Are Taxes High in the USA? Not in All States!

You can take your business venture to the next level if you register a company in the United States of America. The country is unique in many respects but one of its characteristics is of especial importance for a foreigner wishing to register a company there. The word ‘state’ is a synonym to the word ‘country’ and the USA is a true federation because each state enjoys a high level of independence.

In particular, each state is independent in setting the tax rates. True, there are high-tax states in the USA such as California, for example, but there are also low-tax states in the country. Believe it or not, some states charge no income tax at all! South Dakota and Wyoming charge no corporate income tax. The tax rate is 2.5% in North Carolina, which is the lowest corporate income tax rate in the country. According to the US Tax Foundation, the following American states have the most favorable tax systems: Wyoming, South Dakota, Alaska, Florida, Montana, and Delaware.

Below we provide some figures that will show that taxes do not have to be high in the United States. You can find places where the fiscal burden is easy to carry. Before we proceed, however, we would like to point out the main benefits that you will gain if you register a company in the USA.

Registering a company in the USA: main benefits

Your company in America will let you enter global markets and it will also bring you other important benefits. You will be able to do the following when you have a company registered in the USA:

  • Open a corporate account with an international payment system. According to Americans, the best such system is Stripe. Set up an account with Stripe and you will be able to easily make payments wherever you like and receive payments from all over the world.
  • Alternatively, open an account with an online bank such as Payoneer or Wise, for example. This will also let you carry out financial operations internationally.  
  • Use the largest e-commerce platforms and marketplaces. With a company registered in America, you can set up accounts at such places as Amazon and Etsy, for example.  
  • Organize delivery of your products to any country of the world. The transportation network is superb in the United States. 
  • Hire skilled local personnel and make use of numerous technological innovations. 
  • Find a place where the taxes are low. Some states offer tax incentives to certain types of businesses and you can qualify for huge tax cuts in some instances.

There are other reasons why you should set up a business in the USA but you have to realize that various legal procedures are involved in the process and you are going to need professional assistance in the matter.

Factors to consider when choosing the state

You have to take the following factors into consideration when choosing the American state where you would like to register a company: 

  • The geography of your clients. Please do not ignore this factor: the closer you are to your clients geographically the higher are your chances to sell your goods or services to them. 
  • Requirements to company founders. Find out if a non-resident is eligible for forming a company in the state. Can it be done remotely? Would you have to set up a bank account in the same state? Is it possible? 
  • Tax rates. Find out about the personal and corporate income tax rates. Is there a franchise tax in the state? What additional payments would you have to make? 
  • Bonuses and privileges for businesses. Some states will offer special conditions to some business types such as financing, tax deductions, infrastructural objects that can help your company grow, and so on. 
  • The cost of company registration and maintenance. Because each American state is almost an independent country, the amounts of company registration fees and various state duties are different in different states. The place of your company registration will also affect your annual costs.   
  • Relocation opportunities. Because registering a company in the USA can make you qualified for a residence permit in the country, you may want to relocate. Find out about the requirements related to permanent residence, the living standards in the area, the attitude of local people to immigrants, and so on.

Low-tax American states

Let’s look at the tax rates in some of the states that we have mentioned at the beginning of the article. We will also point out some other advantages that each state offers to business owners. 

Wyoming

The US Tax Foundation ranks Wyoming the first. The most favorable business areas include IT, tourism, mining industry, trade, and financial services.

No corporate profits tax nor personal income tax nor franchise tax are charged in Wyoming. The sales tax is 4% in the state. The amounts of annual payments are calculated on the basis of the costs of assets that your company has in the United States.

The requirements to company founders and company structures are lax in Wyoming too. No charter capital needs to be deposited, no share certificates need to be issued, nominee shareholders are allowed, and shareholders’ meetings can be held in other countries. The register of company owners and shareholders is closed to the public. Non-residents can form companies in Wyoming. If a locally registered company does not do any business in the USA, no taxes are payable and no reports need to be filed.

North Dakota

North Dakota is among the top 5 American states for business opportunities as well as education opportunities and medical services. A non-resident can register a company there. Popular business areas include agriculture, food production, and tourism.

The corporate income tax is levied at a progressive rate: income of up to $25,000 per year — 1.41%; $25,000-$50,000 — $352.50 + 3.55%; more than $50,000 — $1240 + 4.31%. Personal income tax is between 1.1% and 2.9% in North Dakota. In addition, there are support programs available, for example, to companies that administer training programs for their personnel. 

Alaska

Alaska ranks third in the US Tax Foundation index. Promising business areas include oil mining, fishing, forestry, and active tourism. Non-residents are eligible to form companies in Alaska.

The income tax for companies in Alaska can be between 2% (if the income is up to $25,000 per year) and 9.4% (more than $222,000 per year). The local sales tax is 7.5%. No personal income tax is charged in the state. Small businesses enjoy informational as well as financial support on the part of the state administration. 

Montana

In 2021, Montana was the best state for launching a small business venture. In 2023, it is among the top 5 states with the best tax climate. Montana is the leader in cybersecurity in the USA.  

Resident companies pay a corporate tax of 6.75% in the state. Personal income tax is between 1% and 6.75% depending on the amount of income. No sales tax is charged in Montana.

The state offers various support programs both to startups and to long-lasting business ventures. In particular, such programs are available to companies engaged in financial analytics and business planning.

It is commonly believed that taxes are high in the United States but this belief is only partially true. Above we have shown that you can find a few low-tax states in the country if you look well enough.

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