Foreign investors are often told to form their US company in Wyoming, even when the property they are buying is in Florida, Texas or another state. Wyoming is a legitimate, well-run place to form an LLC. The question is whether its advantages carry over to a property somewhere else, and for a single investment property they mostly do not.
This page sets out what Wyoming offers, what changes once the property is in another state, and what the lender needs either way. It is general information, not tax or legal advice.
Why Wyoming is popular for LLC formation
- No state income tax, personal or corporate, and no franchise tax
- A low annual report fee: a license tax of $60 minimum, or two-tenths of a mill ($0.0002) per dollar of the company's assets located in Wyoming, whichever is greater
- Privacy: Wyoming does not require the articles of organization or the annual report to name the members or managers. The public record shows the company name, the registered agent, the principal office and the organizer
What does not follow the company out of Wyoming
Tax follows the property, not the formation state. Rental income and gains from a property in Florida or Texas are taxed under US federal rules and under the rules of the state where the property sits. Forming in Wyoming does not change that.
Privacy is also narrower than it sounds. The deed is recorded in the county where the property is, in the LLC's name. Registering in the property state adds that state's own filings. And every lender identifies the people who own and control the borrowing company as part of its KYC and anti-money-laundering checks, whatever the formation state.
Registering as a foreign LLC in the property state
An LLC formed in one state that transacts business in another registers there as a "foreign" LLC (foreign meaning out-of-state, not non-US). Florida (section 605.0905 of the Florida Statutes) and Texas (section 9.251 of the Business Organizations Code) both list owning property, without more, among the activities that do not by themselves count as transacting business. Renting a property out, renovating it, building on it and selling it go further than passive ownership, and an LLC doing those things in the state will normally register there. Where the line falls for your plan is a question for your adviser.
The cost of not registering when you should have is concrete. In both Florida (section 605.0904) and Texas (section 9.051), an unregistered company that was transacting business in the state cannot bring a lawsuit in that state's courts until it registers, which matters the day you need to sue a contractor or a buyer. Texas also allows a penalty equal to the fees and taxes that registration would have triggered.
Registering means a second registered agent, a second annual report and the property state's own fees and taxes. In Texas, for example, an LLC doing business in the state is subject to the Texas franchise tax and files its reports whatever its formation state.
The EIN, with or without a Social Security number
A Wyoming LLC and an LLC formed in the property state get their EIN the same way. A non-resident applies with IRS Form SS-4 by fax or mail, or by phone through the IRS international line, rather than through the online tool, and no Social Security number is required. The EIN comes before the US bank account, so start it the week you sign the purchase contract.
One federal filing applies to both: a single-member LLC wholly owned by a non-US person and treated as a disregarded entity files Form 5472 with a pro forma Form 1120 each year. The penalty for missing it is $25,000 per form per year, even when the company owes no tax.
What the lender needs
The loan is made to the LLC, not to you personally, and it is underwritten on the property and the plan, with no US credit history required. The formation state does not change the terms. What it changes is the paperwork: expect the lender and the title company to ask for the formation documents, the operating agreement, a certificate of good standing and evidence that the company is registered where the property is. A Wyoming LLC that has not registered in the property state is one more item to clear before closing.
The practical answer
- One property, or a few in the same state: forming the LLC in the property state is often the simplest choice. One registered agent, one annual report, and the structure most title companies and lenders expect
- Several properties across states: a holding company, sometimes in Wyoming or Delaware, above one LLC per property can make sense. Each property LLC is formed or registered where its property is
- Before forming anything: ask a US tax adviser how the structure is taxed in the US and in your home country. The right answer depends on your residence, the treaty position and your exit, more than on the formation state