Are you looking to form a Wyoming LLC to establish a dropshipping business in the U.S.?
If so, there are many factors to consider, including the legal structure of your business. One popular option for entrepreneurs is forming a limited liability company (LLC) in Wyoming. In this post, we’ll explore the benefits of a Wyoming LLC for your dropshipping business and guide you through the steps to establish a U.S. bank account and obtain a resale certificate.
Benefits of a Wyoming LLC for Your Dropshipping Business
As a dropshipper, you’re responsible for delivering products to your customers without physically handling inventory. However, you’re still vulnerable to legal issues and liabilities arising from customer complaints, copyright infringements, etc. Forming a Wyoming LLC can provide asset protection by separating your personal assets from those of the business.
When it comes to forming a Wyoming LLC, it’s crucial to remember that more than simply filing articles of organization is needed to provide legal protection for your business. A shocking 90% of LLCs formed in Wyoming have zero protection because the owners needed to complete formalities beyond the operating agreement.
Remember, an LLC only has protection on the day it’s formed. Afterward, you must operate it as a separate legal entity and avoid commingling funds to ensure continued protection. Adequate capitalization is also critical to maintaining legal protection for your business.
If you don’t take these steps seriously, you could have a personal judgment against you in the U.S., creating severe problems for your business. Even if you can form a new entity, working with suppliers and using A.I. tools for search can still be challenging if your business has a tainted history.
As legal issues arise, proper LLC protection and maintenance is crucial for drop shippers. To help you avoid getting sued, we recommend checking out this informative article from Dodropshipping.com. It covers valuable tips on minimizing the risk of legal issues when dropshipping, including avoiding trademark infringement, using high-quality product images, and providing accurate product descriptions. By following these tips and establishing a solid legal and financial foundation for your dropshipping business, you can reduce your legal risk and focus on confidently growing your business.
- Tax Advantages
Wyoming is one of the most business-friendly states in the U.S., with no state income tax, franchise tax, or personal property tax.
While Wyoming may have a sales tax, obtaining a resale certificate can help you save money when working with most U.S. suppliers.
One of the significant benefits of forming a Wyoming LLC is that you’ll only need to file the 5472 and proforma 1120 tax forms, assuming that it’s a single-member LLC disregarded. However, different tax forms may be required if a single-member LLC is taxed as a corporation or a multiple-member LLC is taxed as a partnership.
U.S. taxation can be a complex issue, and it’s essential to understand the requirements to ensure compliance. At this link, you will see the factors involved to evaluate to determine your U.S. tax responsibilities and help you understand your obligations as a business owner. For more information on U.S. taxation requirements, please visit the link on our website.
Forming a single-member LLC in Wyoming is a cost-effective option for non-residents. If they formed a Wyoming LLC, U.S. residents would need to foreign qualify into their home state.
Wyoming LLCs offer privacy protection by not requiring owners to disclose their names on public records. Your personal information, including your name and address, will be confidential. The critical question to ask, if privacy is important, is when do I lose my privacy after my LLC formation?
Steps to Establish a U.S. Bank Account and Obtain a Resale CertificateChoose a Business Name and Register Your Wyoming LLC
The first step to establishing your dropshipping business is to choose a business name and register your Wyoming LLC.
If you’re considering forming a Wyoming LLC, starting with a comprehensive strategy is critical. Don’t make the mistake of simply filing your articles without considering the management structure of your LLC, foreign ownership, and your U.S. tax responsibilities at both the state and federal levels.
To ensure that your business is set up for success, we recommend conducting a federal trademark search, at a minimum, using the trademark office database. However, for the best results, a comprehensive search is highly recommended. This step can help you avoid costly legal issues and protect your business’s intellectual property.
- Apply for an EIN
An EIN (Employer Identification Number) is a unique identifier your business will use when filing taxes and opening a bank account. The key is to complete the SS4 property, which will let the IRS know which U.S. tax returns you plan to file. The SS4 can NOT be amended, so complete it carefully. The SS4 must be faxed to the IRS for non-residents, which may take up to 30 business days. The time frame is also essential for U.S. banking, as they will need the IRS letter with the EIN.
- Open a U.S. Bank Account
Once you have your EIN, you can open a U.S. bank account for your Wyoming LLC. You’ll need to provide your EIN, articles of organization, and other identifying information to the bank.
Choosing the right bank is critical when establishing a U.S. bank account for your non-U.S. dropshipping business. Finding a bank familiar with working with non-U.S. residents is essential to ensure a smooth and efficient process.
However, be prepared to provide a personal utility bill in your name that matches your personal address. Most banks typically require this documentation, even if you plan to travel to the U.S. after the pandemic.
Unfortunately, establishing a U.S. bank account for a legal entity (not the individual) can be nearly impossible for non-residents.
Many banks require a personal utility bill in the U.S. linked to your personal address, separate from the documentation required for the LLC formation. If you plan to travel to the U.S., you will likely not be able to establish a U.S. bank account.
Be sure to choose a bank familiar with working with non-US residents. Most banks will also want a utility bill in your personal name that matches the same address as your personal address. Even if you plan to travel to the U.S. after the pandemic, establishing a U.S. bank account for a legal entity (not the individual) is almost impossible for non-residents.
The banks request a personal utility bill in the U.S. linked to your personal address, separate from what they require for the LLC formed.
- Obtain a Resale Certificate
A resale certificate lets your business purchase products from suppliers without paying sales tax. To obtain a resale certificate, you must register with your state’s tax authority and provide your EIN and other business information.
A Wyoming resale certificate will suffice in many cases, allowing you to avoid paying sales tax on your purchases. However, it’s important to note that suppliers may require a resale certificate from that specific state in some states, such as nine.
In addition to registering your Wyoming LLC, obtaining a U.S. bank account, and obtaining a resale certificate, there are a few other steps to establish a solid legal and financial foundation for your dropshipping business.
- Set Up a U.S. Business Address and Phone Number
You must establish a U.S. business address and phone number to build trust with your suppliers and customers. Without this, you may struggle to communicate effectively and establish credibility in the marketplace.
You can work with a reliable mail forwarding service or virtual office provider to obtain a virtual business address and phone number.
However, it’s essential to ensure that your virtual address is fully compliant and that you have a lease agreement to avoid legal issues.
Additionally, you should partner with a team that understands the critical items that will be mailed to your virtual address, including verification codes, bank requirements, sales tax permits, and IRS notices.
- Set Up a Payment Gateway Account
To accept customer payments, you must set up a payment gateway account, such as Stripe or PayPal. A VPN is a consideration for non-residents regarding these accounts. These gateways allow you to securely process credit card transactions and manage your customers’ payment information. Be sure to choose a payment gateway compatible with your dropshipping platform that offers competitive rates. The key is knowing the entire process, including what happens when an SSN is unavailable.
- BE-13 Government Filing
According to a Form BE-13 filing (Survey of New Foreign Direct Investment in the United States), foreign investors in certain U.S. businesses must report their investments. U.S. companies with more than 10% foreign ownership must file a Form BE-13 with the U.S. Bureau of Economic Analysis (BEA), a U.S. Department of Commerce division.
The BE-13 is a complex form due within 45 days of filing your entity.
Failure to comply may result in fines of up to $25K, and the BEA may seek injunctive relief. Furthermore, willful violations may result in criminal penalties of up to $10K and imprisonment of up to one year.
Please note that the BE-13 is NOT the same as the 5472 and Proforma 1120, which are federal tax returns related to an SM LLC DE.
For your convenience, we’ve included a link to the BE-13 FAQ page: https://www.bea.gov/help/faq (note that there are 40 tabs of FAQs).
Schedule Your Discovery Call Today
At Nvinc.com, we understand the importance of proper LLC formalities and can help guide you through the process to ensure your business is fully protected. Schedule a discovery call with us today to learn how we can help you establish a solid legal and financial foundation for your dropshipping business. Don’t leave your business vulnerable to legal issues – take action now to protect your future success.
Forming a Wyoming LLC can be an intelligent choice for your dropshipping business, providing asset protection, tax advantages, and privacy. If you’re ready to get started, our team can help guide you through the process.
Schedule your discovery call today at our calendar at this link to learn more about how we can help you launch your U.S. dropshipping business.
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