Choosing a state for a first US limited liability company depends on more than the state’s marketing reputation. For international entrepreneurs, investors, Americans operating globally, and non-resident aliens using a US LLC, the main factors are tax treatment, economic substance, privacy, asset protection, incorporation speed, state fees, and practical banking access.
US LLCs are flexible from a tax perspective. They can be taxed as disregarded entities, partnerships, corporations, or, for US persons, S corporations. For non-resident aliens, a US LLC can be tax neutral depending on how it is structured.
Federal tax treatment is separate from state tax treatment. Each US state has its own rules, so the state of formation matters. While it is technically possible to use an LLC formed in a high-tax state such as New York or California for international planning, a more tax-friendly or tax-neutral state is generally preferable.
Examples of states often considered more favorable include:
- Texas
- Florida
- South Dakota
- Nevada
- Wyoming
- Delaware
Economic Substance Matters
A common mistake is choosing a state only because it is known for privacy or asset protection. States such as South Dakota and Wyoming are popular because of their privacy and asset protection reputation, but they may not always make sense from an economic substance perspective.
Economic substance means the state should have a credible business connection to the owner or activity. For many international entrepreneurs or investors, it may be difficult to justify a real economic link to South Dakota or Wyoming because they have small populations and relatively small economies.
That does not mean South Dakota or Wyoming LLCs are never useful. They may make sense in some cases. However, for many operating businesses, a state with a larger economy, major cities, and stronger business and banking infrastructure may be more practical.
States that may better support an economic substance argument include:
- Florida
- Texas
- Nevada
- Delaware in some cases
Florida and Texas are especially notable because they have large economies, major cities, and banking networks accustomed to working with international entrepreneurs and investors. Miami and Houston are examples of major business and banking centers that may support a clearer business rationale for forming an LLC there.
Privacy And Banking Access
Privacy should be considered together with practical banking access. Wyoming is often favored because public records reveal very little: generally the company name, registered agent, and limited additional information. Even managers can be kept private.
However, that privacy can create practical problems when opening a bank account. A bank may ask for the operating agreement to confirm who is authorized to act for the company. If the bank finds the structure unusual, unclear, or high-risk, it may ask additional compliance questions and request more private documents.
Florida uses a different model. In a manager-managed Florida LLC, the manager appears publicly on Sunbiz, while the members remain private. This is compared in the transcript to the Panama model, where shareholders are private but directors and officers are publicly listed.
This selective transparency can make bank account opening smoother. A banker can confirm the authorized manager through the public record, which may reduce the need to share an operating agreement. For many clients referenced in the transcript, Florida LLCs were able to open accounts without providing operating agreements.
Asset Protection Differences
Asset protection is another major factor. Nevada, Wyoming, South Dakota, and Delaware are often cited because they offer charging order protection for single-member LLCs.
A charging order is a creditor remedy where the creditor cannot take control of the LLC, liquidate its assets, or assume control. Instead, the creditor can place a lien on the membership interest and claim distributions if they are made.
Florida does not extend the same charging order protection to single-member LLCs. However, for multi-member LLCs, Florida offers asset protection comparable to Wyoming.
The importance of single-member LLC charging order protection may also depend on the broader ownership structure. If the LLC is held through an international holding company, such as a Panama holding company, the transcript argues that the state-level single-member LLC charging order issue may become less important.
There is also a practical caveat: if assets or disputes are connected to another state, the laws of that other state may become relevant. California is described as an aggressive example. A Wyoming LLC may not provide the level of protection expected if another state’s laws are applied.
International Perception
The state of formation can affect how the business is perceived internationally. A Wyoming or South Dakota LLC may be viewed by some counterparties as a structure chosen mainly because it was recommended for privacy or tax planning reasons.
By contrast, a Florida or Texas LLC may appear more commercially credible because those states have large economies and major business centers. In a world where tax benefits are increasingly tied to economic reality, the transcript emphasizes choosing a state that first makes business sense, then seeking tax advantages around that structure.
Fees And Incorporation Speed
Fees and speed of incorporation also matter. Nevada and Texas are described as having relatively high fees. Florida is presented as more favorable because it combines:
- Strong economic substance
- Miami as a banking and financial hub
- Fast incorporation
- Reasonable state fees
- Practical banking access for international entrepreneurs and investors
Florida LLCs can often be formed within a matter of days, according to the transcript.
Why Florida May Be The Best Default For Many International Operators
For legitimate operating businesses engaged in real economic activity, Florida is presented as the strongest general choice. The main reasons are:
- No state-level tax issue highlighted in the transcript
- Real economic substance through Miami and Florida’s broader economy
- Good incorporation speed
- Reasonable fees
- Strong banking infrastructure
- Member privacy in manager-managed LLCs
- Practical transparency that can help with bank onboarding
Florida may be especially practical for entrepreneurs and investors who are tax residents in Latin American countries, including Panama, and who may find Miami banking relationships easier to establish.
When Other States May Make Sense
Wyoming and South Dakota may still make sense for certain people, particularly where privacy and single-member LLC asset protection are the main priorities and the structure otherwise fits the facts.
Delaware may be useful for complex corporate governance situations. The transcript gives special weight to Delaware in sophisticated cases where LLC governance, corporate disputes, venture-backed structures, or extensive case law matter.
For highly local businesses, the LLC should generally be formed where the business operates. A grocery store or hardware store in downtown Los Angeles would naturally use a California LLC. A local business in Sioux Falls would naturally use a South Dakota LLC.
The best state for a US LLC depends on the actual business activity, ownership structure, banking needs, tax profile, and the credibility of the connection to the state. For many international entrepreneurs and investors, the transcript’s strongest preference is Florida, while Wyoming, South Dakota, Nevada, Texas, and Delaware may be appropriate only when the facts support them.
