It depends on whether you start the company solo or with cofounders.
If you start solo, it is best to incorporate an LLC.
If you start a company with other people, a C-Corp may suit you better.
Why is that so?
Here it is important to understand that:
- LLCs are pass-through entities, which means that the legal entity does not pay taxes because the tax duty is passed through to the LLC owner, and
- C-Corps are not pass-through entities. They pay corporate taxes.
If the LLC owner does not owe taxes in the US as an individual, it is possible to not need to pay any taxes except for the personal income taxes in their home country.
A foreign-owned US LLC may pay 0% taxes if:
- It has a single owner who owns 100% of the company
- The owner does not spend more than 30 days in the US annually (it may be more, but they need lots of paperwork)
- The LLC must have no employees in the state of incorporation (contractors are fine)
- The LLC must not have any premises in the state of incorporation (using premises of Amazon FBA doesn’t count as your premises).
So, if you are single owner of an US LLC, you pay 0% taxes if you don’t travel there, run the business fully online, and do not have full-time employees from your state.
If you do not meet at least one of these requirements, you’ll pay taxes as if you were a resident of the US.
The best places to incorporate a foreign-owned LLC in the US are Wyoming and New Mexico because they require the least amount of paperwork. They provide ownership secrecy as well, if you need it.
If you are not a solo founder and you have at least one co-founder, then the rules for 0% taxation do not apply to you.
That’s where C-Corps come in handy.
C-Corps pay corporate taxes, but they can be quite low or none if you go to the right places.
Wyoming C-Corps do not pay corporate taxes. Delaware C-Corps pay below 10% taxes and enjoy one of the world’s most business-friendly jurisdictions, including a specialized business court. That’s the reason why most of the Fortune 500 companies are Delaware C-Corps.
Moreover, this is the preferred structure and jurisdiction for venture capitalists.