You’ve been dreaming of it and now the time is finally here…
You’re starting your own business.
You’ve done some research and decided the best choice for your business is to form an LLC.
The first important issue is what is the best state for LLC?
The clear answer:
You should 100% form your LLC in your home state.
For example, if you’re in California, then you should form your LLC in California.
If you have any questions about this, you can email me Sam Mollaei Esq., Business Lawyer, at [email protected]
If you’re a U.S. resident, forget about Delaware, Nevada and Wyoming — all of the advice about forming your LLC in Delaware, Nevada or Wyoming is straight-up WRONG.
If you choose to form your LLC in any other state outside of the state where you have actual presence or are physically doing business, you would have to also register your LLC in your own home state as well.
This is because you need to let your home state know that are you operating a “foreign” LLC in their state, and as a consequence, you would be responsible to pay filing fees and annual fees in BOTH states — which you do NOT what to do.
You should form your LLC in your home state and avoid the fees associated with filing in another state, and then having to file as a Foreign LLC in your home state, which will be required.
That covers 90% of you reading this…
However, what happens if you’re a non-U.S. resident?
If your company does not plan to have a physical presence in the U.S. (meaning that it will operate solely from outside of the U.S.), then you should form your LLC in Delaware, the best and most business-friendly state for non-U.S. residents.
If you’re looking to start your LLC, email me Sam Mollaei Esq., Business Lawyer for Entrepreneurs, at [email protected] to get started
What is the Best State to Incorporate In?
The best state to incorporate in is usually the state that you live. Unless you have a reason otherwise, it’s usually best to incorporate in the state you’ll be doing business in.
In some cases, you may want to consider incorporating in another state for the tax or organizational advantages.
Delaware, Nevada, and Wyoming are the three most popular states for out-of-state business owners to incorporate in.
Can You Form an LLC in Any State?
Yes, you can form an LLC in any state. LLCs are separate entities so they can be located wherever you choose.
For some people, that choice will be the state they live and do business in. For others, they will choose the best state to register LLC based on tax laws or infrastructures, and that will lead them out of state.
It is true that forming an LLC in the state you live in is the simplest choice due to paperwork, fees, and taxes. In some cases, the extra hassle is worth it.
Can You Form an LLC in a Different State?
Yes, you can form an LLC in a different state. As mentioned above, you can form an LLC in any state.
The only limitation on this is if you have a brick and mortar business and want to have your business close by.
In that case, you’d want to form your business in the state you live in. Unless, of course, you plan on moving to another state for its tax benefits.
You may want to discuss your options with a business lawyer to help you decide the best state to start LLC. Please contact me by email at [email protected] today.
Can I Incorporate a Business in Another State?
Yes, you can incorporate a business in another state. Each state has their own fees, taxes, and regulations that govern how you can form and run a business.
There are some states that are more appealing than others, such as Delaware, Nevada, and Wyoming. Each of these states has unique advantages over other states, which we will explore in more detail below.
Unless you have more than five shareholders, you likely want to incorporate in your own state because the advantages of forming in another state do not outweigh the hassles and fees for operating out of state.
Can I Form an LLC in Another State?
Yes, you can form an LLC in another state no matter where you live. The best state to start an LLC is really your choice. But don’t forget that you should always incorporate in your home state where you are doing your business.
Unless you choose a state for their tax, fees, or regulations, you will likely just form your LLC in the state you live in.
If you want to discuss which states are ideal for forming an LLC, contact a business lawyer with your questions.
Worst States to Incorporate
Some of the worst states to incorporate a business include Maryland, Iowa, Wisconsin, North Carolina, and Minnesota.
You can see the full list of the 10 worst states to incorporate here.
Here’s a summary of the bottom 5:
- Maryland: $2,756 taxes collected per capita; 6.7% unemployment rate; $134 corporate taxes collected per capita; and a sales tax rate of 6%.
- Iowa: $2,368 taxes collected per capita; 5% unemployment rate; $82 corporate taxes collected per capita; and a sales tax rate of 6%.
- Wisconsin: $2,692 taxes collected per capita; 7% unemployment rate; $149 corporate taxes collected per capita; and a sales rate of 5%.
- North Carolina: $2,332 taxes collected per capita; 9.5% unemployment rate; $114 corporate taxes collected per capita; and a sales rate of 4.75%.
- Minnesota: $3,557 taxes collected per capita; unemployment rate of 5.6%; $188 corporate taxes collected per capita; and a sales tax rate of 6.875%.
If you’re unsure what all of this means to your business and want to know which states to avoid, contact Sam Mollaei at [email protected]
Why Incorporate in Delaware?
Delaware is a great state to incorporate in because it has a lot of advantages. Delaware has some of the most pro-business, flexible statutes in the country.
Delaware has a Chancery Court that makes decisions regarding business matters. This is the only state to have such a court.
Why is the Chancery Court important? Because most states are backed-up with cases and you can count on a long waiting period for your case to be even heard.
With the Chancery Court, your case will be heard quickly and a decision will be made so you can move on.
Furthermore, in all of the other states, when you finally have your case heard, it may be by a traffic judge who has little experience with business.
In Delaware, the judges in the Chancery Court are trained in business so the person who hears your case will be knowledgeable.
Additionally, Delaware has hundreds of years of case law to apply to business cases because Delaware was one of the first to privatize government-controlled corporate entities.
From there, they loosened restrictions and reduced the tax burden on corporations.
Why Incorporate in California?
There are many reasons you may want to incorporate your business in California.
California is a great state to incorporate in because it has a strong business community and some unique benefits.
California requires only three officer positions for filing and you can even let one person hold all three positions.
California also lets management and the shareholders of a company to be private. You’re only required to disclose the director and the resident agents.
Getting down to money, California’s corporate taxes are only 9% and there are additional advantages depending on the type of corporation you form.
If you want to incorporate in California, contact Sam Mollaei at s[email protected]
Why Incorporate in Wyoming?
Wyoming is one of the best states to incorporate in.
Wyoming has the benefit of no corporate income taxes as well as no personal income taxes. Wyoming is 1 of the only 9 states to have no income tax.
Wyoming is one of the states that offers the most privacy as you don’t have to disclose any of the individuals involved in the business. This also leads to strong asset protection.
Why Incorporate in Nevada?
Nevada is a popular choice for starting a business.
Nevada has no state corporation tax, no business income tax, no inheritance tax, no capital gains tax, and no franchise fees. Yes, you read correctly: zero tax.
This means that as a corporation or an LLC, you won’t even file an income tax return.
Nevada also allows for total anonymity for all of a corporation’s members. The members don’t have to be Nevada residents or even residents of the United States.
Furthermore, you can form a single member LLC and hold all positions.
The required meetings of managers and members don’t have to happen in Nevada.
Stock can be purchased with anything of value, including services or time.
Best State to Form LLC
Delaware seems to be the best state to form LLC because it is very business-friendly.
As mentioned above, Delaware has the Chancery Court that handles all business matters as well as a rich history in business law.
Delaware also doesn’t tax out-of-state income. This means that if you do little to no business in the state itself, you could save a lot of money on taxes.
You may want to contact a business lawyer to find out if forming an LLC in Delaware, the best state to form LLC, makes sense for your business.
Unless you have more than five members, the benefits may not outweigh the disadvantages.
Best State to Form a Corporation
The best state to form a corporation in is Delaware, Wyoming, or Nevada. Each state has amazing benefits to businesses.
Keep in mind that you may not benefit from incorporating in another state outside of the one you live in unless you have five or more members.
If you want to discuss what the best state to form a corporation is, you may want to talk to your business lawyer.
Best State to Form Single Member LLC
Nevada is the best state to form a single member LLC.
Some states don’t even allow single member LLCs, so that’s something you should keep in mind.
Not only does Nevada allow single member LLC, but that member can also hold all positions.
Additionally, you can enjoy total anonymity because you don’t have to disclose the members of an LLC in Nevada.
Best State to Form LLC for Privacy
If you’re looking for the best state to form LLC for privacy, you should choose Nevada or Wyoming.
Both of these states allow for total anonymity of a business’s members.
If you’re unsure of the benefits of privacy in an LLC, contact a business lawyer to learn more. You can reach me, Sam Mollaei by email at [email protected]
Best State to Form a Trust
The best state to form a trust is one that exempts the trust from state income tax.
Many states have a tax on trust income that ranges from three to twelve percent. There are seven states that do not impose a tax.
One of these states are the best state to form a trust:
- South Dakota
If you can’t form a trust in one of the above states alone, you may want to work with a trust company who can form a trust for you in at least one of the above states.
Best State to Form LLC for Online Business
The best state to form LLC for online business is usually the state you live in.
There is one deviation to this rule: if you aren’t a US resident.
If you aren’t a resident of the United States, the best states to form an LLC for an online business are Delaware, Nevada, and Wyoming.
If you have questions about forming an LLC for an online business, call Sam Mollaei, Esq. at Mollaei Law at [email protected]
Best State to Form an LLC for an Internet Business
The best state to form an LLC for an internet business is the state that you live and conduct business in.
Like the information above, this is true unless you aren’t a resident of the United States.
If you aren’t a resident, Delaware, Nevada, and Wyoming are the best states for form an LLC for an internet business.
Keep in mind that if your form your LLC outside of the state you live in, you will face foreign entity fees and filing requirements for that state.
Best State to Incorporate an Online Business
The best state to incorporate an online business is the state you live and do business in.
This is because you don’t want to have to pay foreign entity fees and follow the regulations and laws of another state.
If you aren’t a resident of the United States, you may want to take advantage of the benefits of incorporating in some of the more favorable states such as Delaware, Nevada, and Wyoming.
If you have any questions about forming your online business or where to incorporate, contact Mollaei Law by emailing [email protected]
Best State to Incorporate a Tech Startup?
The best state to incorporate a tech startup is the state that you live in unless you have five or more members.
If you incorporate in any other state than the one you live in, you will face paperwork and additional fees as you operate as a foreign entity.
The benefits of incorporating in a more favorable state aren’t as much with a small company with less than five members.
If you have more than five members, the best state to incorporate a tech startup in is Delaware, Nevada, and Wyoming.
Best State to Incorporate a Nonprofit Organization?
The best state to incorporate a nonprofit organization is generally the state that the nonprofit will operate in.
By incorporating in the state that the nonprofit will do business in, the nonprofit will face less fees, reporting requirements, and paperwork.
In some cases, the nonprofit may operate in multiple states, which means it will be advantageous to choose a state to incorporate in.
Delaware is one of the best states to incorporate a nonprofit organization because Delaware doesn’t have a separate nonprofit statute.
Delaware governs nonprofits by the Delaware General Corporation Law (DGCL). This allows flexibility with the internal structure.
The DGCL only allows a nonprofit to have only one director and while the nonprofit must have members, the directors can serve as the only members.
Keep in mind that there are requirements to incorporate a nonprofit in Delaware, such as a registered agent, qualifying for a charity, and additional registration or regulation requirements.
Choosing the best state for LLC is a big decision that you shouldn’t make without careful consideration.
The information here is meant to be a thorough guide to help answer your questions about where to incorporate a business.
If you have additional questions about starting your LLC, contact me, Sam Mollaei Esq., Business Lawyer for Entrepreneurs, at [email protected]