Single-member Non-Resident LLC Asset Protection

[tomwis]

I'm aiming to set up SINGLE-MEMBER Non-Resident LLC in the US, for pass-through taxation. I'm based in European Union.

From ASSET PROTECTION point of view - is there any difference in which state I incorporate? I read somewhere, that Wyoming and Nevada offer stronger protection in this field than other states.

Use-case I'd like to protect myself from is this:
A customer uses service (Saas) provided by my LLC, but something goes wrong (for example software bug) and he loses a lot of money. He might sue my LLC for millions $$$. Do I have to worry I might loose a car/house/whatever I own in my home country?

I would love to incorporate in a state, which 100% protects LLC owners in such case. Currently I'm rooting for New Mexico, because of lowest incorporation/annual costs, but if switching to Wyoming (or someplace else) adds security, I'm happy to spend a hundred or two more.

 

[CaptK]

If that is your issue then set up the US LLC with a nominee who liscence the SaaS from you. The contract is between the nominee and the customer and the payment is made either to the LLC as a pass through or directly to you in whatever jurisdiction works for you.

That way if something goes wrong then they will sue the nominee rather than you. Of course they may contact you but the contract between you and the nominee is that you simply liscence but any programming and maintenance is the responsibility of the nominee.

 

[Patrick846]

Inside liability protection is the same in almost any state in the US (liability that arise from an action from the LLC). Your personal assets out of the LLC will be protected, unless there is a case showing that the LLC was your alter ego and had no business purpose, or if you personally was acting in a negligent or fraudulent manner.

Outside liability however (if someone sues you personally for your personal actions), if vastly different depending on the US state. WY, TX, NV and a few other states have excellent charging order protection that will block the access of your LLC asset from an outside claim. WY and NV also offer anonymity that helps avoiding ambulance chaser that will only start a lawsuit if they find out that you have big pockets.
NM has good anonymity, but not charging order protection as sole remedy.

So if you only concern is inside liability, you can choose NM, but it would be stupid in my opinion, to loose outside liability protection just to save $50 a year...

 

[Fulton Abraham Sanchez]

I'm aiming to set up SINGLE-MEMBER Non-Resident LLC in the US, for pass-through taxation. I'm based in European Union.

From ASSET PROTECTION point of view - is there any difference in which state I incorporate? I read somewhere, that Wyoming and Nevada offer stronger protection in this field than other states.

Use-case I'd like to protect myself from is this:
A customer uses service (Saas) provided by my LLC, but something goes wrong (for example software bug) and he loses a lot of money. He might sue my LLC for millions $$$. Do I have to worry I might loose a car/house/whatever I own in my home country?

I would love to incorporate in a state, which 100% protects LLC owners in such case. Currently I'm rooting for New Mexico, because of lowest incorporation/annual costs, but if switching to Wyoming (or someplace else) adds security, I'm happy to spend a hundred or two more.

T, hi. No, you will not loose your personal property in your country. For that the litigant will need to go there and start a lawsuit. LLCs with a single member are disregarded entities in the US and DO NOT have liability protection unless they are two member LLCs. In a lawsuit you will loose any personal property in the US in addition to the company property.

 

[Patrick846]

LLCs with a single member are disregarded entities in the US and DO NOT have liability protection unless they are two member LLCs. In a lawsuit you will loose any personal property in the US in addition to the company property.

It is not correct. Inside liability is the same for single or multi members LLC. As long as you don't pierce the veil of the LLC or not commit fraud or gross negligence, your personal liability as a member won't be engaged for a tort issuing from inside the LLC.
Outside liability protection is different in each state. For instance in FL, a single member LLC will not have charging order, while a multi members LLC will have charging order protection (see Olmstead vs FTC). In WY single member AND multi members LLC have charging order protection.

LLC are state creatures; For the IRS all LLC are technically disregarded and will be treated either as sole proprietor (pass through no filing, but report on the owner 1040 probably schedule C if an individual), partnership (pass through with 1065 filing), C or S corp (1120 filing) depending on what default or active election will be done. Of course a single member LLC won't be able to be taxed as a partnership and a multi-member LLC won't be able to elect to be taxed as sole proprietor (except in some states with 2 members who are maried filing jointly).