Most Canadian founders forming a US LLC start with a two-state shortlist: Delaware or Wyoming. After a search round, New Mexico shows up as the cheapest option and Nevada appears in older blog posts. This is the four-way comparison that matters for a founder in Toronto, Vancouver, or anywhere else in Canada — covering 5-year cost, banking outcomes, privacy, and where each state's marketing material does not match the operational reality.
The short answer
If you expect to raise US venture capital in the next 24 months, file in Delaware. For solo operators, consulting businesses, Amazon FBA sellers, and SaaS founders bootstrapping to profitability, Wyoming is the default. New Mexico is a real option if you prioritize lowest annual cost and maximum filing privacy and you are confident you can satisfy bank verification questions about a less-recognized formation state. Nevada used to be on this shortlist; it usually drops off in 2026 because of layered Commerce Tax + Business License costs without offsetting tax advantages for non-resident owners.
The 5-year cost matrix
| State | Initial filing | Annual report / franchise | Other annual | 5-year state cost | RA at $50/yr | 5-year total |
|---|---|---|---|---|---|---|
| Delaware | $90 | $300 franchise tax | None | $1,590 | $250 | $1,840 |
| Wyoming | $100 | $60 minimum annual report | None | $400 | $250 | $650 |
| New Mexico | $50 | $0 (no annual report) | None | $50 | $250 | $300 |
| Nevada | $425 | $350 annual list | $200 business license | $3,175 | $250 | $3,425 |
For a bootstrapped Canadian founder, the 5-year cost spread between New Mexico and Nevada is roughly $3,100. That is real money, but not the only variable. Banking acceptance, privacy mechanics, and ease of explaining the state to US partners often weigh more than the dollar gap.
Banking and Stripe acceptance by state
Mercury, Brex, Relay, and Stripe accept entities from all four states in principle. In practice, approval rates and questioning patterns differ.
| State | Mercury baseline | Common follow-up question |
|---|---|---|
| Delaware | Most familiar to US banks; rarely questioned | None typical |
| Wyoming | Familiar; "Wyoming + Canadian + digital products" sometimes flagged | Site-of-operations clarification |
| New Mexico | Less familiar to US banks; bank may ask why this state | Be ready to explain (cost + privacy) |
| Nevada | Familiar but less common; usually no extra questioning | None typical |
What matters more than state choice for Canadian banking applications:
- A real commercial US address (not a PO Box, not the bare RA address)
- An EIN issued correctly with line 7b properly filled
- A clean Operating Agreement signed by the member
- A website with at least basic information about the business (not a parked domain)
A Canadian founder with all four of these in place typically gets approved at any of the four states. A Canadian founder missing two or more of them gets rejected at any of the four.
Privacy posture, side by side
| State | Member name in public filing | Manager name in public filing | Beneficial ownership lookup |
|---|---|---|---|
| Delaware | No | No (manager-managed only) | Not public |
| Wyoming | No | No | Not public; charging-order protection strong |
| New Mexico | No | No | Not public; among the most private states |
| Nevada | No (since 2003) | Yes (resident agent + manager) | Some manager information searchable |
For most founders this is a non-issue. Neither state forces the public filing of a founder list. If privacy is a specific requirement (e.g., separation between business identity and personal Google footprint), Wyoming and New Mexico edge ahead of Delaware. New Mexico's no-annual-report policy is the strongest filing-level privacy: nothing is updated annually, so nothing is public.
The privacy claim has limits. Form 5472 (federal) lists the foreign owner. State sales tax registrations list the responsible party. Bank account openings disclose the member to the bank. State-level anonymity does not equal regulatory anonymity.
New Mexico in detail: lowest cost, but watch the bank step
New Mexico is the cheapest US LLC formation in the country at $50 with no annual report. For a Canadian founder running a side project or a small services business with no investor expectations, the math is hard to beat.
The catches that do not appear in the marketing material:
- Bank verification asks why. Mercury and Relay see Wyoming applications constantly; New Mexico applications less so. Underwriting may ask questions, including why you chose this state. The answer ("lowest filing cost and strongest privacy") is fine, but be prepared to give it.
- No annual filings means no proof of standing. When state agencies, banks, or counterparties want a Certificate of Good Standing, New Mexico can issue one but the absence of annual updates means there is less recurring activity to confirm. This is rarely a blocker, but it surprises founders who expect the same paperwork rhythm as Delaware or Wyoming.
- Less RA market. Fewer Registered Agent providers operate in New Mexico than in Wyoming or Delaware. The market still works, but the price difference between providers is smaller and there are fewer cancellation/transfer options.
- State sales tax (gross receipts) on business done in New Mexico. If you actually sell to New Mexico customers from a New Mexico LLC, gross receipts tax applies. This rarely applies to remote Canadian founders selling outside New Mexico.
For a Canadian founder whose business is fully remote, fully outside New Mexico, and whose owner identity will pass bank verification cleanly, New Mexico is a real option. For founders who want a state name banks immediately recognize, Wyoming is more frictionless.
Nevada: why it usually drops off the list in 2026
Nevada was promoted heavily as a low-tax LLC state through the 2010s. The story has shifted.
| Issue | Effect |
|---|---|
| Commerce Tax (since 2015) | Once revenue exceeds the threshold, gross-receipts tax applies — most Canadian-owned LLCs do not hit it but the obligation exists |
| Annual list filing $350 | Higher than Delaware's $300 franchise and far higher than Wyoming's $60 |
| Business License $200/yr | Mandatory; no equivalent in Delaware or Wyoming |
| Manager information disclosed | The "Nevada is most private" claim is weaker now than it was 15 years ago |
For Canadian-resident founders without an actual Nevada operating presence (real estate, gaming-adjacent business, in-state customers concentrated in NV), Nevada is rarely the right pick. The original tax-savings story does not apply because Canadian owners pay Canadian tax on worldwide income regardless of US state choice.
The investor question (still Delaware)
If you are forming an LLC and might convert to a Delaware C-Corp later for US venture funding, file in Delaware from day one. Converting a Wyoming or New Mexico LLC to a Delaware C-Corp later is doable through a domestication or merger but adds a few thousand dollars of legal friction and creates a paper trail VC counsel does not love.
US VCs default to Delaware. Their standard financing documents reference the Delaware General Corporation Law. Their counsel charges by the hour to rewrite for any other jurisdiction. If a real venture path is two years out, save the friction at the start.
Cross-border tax considerations are state-neutral
Your Canadian tax position is determined by your residency and the nature of the income, not by the US state of formation. Form 5472, Form 1120-F, T1135, T1134, and the CRA-IRS classification mismatch all apply identically whether you file in Delaware, Wyoming, New Mexico, or Nevada. State choice is about cost, privacy, and banking — not about reducing Canadian tax.
What does change at the state level: sales tax nexus, foreign qualification when operating in other states, and franchise tax accumulation in states like California where you have inventory or employees. None of these are eliminated by picking the "right" formation state.
Default recommendations by founder type
- Bootstrapped SaaS / consulting / e-commerce, fully remote: Wyoming
- Lowest annual cost, comfort with bank verification questions: New Mexico
- Venture-backed startup plans within 24 months: Delaware
- Amazon sellers with simple US payout need: Wyoming
- Real estate or gaming-adjacent business with NV operations: Nevada (only when NV operations exist)
- Professional services with US bar / license ties to a specific state: file in that state, not on this list
We walk through this with every founder on the free call. The right answer depends on your model, your funding plans, and where your customers actually are.
Frequently asked questions
Can I switch states later if I picked wrong?
Yes. Domestication transfers an LLC from one state to another while keeping the EIN and member identity. Delaware accepts incoming domestication; Wyoming, New Mexico, and Nevada all allow outgoing domestication. The cost is typically $300-800 in state fees plus $500-1,500 in legal preparation. Switching from Wyoming to Delaware before Series A is the most common path.
Does Wyoming or New Mexico save me Canadian tax?
No. Your Canadian residency and the source rules under the Canada-US tax treaty determine your Canadian tax liability. The US state of LLC formation does not reduce your Canadian income tax, GST/HST obligations, or T1135/T1134 filings. State choice is a US-side cost and operational decision only.
Why do some advisors still recommend Nevada?
Some Nevada-based service providers and older-vintage articles still emphasize the "no state income tax" angle. For a Canadian non-resident, that has never been the deciding factor because Wyoming, New Mexico, and Florida also have no state income tax for individuals. Nevada's offsetting cost in annual filings + Business License typically erases the state-tax advantage for non-resident owners.
Related guides
- LLC for Canadians funnel guide
- Basic LLC formation process
- Form 5472 filing for single-member LLCs
- Why you need a Registered Agent
- LLC annual fees by state
- Wyoming vs South Dakota for non-resident asset protection
- Series LLC for non-resident owners: DE/NV/TX/WY/IL matrix
- Anonymous LLC for non-resident owners: WY/NM/NV/DE matrix + BOI impact