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US citizen living abroad: Which is best state to incorporate in?

Asked by: Donovan L.  — 11 March, 2012

I am a US citizen from CA living abroad and I will be majority owner of a future company, with second owner being an Australian, and third owner US citizen living in CA. We wish to incorporate, perhaps in Delaware. We do not plan to have offices or other employees in the states at this time. The product will be a e-learning application developed by all three owners in their respective locations. We wish to sell our product in the US and abroad. As a CA resident should I incorporate there or is there another state that would be more open? Are there limitations that we should be aware of as a national/international company?

Answered by: admin  — 11 March, 2012

Dear Donovan,

The only limitation I can think of for you and your partners in organizing a US-based business is S-Corporation Election – you cannot do it, since one of the partners is not a US-person (all shareholders/members must be US citizens or resident aliens).

Other than that I see no reason why you wouldn’t form your company in Delaware (and probably choose an LLC and not corporation, as corporation is a double-taxation entity). Also, you being from California and your second partner living in California is not a reason to form your company in California, unless you plan to establish physical presence for your business in California. From your business description I deduct that this business will not have any real connection to any state, so you are free to choose one of the incorporation friendly states, such as Delaware or Wyoming, as the state of formation for your company.

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