Delaware LLC for Non-US Founders: Everything You Need to Know

Delaware LLC

A Delaware LLC is a flexible, pass-through entity. If the LLC is owned by a single non-US individual and has no US employees or office, it's typically treated as a "disregarded entity" for US tax purposes. This means the LLC itself doesn't pay US federal income tax — profits pass through to the owner.

Key advantages: no US corporate tax if properly structured (no US-source income), flexible management structure, simpler compliance requirements, and lower formation and maintenance costs.

Best for: freelancers, consultants, SaaS founders selling to US clients, and e-commerce businesses that want a US entity for payment processing without creating a US tax obligation.

Delaware C-Corp

A C-Corp is a separate legal entity that pays its own taxes at the US federal corporate rate of 21%. For non-US founders, a C-Corp creates a US tax presence — the corporation pays tax on its worldwide income.

Key advantages: preferred by US venture capital investors (most VC term sheets require a C-Corp), can issue multiple classes of stock, no limit on number of shareholders, and creates a clear separation between personal and business finances.

Best for: startups planning to raise venture capital, companies that want to hire US employees, and businesses that will have significant US operations.

The Decision Framework

Choose LLC if: you're a solo founder or small team, you primarily serve clients from outside the US, you don't plan to raise US venture capital, and you want the simplest possible structure with minimal US tax exposure.

Choose C-Corp if: you plan to raise from US investors (YC, seed funds, Series A), you want to hire US employees, you're building a company you intend to sell to a US acquirer, or your US revenue will be substantial.

Step 1: Choose a Registered Agent (Day 1)

Delaware requires every LLC to have a registered agent with a physical address in the state. The registered agent receives legal documents and state correspondence on your behalf. Annual cost: $50–300/year depending on the provider.

Vector arranges this as part of our setup package.

Step 2: File the Certificate of Formation (Day 1–3)

File with the Delaware Division of Corporations. The filing includes your LLC name, registered agent information, and the name of the authorized person. Standard filing takes 3–5 business days. Same-day or 24-hour expedited filing is available for additional fees ($50–1,000).

Filing fee: $90 for standard processing.

Step 3: Prepare the Operating Agreement (Day 1–3)

While not filed with the state, an Operating Agreement is essential. It defines ownership, management structure, profit distribution, and operational rules. Banks will request it when you open an account.

For a single-member LLC, this is a relatively simple document. For multi-member LLCs, it becomes more complex and may benefit from attorney review.

Step 4: Apply for an EIN (Day 3–10)

An EIN (Employer Identification Number) is your company's tax ID — essentially the US equivalent of a VAT number. Non-US persons cannot apply online. You must either fax Form SS-4 to the IRS or have an authorized third party apply on your behalf.

Processing time: 4–8 weeks via fax (the IRS no longer accepts phone applications from international applicants as reliably as before). With an authorized third party, it can sometimes be faster.

The EIN is required to open a bank account and to file taxes.

Step 5: Open a US Bank Account (Week 2–6)

This is where most non-US founders get stuck. Traditional US banks (Chase, Bank of America, Wells Fargo) generally require an in-person visit to a US branch and extensive documentation.

Alternatives for non-US founders:

Mercury: Fintech bank popular with startups. Accepts non-US founders (LLC or C-Corp). Application is online. Approval takes 1–5 business days for most applicants. Offers USD accounts, wire transfers, and integrations with accounting software.

Relay: Another fintech option with similar features to Mercury. Good for expense management.

Wise Business: Not a full bank account but provides a US routing number and account number. Useful for receiving USD payments.

Note: banking approval is never guaranteed. Fintechs have their own compliance requirements and may reject applications based on business type, country of residence, or other factors.

Single-Member LLC with No US Activity

If you're the sole owner of a Delaware LLC, you're not a US resident, and the LLC has no employees, office, or dependent agent in the US, the LLC is generally treated as a "disregarded entity." This means no US federal income tax on the LLC's income.

However, you still have filing obligations: Form 5472 and a pro-forma Form 1120 are due annually. These are informational returns — they report related-party transactions but don't result in tax owed. Missing these filings can result in penalties of $25,000 per form.

LLC with US-Source Income

If your LLC earns income that is "effectively connected" with a US trade or business (ECI), that income is subject to US tax. Common triggers include having US-based employees, a physical office in the US, or a dependent agent who concludes contracts in the US.

Selling software to US customers from outside the US, by itself, does not typically create ECI — but the analysis is fact-specific and you should confirm with a qualified US tax advisor.

State-Level Taxes

Delaware charges a $300 annual franchise tax for LLCs — this is unavoidable regardless of where you operate. If your LLC is registered or does business in other states, you may owe additional state taxes.

California, for example, imposes an $800 minimum franchise tax on LLCs doing business in the state. "Doing business" can include having employees or significant customers there.

Important Disclaimer

US tax law for international persons is complex and fact-dependent. This guide provides general information — not tax advice. We strongly recommend consulting with a US tax professional who specializes in international taxation. Vector can introduce you to qualified advisors.

Year 1 Setup Costs

Vector setup fee: from $1,500 Delaware filing fee: $90 Registered agent: $50–300/year Operating agreement preparation: included in Vector's fee (or $200–500 if done independently) EIN application: included in Vector's fee Bank account opening: $0 (Mercury, Relay) or varies

Total Year 1: approximately $1,700–2,300 all-in.

Annual Maintenance Costs

Delaware franchise tax: $300/year Registered agent renewal: $50–300/year Tax filing preparation (Form 5472/1120): $300–800/year (via CPA)

Total annual maintenance: approximately $650–1,400/year.

This makes Delaware one of the most affordable jurisdictions for international founders — significantly cheaper than Dubai, Andorra, or Malta.

Forgetting to File Form 5472

This is the most common and most expensive mistake. Even if your LLC owes zero US tax, you must file Form 5472 (attached to a pro-forma Form 1120) by April 15 each year (with extension available to October 15). The penalty for not filing is $25,000 per form. The IRS does enforce this.

Using the LLC as a Personal Account

Mixing personal and business funds — paying personal expenses from the LLC account, transferring funds without proper documentation — can pierce the veil of limited liability and create tax complications. Treat the LLC as a separate entity, even if it's a single-member disregarded entity.

Ignoring State Nexus

If your LLC has employees, inventory, or significant sales in a US state other than Delaware, you may have state tax obligations there. This is particularly relevant if you hire US-based contractors or employees.

Choosing an LLC When You Need a C-Corp

If there's any chance you'll raise venture capital, form a C-Corp from the start. Converting an LLC to a C-Corp later is possible but involves legal fees, tax implications, and complexity that you can avoid by making the right choice upfront.