U.S. Company Registration for a Drop-Shipping Business
Drop-shipping is a very popular modern business concept, and U.S.-based drop-shipping businesses became the driving force of the "location-independent entrepreneur" phenomenon.
Much has been written on the mechanics of the drop-shipping business itself, so this article will only cover the aspect of U.S. company registration, taxation, banking, and other related business filings.
Running your drop-shipping business under a U.S. company has many advantages, and given the relative affordability and ease of registration and maintenance of U.S. companies, it is highly recommended to organize your business using a U.S. legal entity such as LLC or corporation.
Let's explore some of the questions related to U.S. company registration specifically for your drop-shipping business.
Since a drop-shipping business owned by you, a non-U.S.-based entrepreneur, has no physical connection to any specific state you have the freedom to select any of the 50 U.S. states and DC as the home state of your U.S. company. It is recommended to form your company in one of the incorporation-friendly states, such as Delaware, Wyoming, or Nevada.
Majority of our clients choose either Delaware or Wyoming, due to more expensive fees in Nevada. You can see the comparison between those 3 states here: DE vs. NV vs. WY.
Because a drop-shipping business essentially deals with tangible goods, the question of sales tax becomes relevant, and as a result many drop-shippers opt for registration in one of the states that have no sales tax. We cover the issue of sales tax as part of our article U.S. Taxation for Foreign Entrepreneurs: Sales Tax, and it is more complex than just picking a no-sales-tax state, however a decision to register in one of the no-sales-tax states is not without a degree of merit.
Delaware, being a no-sales-tax state, is often the state of choice for drop-shipping business registration, however it is important to note that the registration and maintenance of a company in Delaware are relatively costly, making some other no-sales-tax states an attractive alternative. These states are Oregon, Montana, Alaska and New Hampshire.
It is also important to note that Wyoming, despite having a relatively modest sales tax, is still an attractive state for drop-shippers due to the fact that it is the least populated state, which means the chance of needing to worry about collecting and remiting sales tax in Wyoming is negligeable.