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 to Form LLC?
Here is the clear answer to choosing the best state for LLC:
- Best State for LLC If You Are a U.S. Resident
- What is the Best State to Incorporate LLC In?
- Can You Form an LLC in Any State?
- 5 Worst States to Incorporate
- 7 Best States to Form a Trust
- Best State to Form LLC for Privacy
- Best State to Form Single Member LLC
- Best State to Form LLC for Online Business
- Best State to Incorporate a Tech Startup?
You should form your LLC in your home state (in the state where you’re conducting business).
For example, if you’re in California, then you should form your LLC in California.
However, if you are not planning to have a physical presence in the US (meaning that you will be operating solely from OUTSIDE the US), then we should form your LLC in Wyoming, the best and cheapest state for non-US residents.
If you have any questions about which is the best state to form your LLC, you can email me at sam@mollaeilaw.com
Best State for LLC If You Are a U.S. Resident
If you’re a US resident, you should form your LLC in the state where you’re doing business.
Typically, you’re considered to be conducting business activities in a state when:
- Your business has a physical presence in the state
- You often have in-person meetings with clients in the state
- A significant portion of your company’s revenue comes from the state
- Any of your employees work in the state
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 the actual presence or are physically doing business, you would have to also register your LLC in your home state as well.
This is because you need to let your home state know that you are 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 want to do.
You should form your LLC in your home state and avoid the fees associated with filing in another state. After this, you will be required to file as a Foreign LLC in your home state. Also, you should know about EIN for foreign entity beforehand.
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 Wyoming, the best state for LLC that is also known as the most business-friendly state for non-U.S. residents.
However, if you are a first-timer and you want to know how to start a business in the USA for non-US residents, I will guide you till the end.
If you’re looking to start your LLC, email me at sam@mollaeilaw.com to get started.
What is the Best State to Incorporate LLC In?
The best state to form LLC in is usually the state that you live in. Unless you have a reason otherwise, it’s usually best to consider your home state as the best state to form an LLC.
In some cases, you may want to consider incorporating in another state so you can benefit from the tax or organizational advantages.
If you are wondering what is the best state to form an LLC in outside of your state, then this information is beneficial for you: Delaware, Nevada, and Wyoming are the three most popular states for out-of-state business owners to incorporate in.
If you have any questions about choosing the best state for LLC, you can email me at sam@mollaeilaw.com
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.
However, should you? Definitely not. You should form your LLC in the state where you’re conducting business.
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.
Forming an LLC in the state you live in is indeed the simplest choice due to paperwork, fees, and taxes. Plus, it is one of the best states for LLCs. 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 as this will be considered the best state for LLC unless, of course, you plan on moving to another state for its tax benefits.
You may want to discuss your options with a business contract lawyer to help you decide the best state to start LLC. To make it a quick and hassle-free experience, please contact me by email at sam@mollaeilaw.com today.
Can I Incorporate a Business in Another State?
Yes, you can incorporate a business in another state. Each state has its fees, taxes, and regulations that govern how you can form and run a business.
Some states 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 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 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 as this is considered the best state to form LLC.
If you want to know about the best states for LLCs, 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%.
Corporate income taxes for LLCs are not as complicated as they seem. In fact, the process is quite simple and straightforward.
The first step in calculating your LLC’s corporate income taxes is to determine your taxable income. The second step is to deduct certain business expenses from that taxable income before calculating a tax on the remaining amount.
The third step is to calculate the tax rate for your LLC and multiply it by the total taxable income. Lastly, you will need to file a return with the IRS that includes all of this information.
If you’re an LLC, you’ll need to pay taxes. If you don’t, the IRS will find out and take legal action against your business.
When an LLC is formed, the members of the LLC are not taxed individually. Instead, they are taxed as a group. This means that there is no need for individuals to file their own tax returns since the members are already taxed as a group. However, if one member of the LLC leaves or dies then it is necessary for that person to file their own taxes individually.
There are two ways in which an LLC can be taxed:
1) through pass-through taxation and
2) through corporate taxation. In order to avoid corporate taxation, a single-member must be treated as a sole proprietor or disregarded.
Sales Tax for LLC is a topic that is difficult to understand. It would be best to have an expert explain this topic to help the reader better understand how sales tax works.
The sales tax for LLC is different from the sales tax for corporations. In general, the sales tax for corporations is charged on all income, not just profits. However, when calculating the sales tax income of an LLC, only profits are taxed.
Sales Tax is commonly imposed on goods and services in many states. When an individual or company sells goods or services within the state, they must pay sales tax on the transaction. The entity that makes the sale is known as the seller and the person who receives goods or services is known as the buyer.
Sales Tax for LLCs:
As an LLC or limited liability company owner, you are responsible to pay taxes on your business income. If your business is a sole proprietorship or partnership, then the state where the company is registered will collect taxes on behalf of the company.
However, if your company is an LLC or limited liability company, there isn’t a state entity that collects or pay taxes on behalf of the company. Instead, when your LLC files its annual tax return with the IRS (or other applicable taxing authority), it will report its income and expenses to that authority and pay any applicable taxes due from that return.
If the business owes money and can’t pay, only its business assets are at risk. LLCs use pass-through-taxation. Pass-through taxation means the business itself does not pay taxes. Instead, owners must report business income and pay taxes on their personal tax returns.
Sales tax is a percentage charged on the gross receipts of businesses, usually at the state or local level. It’s used to fund the government and public services in states such as California and New York and municipalities like Philadelphia. For example, Philadelphia has a 1% sales tax rate on all purchases made within city limits, while Baltimore has a 4% rate on all purchases made within the city limits.
Sales tax for LLCs is a complicated process, but it’s not impossible to learn how it works. Here are some basic rules of how sales tax for LLCs works:
– The sales tax for LLCs is imposed on the gross receipts from the sale of goods and services.
– The gross receipts are defined as all monies received without any deductions or allowances whatsoever, including discounts, commissions, or allowances paid to employees who perform services in connection with any transaction.
– In order to calculate your sales taxes on your gross receipts, you’ll have to use a formula called “gross receipts divided by net purchases.”
Sales Tax for LLCs: How It Works
There are four types of sales taxes that an LLC can be subject to in the United States: state, local, city, and county. The most common type of sales tax is the state one which applies to all businesses operating within a particular state.
However, some states require that LLCs are taxed at a different rate than other types of businesses such as corporations or sole proprietorships. In these cases, they may be taxed at either a lower or higher rate than other types of businesses depending on what the law specifies.
In what way franchise taxes work?
The franchise taxes are taxes that apply to businesses that are owned by one individual but are operated by another. The business owner is the person who pays the franchise tax and not the employees.
This topic is relevant to all businesses, but especially for LLCs and other entities that have multiple owners. This can be a complex topic for some to understand, so it’s important to have an introduction that provides clarity on the issue.
In what way corporate tax rate works?
The tax rates for corporations are different from the personal tax rates. The corporate tax rate is a percentage of the company’s net income.
The corporate tax rate is one of the most important aspects of a company’s overall financial picture. It affects how much money they need to make in order to pay taxes and how much money they have leftover to reinvest in their business.
The corporate tax rate can be found on a company’s income statement, which is often found on the balance sheet or in its annual report.
In what way does business inventory tax work?
Business inventory tax is a type of sales tax that is imposed on the gross receipts of a business. This means that it is charged on the total amount of money that was generated during a particular period, regardless of where it was made.
The business inventory tax is usually imposed by the state and local governments in an effort to discourage businesses from relocating outside the state or city. It also helps to keep jobs and businesses within the state or city.
In most cases, businesses are not required to collect this tax, but they do have to pay it if they are subject to sales taxes in their jurisdiction.
In what way state filing fees work?
State filing fees are an extra charge that is imposed on a company when they register their business in a specific state. It is an additional cost that needs to be taken into consideration when starting a business.
A common question many small businesses ask is how state filing fees work for LLCs. State filing fees are not the same for all states, so it’s important to know what the process will be like before you register your business in any state.
In what way does corporate income tax works?
The corporate income tax is a tax that is imposed on companies that are incorporated in the United States. The taxation system for LLCs is different from that of C-corporations because LLCs are not taxed on their profits at the entity level but rather at the owner level.
Generally speaking, an LLC does not pay taxes on its profit until it distributes them to its shareholders or partners. When an LLC distributes profits to its shareholders or partners, they are taxed as well.
Do you need to file an annual fee if you have LLC?
Annual fees are a common type of fee that is charged on an annual basis. It is a fixed amount of money that you must pay for your LLC every year.
The annual fee is the amount of money that you need to pay to maintain your LLC. If you don’t pay it, then your LLC will be dissolved and it will be considered inactive. It’s important to remember that this fee can only be paid if there are no other outstanding fees or fines owed by the company.
If you’re unsure what all of this means especially the sales tax to your business and want to know which states to avoid while choosing the best state for LLC, contact Sam Mollaei at sam@mollaeilaw.com
Why Incorporate in Delaware?
Delaware is considered to be the most business-friendly state for incorporation.
In fact, Delaware is America’s best state to file LLC or Corporation. More than half a million business entities have their legal home in Delaware including over 50% of all U.S. publicly-traded companies and 60% of the Fortune 500.
The top 5 reasons to choose Delaware as the best state for LLC are:
- Business-friendly laws – Delaware’s General Corporation Law is the most advanced and flexible business formation law in the United States. Also, if you end up going to court to settle a dispute, Delaware’s Court of Chancery uses judges instead of juries — this is favorable because it places your business’ legal fate in the hands of a well-trained expert than regular people.
- Privacy – Delaware does not require members, directors, or officer names to be listed in the formation documents. Thus, Delaware provides a level of the high level of privacy.
- Cheaper filing fee – Currently, Delaware’s filing fee is $90 which is cheaper than California’s ($100 — but they charge you $800 every year for Franchise Tax fees), New York ($125), and a lot cheaper than Texas ($300).
- No income tax for businesses that operate outside of Delaware
- Investors are more comfortable with Delaware business entities.
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 the 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 why you may prefer starting a 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 additional advantages are depending on the type of corporation you form.
If you want to incorporate in California, contact Sam Mollaei at sam@mollaeilaw.com
Why Incorporate in Wyoming?
If you know about the LLC cost, you can consider Wyoming as one of the best states for LLC.
Wyoming has the benefit of no corporate income taxes as well as no personal income taxes. One of the reasons why it is considered the best state for LLC is that Wyoming is 1 of the only 9 states to have no income tax.
Wyoming is one of the states that offer 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.
In the United States, there are only two states that don’t have personal income taxes. Nevada and Wyoming are the only states in the US without any form of personal income taxes.
The reason why these two states have no personal income taxes is that they rely on other sources of revenue to fund their state government. For example, Nevada relies on gambling and Wyoming relies on oil production for money.
This is an interesting topic because it shows how these two states have different methods of funding their state government. This has led to a lot of people moving to the states because they can save a lot of money by living in these states.
There are many reasons for this. The first reason is that these two states have low taxes on businesses and property, which makes it easier for companies to operate in these two states.
The second reason is that the governments in these two states don’t rely on income taxes as their main source of revenue but instead rely on sales tax, which means they don’t need to collect as much data from taxpayers.
However, this is not always the case for all states because some states have a sales tax that can be applied to purchases made by consumers. This means that individuals who make purchases in these states will have to pay taxes on those purchases. The absence of personal income taxes means that the state can spend less on services and provide more for the people.
Nevada’s economy is driven by the mining industry, agriculture, and tourism. The state has the fastest-growing population in the United States. In 2018, it was ranked as the ninth most populated state in the country with 2.2 million people. The mining industry is a major contributor to Nevada’s economic success with a total value of $22 billion in 2018 alone. The state has been ranked as one of the top ten states that offer business incentives to companies that want to relocate their headquarters or establish new operations there.
Nevada is one of the few states that does not have a personal income tax. It’s an interesting fact about this state, but what’s even more interesting is the history of how this happened.
The reason why Nevada has no personal income tax is that it was in the Constitution from 1864. When Nevada became a state, the citizens voted on whether or not they wanted to have a personal income tax. Since they voted against it, Nevada has been without one ever since.
Wyoming is one of the few states that doesn’t have personal income taxes. The state relies on other sources of revenue such as oil, gas, and coal. Wyoming’s economy is driven by natural resources, and it has been for decades. The state has no personal income tax because its residents are mainly self-employed or work in the service industry.
The absence of personal income taxes in Wyoming has caused issues with the state’s budgeting process because there is not enough money to fund public services like education and infrastructure without raising taxes on other sectors such as sales or property.
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.
Here is another reason that makes it one of the best states for LLC: 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
Short answer: you should register your LLC in the state where you are located (the state where you have a physical presence). For example, if you will be operating in California, then we should register your LLC in California.
If you form an LLC, remember to create an operating agreement.
An operating agreement is a legal document that defines the terms and conditions of the partnership between two or more people or entities. It lays out the rights and responsibilities of all partners, including how profits are shared, what happens if one partner leaves, etc.
An operating agreement for an LLC is quite similar to a partnership agreement. It includes information about how profits are shared among members and what happens in case one member leaves. The main difference between an LLC operating agreement and a partnership agreement is that in the latter case there can be only one partner whereas in an LLC there can be multiple partners.
An operating agreement for an LLC should be drafted by experienced legal counsel who understands its importance as well as the state laws that govern it.
However, if you are not planning to have a physical presence in the US (meaning that you will be operating solely from OUTSIDE the US), then we should form your LLC in Wyoming, the best and cheapest state for non-US residents.
Best State to Form a Corporation
The best state to form a corporation in is Delaware, Wyoming, or Nevada. Each state has amazing benefits for 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. All you need is just a few clicks. To begin the discussion, email me at contact Sam Mollaei at sam@mollaeilaw.com
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 the 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 sam@mollaeilaw.com
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. Seven states do not impose a tax.
To choose the best state to form a trust, choose from one of these states:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
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 an 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 choosing the best state for LLC for your online business, call Sam Mollaei, Esq. at Mollaei Law at sam@mollaeilaw.com
Best State to Form an LLC for an Internet Business
The best state to form 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 to form an LLC for an internet business.
Keep in mind that if you 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 sam@mollaeilaw.com
Best State to Incorporate a Tech Startup?
The best state for LLC if you want 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 states to incorporate LLCs as a tech startup are Delaware, Nevada, and Wyoming.
Best State to Incorporate a Nonprofit Organization?
The best state to incorporate a nonprofit organization is generally the state where the nonprofit will operate in.
By incorporating in the state that the nonprofit will do business in, the nonprofit will face fewer 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.
What to do Next?
Choosing the best state for LLCs is a big decision that you shouldn’t make without careful consideration.
The short answer on where you should form your LLC is…
If you’re a US resident, you should form your LLC in the state where you are physically located.
If you’re a non-US resident, you should form your LLC in Wyoming, the best and easiest state for non-US residents.
Don’t fall for the misconceptions online that tell you that you should form your LLC in Delaware or Nevada or Wyoming. Follow the advice above and you will be fine.
If you have additional questions about choosing the best state to form an LLC, email me Sam Mollaei Esq., Business Lawyer for Entrepreneurs, at sam@mollaeilaw.com
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