New York vs California LLC: Which Is Better for Non-Residents?

New York vs California: Side-by-Side Comparison

Here's a comprehensive comparison of the two states across all key factors for non-resident LLC formation:

Tax Comparison

New York Taxes

• Personal Income Tax: 4%–10.9%
• Corporate Tax: 6.5%–7.25%
• Sales Tax: 4% (+ local)

California Taxes

• Personal Income Tax: 1%–13.3%
• Corporate Tax: 8.84%
• Sales Tax: 7.25%

For non-resident entrepreneurs with single-member LLCs treated as disregarded entities, state income tax typically only applies if you have income sourced within that state. If you have no in-state operations, employees, or customers, state income tax may not apply regardless of which state you form in.

Formation & Annual Costs

Privacy & Asset Protection

New York

• Privacy: Publication reveals entity
• Asset Protection: Moderate
• Court System: Strong commercial courts

California

• Privacy: Member names public
• Asset Protection: Weak
• Court System: Standard state courts

The Verdict: New York or California?

Both are high-tax states. California has higher income tax (13.3% vs 10.9%) and much higher ongoing costs ($800+ vs $9 biennial). New York's publication requirement adds $1K–2K upfront but then costs almost nothing annually. California charges $800 every year. For non-residents not operating in either state, neither is recommended — consider Wyoming, Delaware, or New Mexico instead.

Remember that regardless of which state you form your LLC in, your federal tax obligations remain the same. All foreign-owned single-member LLCs must file Form 5472 and a pro forma Form 1120 annually, with a $25,000 penalty for non-compliance.