Choosing the state for a US LLC can matter in international cross-border tax planning, even when an LLC could technically be formed in a high-tax state. The key point is to consider both state tax treatment and whether the structure has real economic substance.
A US LLC may be formed in a high-tax state such as New York or California, but the transcript recommends choosing a state that is tax-friendly or tax-neutral instead.
Examples of states described as tax-friendly or tax-neutral include:
- Texas
- Florida
- South Dakota
- Nevada
- Wyoming
- Delaware
Economic substance matters
State law is important, but the transcript emphasizes that economic substance should not be overlooked.
The recommended approach is “substance before form.” In practice, the structure should make commercial and factual sense, rather than being chosen only for legal appearance or formal advantages.
The transcript suggests that a state with real economic weight in the United States may be preferable to a state whose main appeal is privacy or asset protection.
Practical takeaway
When choosing a state for a US LLC in cross-border tax planning, the decision should not be based only on privacy, asset protection, or low state taxes. The structure should also be supported by a credible economic rationale.
