Due to Sri Lanka’s unending economic crisis, most local businesses are started transforming their business into the USA and UK, and other groups of people migrating to other countries with no options left. Last year I published a post about how to prepare yourself to incorporate Single member LLC in the USA
If you already registered your LLC, LLP from Delaware, Wyoming states, then it’s high time to File your Wyoming or Delaware Franchise Tax before 31st, May 2022. Even if your company was filed in December you’ve to pay the following before the 1st of June, 2022.
1. Delaware State Franchise Tax – ( $300 Mandatory )
Delaware LLCs are not required to file an Annual Report, but LLCs must pay a fixed rate as Annual Franchise Tax of $300 each year. This is nothing to do with your income or number of sales, every Delaware state LLC, must pay the $300 tax otherwise the Delaware state imposes a $200 late payment penalty, plus a monthly interest fee of 1.5%.
3. Tax forms 5472 and 1120 ( $80-$100)
According to IRS, 25% Foreign-Owned U.S. corporations or a Foreign Corporation Engaged in a U.S. Trade or Business. This means that if your business is at least 25% owned by a foreign person or entity, Form 5472 is needed to report any transactions during your company’s tax year. Filling form 1120, every LLC communicates their business performance and figures out their tax liability with the IRS. Whether you like it or not you’ve to file Form 5472 and form 1120. In case you failed to file or even filed incorrectly this will cost you a minimum penalty of $25,000 plus an additional $25,000 for each month the failure continues. Reach out to your registered agent or contact a tax expert via Fiverr this will cost you a maximum of $80-$100 to complete this process.
3. Registered Agent Fee ( $49-$60)
Your LLC registered agent will charge you a certain amount in order to act as your registered agent on behalf of your LLC, The registered agent cost varies however this is always between $60 – $49 which you’ve to pay every year as the Registered agent service fee and sometimes registered agent may charge you extra for file and remit the franchise fee separately.
Conclusion:
When you are operating a business in the state of Delaware or Wyoming just to makesure you are complying with the IRS and the state laws, Ignoring these mandatory filings may create a risk of blocking your LLC operations and ceasing the accounts for non-compliance plus you’ll be reported ( even if no activities) through your EIN records. You only have just eight more days to finish all these processes and you need a minimum of $450 to fulfill these state requirements. Let me know if you have any questions or need any help?
The wait is over, Most of you asked me to write about my USA business incorporation Journey. As I mentioned in my LinkedIn post, it’s NOT just another LLC registration but a complete transformation for me! in other words, it’s a paradigm shift for my company. As a small business owner who is closely working with the global market, this was my five years of a dream to have a registered USA entity with a physical business office presence.
Since you are here to read this post, I’m sure this is your dream too! Of course, It’s easy to find the incorporation agents online, but the real problem is which one is right for my business model, requirements, budget, and most importantly for my “specific purposes”. This is the point where I’ve slowed down myself and invested quality time in research about the right US company registration agent to fulfill my requirements.
It wasn’t an easy task for me! since I also wanted to rebrand my company structure including the products, market, culture, brand name, organization structure, and almost everything top to bottom. Therefore I started working on my next five years business plan with a simple OKR process where I can get better clarity about my goals and achievable objectives where I can create timelines and KPIs to benchmark my progress.
My short term business goals are like;
Future Ready: Restructure the current Products to the specific niche market.
Feature ready: I decided to completely focus on the USA, Europe, and the middle east market which require certain Payment methods to accept customers’ payments.
Innovation: Especially for my niche, Old wine in a new bottle strategy won’t work anymore, therefore I have to blend the innovation mix in every single business process.
I know that I’m about to go for massive changes! big risk, but if I can execute this properly then it will be a lifetime reward. I will write a separate post later about my rebranding journey and the challenges I have overcome. Now, this post is all about ” How to open LLC in the USA for the non US citizens ” with a lean budget but maximum return.
Ask these questions before you start forming an LLC in the USA.
What’s your purpose? what are you trying to achieve throughout this entire process?
Does your business “really” require a US presence? If yes Virtually or Physically?
What “BIG” problem you’re trying to solve here? That can be done locally with any alternative options?
Have you analyzed your customer’s persona? How many of them are from the USA, How do they pay now?
Did you analyze your stakeholder’s journey? ( Customers, Partners, Employees, Investors, Banks, legal factors, etc)
If you have the answer ready before you start anything spend some time analyzing the results and their consequences where you will have a clear picture of what you are really about to achieve. Also, see if you can pull your last twelve months’ sales data and try to analyze the basic reactions metrics such as ARR, churn rate just operating locally, and then create a simple business forecast ( NOT just a sales revenue) where you can reinforce your end goals to minimize the risk factors.
What’s LLC in the USA?
The registration process, the organization’s legal structure are completely different than our formation of Sri Lankan Private Limited company procedures. According to the Wikipedia reference, ” A limited liability company (LLC) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
LLC is not just a corporation under state law; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. “. Registering a USA LLC entity isn’t simple and of course, it’s not hard at all! It’s just a matter of which registrar agent you are about to deal with.
The Types of LLC
Once you get a clear picture of your roadmap then you need to select the type of LLC you are about to get registered.
1) Sole Proprietorship or Single-member LLC – Highly recommended for startups and any small business which require USA legal presence, Bank, Merchant, Address, Phone, etc
2) General / Limited Partnership – Suitable for Multiple members with different % of shares, ownership levels SME’s
3) Series LLC / Restricted LLCs – Definitely not for us 🙂 Coz, this will takes 10 yrs to get the registration certificates, and only for US citizens are from Nevada + the AOA is fully restricted.
4) L3C Company / Anonymous LLC – Again, this isn’t for us unless you’ve your own reason not to disclose your personal/financial data with vendors and the Government organization.
5) Member-Managed LLC or Manager-Managed LLC – Suitable for companies funded by multiple investors, The AOA will be structured based on the terms of each members conditions, etc
Which is the most suitable state for form an LLC?
Again this completely depends on your business model and the scope of this LLC formation. There are always Cons and Pros, If you are a non USA citizen, feel free to look at these statistics to know the best and worst states to incorporate your business in the USA. Based on my research and the experience that I have had so far Delaware and Wyoming are the two states that are super cool for non US citizens who want to incorporate their business in the USA as LLC or LLP.
1. Wyoming
Corporate tax rate: 0 percent
Individual income tax rate: 0 percent
Sales tax rate: 4.00 percent
Average effective property tax rate: .61 percent (national average is 1.19 percent)
Unemployment rate: 4.0 percent
2. Delaware
Business-friendly
Low filing fees and franchise taxes
No corporate income taxes for foreign LLCs taxed as corporations
Personal taxes on your business’ profits in addition to the $300 annual LLC tax due annually by June 1.
Flat corporate rates usually range between 4 to 9 percent.
Checklist for choosing the right USA company registration service providers
There are few legal, business factors you have to analyze before choosing the right LLC incorporation agent. Your business model and purpose are different than mine, what is good for me is maybe isn’t suit for you. Therefore, I’m not gonna cover everything here, but only the importance I’ll highlight in this section.
1) Trust and Customer experience: How long have been in this business and most importantly their response rate. Reach out to them with basic questions via mail, call or support ticket to know their response rate.
2) Industry Specialization: Any typical LLC registration agent can help you with obtaining a name check, company formation, registering EIN on behalf of you, act as a registered agent for a certain period, and give you a universal US Address with Mail forwarding plus call forwarding number. But, here we are looking for someone who can understand our business model, painpoints in order to deliver a personalized experience to your niche.
3) The Hidden expenses: Most of the LLC registration agents have transparently listed their packages and the cost details on their websites. However, few are still using the LeadGen pages to capture your details and give you a quote. This is where most of us got trapped! For example, They will hide annual maintenance costs such as act as a registered agent, State, and federal tax filling costs, mail forwarding, etc. When it comes to renewal you will end up paying a huge amount without knowing all these processes.
4) Benefits: This is something you really need to dive deeper into to know what exactly you are about to receive. Only a very few industries specialized US LLC registration agents have crafted their registration packages with adding better value propositions for their target customers, Such agent’s customer journey is perfectly crafted and they know in and out where you can leverage their additional perks to compress your operational expenses. Example: Apart from the typical registration process are they providing any additional values such as third party vendors credits, intro, spotlighting your business on their pages, free legal and accounting advice, etc
5) Financial Benefit: Getting a USA bank account is simple and almost everyone knew these methods! But there are very selective USA LLC registration agents who are providing better Bank account openings with most reputed USA banks where you can get Checking, Saving, Debit cards for you and your team members. I’m gonna cover this method in my next blog post, keep an eye on my next post 🙂
6) ITIN: If you want to open a PayPal, Stripe, 2Checkout business account then you need to have ITIN ( Individual Taxpayer Identification Number ) or SSN ( Social Security Number ), As far as I know, most of my friends are using the Fake PayPal accounts where you can easily get it from any freelance platform for less than $50 bucks. As a business person, I’d like to maintain certain ethics in the business which I follow since I started. Normally, ITIN will come as an addon where you have to pay roughly $350-$425 and it will take 2 – 26 business days to get it registered ( depends on your registrar ) Make sure to inquire them about the ITIN cost, timeframe, refund policy, etc.
7) Future Management Roadmap: Most of the LLC registration agents are acting like Whitelabel agency/a front-end registrars on behalf of corporate service providers, They simply complete the registration process and get their cut and pass it to the corporate service providers, This is where you have to be careful with your research part. Get to know who is your state registrar and how you can collect or renew agent services. article, name & address change amendments, future annual return submissions, and its’s cost, etc.
In fact, I only mentioned the most important key point above, My suggestion is to create your requirements checklist and go for a quick fact check to identify your utmost needs where you can prioritize based on your roadmap.
Wrapping up: Don’t take it personally!
I know, “Most of us” (Maybe not you ) are like a typical consumer! We read everything, but we don’t put it into action! We need to know everything, but we don’t do that! This is why I decided to publish my ” Transforming Global” Journey here like a series! What you learned today is the basic awareness where you can evaluate yourself whether you really need to go ahead with the LLC registration or not!
The Good news is, In my next articles, I’ll be covering the following secrets;
The perfect USA Bank for Asians ( Online access, Checking/ Saving/ Cashback, Cards, Draws, credits, and much more)
ITIN Secrets ( Less investment, fast delivery )
Top Secret Tips: How to get your investment back almost instantly ( Eg: if you pay $380 for the LLC registrar you can get up to $350 back to your account once you got the EIN )
The hidden treasurer: How to get $650,000 worth of perks through your registrar
The sad news is, The next posts are NOT for everyone, but for selective people with a key to access that page. don’t worry, I’m not gonna sell anything here, just wanted to pass this to the “Relevant” people. If you enjoyed this post and wanted to get access to the next series of posts, please feel free to convenience me in the comment box with your name, email and tell me why you’d like to learn more in short 🙂
