC), there are a few things to consider if you want to do business in the USA. Each state has its own legal regulations and fees for foreign LLCs that want to open a permanent establishment or generate sales there.

Corporation tax, trade tax in specific federal states

DelawareWyomingNevadaNew Mexico and Florida raise none Corporate income tax for LLCs. There are also in these states No trade tax.

Registration and application fees:

In most cases, non-domestic LLCs must first apply for a "Registration" or a "Certificate of Authority" in the respective state. There is a one-time registration fee for this, for example $100 in Wyoming or New Mexico. This step is necessary for the foreign LLC to be officially recognized and protected.

Individual listing of the states:

Delaware

  • One-time registration fee for company registration approx. $110 + first license fee: $75
  • Annual franchise tax: At least $300
  • Annual reporting fee: $50

Wyoming

  • One-time registration fee for "Certificate of Authority": $100
  • Annual reporting fee from 2nd year: $52
  • Annual license tax: At least $50

Nevada

  • One-time registration fee for company registration $75 + first listing fee for members $150 + first license fee: $200
  • Annual business license fee: $200
  • Annual listing fee for members: $150

New Mexico

  • One-time registration fee for "Application for Registration": $100
  • Annual franchise tax: $50

Cost comparison in (USD)

Here are the standard fees that normally apply. Special cases and additional services are not listed.

General listing

Delaware

  • Annual franchise tax: Minimum $175 for companies using the authorized share method, $400 for companies with assumed nominal capital.
  • Maximum $200,000 for most companies, $250,000 for large companies.
  • Annual submission fee for report: $50

Wyoming

  • Annual reporting fee: $52 (from the 2nd year after foundation)
  • Annual license tax: $50 or 0.2 millionths of Wyoming property value, whichever is greater. Minimum $50, no upper limit.

Nevada

  • Annual business license fee: $500 for corporations, $200 for LLCs
  • Annual fee for listing directors/members: $150 for corporations, $150 for LLCs
  • No franchise tax

New Mexico

  • No annual reporting fee
  • Annual franchise tax: $50

 

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Disclaimer: Please note that the above dates, tax rates and regulations may change over time. Do not make any independent decisions without first consulting an expert for your individual situation. It is in your interest to always receive individual information from an experienced expert who knows your situation.

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