#1 Best State To Form LLC For Online Business in 2023

 

If you’re starting a business, you’ll need to decide on which is the best state for incorporating a business…

Many entrepreneurs often face confusion as to which state to choose to incorporate their business even if they want to incorporate online. If you’re one of those, this page is for you.

Short answer: you should register your LLC or Corporation 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 or Corporation 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 you should form your company in Wyoming, the best and cheapest state for non-US residents.

If you decide to register your corporation outside of the state where you are located, then you will be required to register that out-of-state corporation as a Foreign corporation in your home state.

For example, if you register a corporation in Nevada (but you don’t live there), then you will be required to register that Nevada corporation in your home state (as a Foreign Corporation) to do business in your home state.

This means: you now have TWO corporations (one in Nevada and one in your home state), you have to pay TWO state filing fees, and you have to pay TWO annual report fees. In short, this can easily add up to DOUBLE the cost and DOUBLE the headaches since you have to maintain 2 corporations — which you do NOT want to do.

You can also be misled into registering your corporation in other states to take advantage of “tax savings.” This is simply NOT true.

Taxes are paid where the money is made (and NOT where the company is registered). For example, if you incorporate in Nevada and your corporation is doing business in California, you will still need to pay taxes in California because that is where you are making money.

Online businesses also need to pay close attention to what state is the best to form an LLC. Even if you are an ONLINE-based business, you cannot get around your state’s tax obligations simply by registering your corporation out-of-state.

For example, if you live in California and you run your online business LLC from home (or mostly from your home), then you have a California business and you should register your corporation in California.

If your company operates in 2 states or if you have offices in 2 states, you may register in any of these states, but you must also register to do business in the other states through a process called Foreign Qualification. I can take care of this for you as well.

So the answer is…

If you’re a U.S. resident, you should register your company in the state where you are physically located or if you’re a non-U.S. resident, then you should form your company in Wyoming, the best and easiest state for non-U.S. residents.

If you want to know more about the state for incorporating a business, I’ll be excited to help you on an individual basis. All you have to do is email me at sam@mollaeilaw.com

 

Best State to Incorporate: Where to Incorporate Online Business?

If you’re starting a business, you’ll need to decide on which is the best state for incorporating a business.

That’s because even if your business comprises of an online store, you’ll need to consider how you’ll be able to deliver your product to your customers. If customers place an order, think about the geographical boundaries and decide the state for incorporating a business accordingly.

Will your online business require an outsourced transport company that can help you transfer goods from one distant state to the other? What if the other state has licensing laws that are entirely different from those in your state?

If you’re unable to answer these questions, you should know which state will be the most suitable for your online business if you want to incorporate your business online. That’s how you can be sure that unexpected sales tax, income tax, franchise tax, and laws and regulations do not distract you from incorporating online.

Many entrepreneurs often face confusion as to which state to choose before incorporating a business. If you’re one of those who want to know about the best states to start your business or even if you want to incorporate your business online, this page is for you.

Researching the best state to form LLC for an online business is worth your time. After all, your decision about choosing the preferred state will not only influence the initial sales but will also affect the long-term growth of your business.

Curious to know about the best state to incorporate an online business LLC?

Well, here is the answer…

The best state to form an LLC for an online business depends on your physical location.

When incorporating a business, it’s generally best for you to incorporate in the state in which you have an actual presence.

For example, if you’re in California, then you SHOULD form your LLC in California.

If you’re in New York, then you should form your LLC in New York.

As a business lawyer, I’ve assisted hundreds of clients just like you start their business and I can help you in incorporating a business.

If you have any questions about which is the best state to form LLC for online business, email me at sam@mollaeilaw.com

 

What Happens If You Choose to Incorporate Online and Form an LLC Outside Your State?

If you are interested in incorporating a business (form an LLC or C-Corporation or S-Corporation) in any other state outside of the state where you have an actual presence or are physically doing business, you would have to also consider incorporating a business in your home state as well.

This is because you need to let your home state know that are you operating a “foreign” company 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.

So the short answer is:

• If you’re a U.S. resident, you should be incorporating a business in the state where you are
• If you’re a non-U.S. resident (living outside the U.S.), you should incorporate an online business in Wyoming

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.

Why Wyoming?

Well, because Wyoming is considered the best and most business-friendly state for non-U.S. residents.

If you have any questions about incorporating a business, email me at sam@mollaeilaw.com

 

What Does It Mean to Incorporate a Business?

Typically, “incorporating” means forming a Limited Liability Company (LLC) or Corporation.

Incorporating a business is the process by which a business entity becomes viewed as a separate legal entity within the eyes of the law.

That means the LLC or Corporation is afforded the same rights and allowed to function within those rights the same as an individual citizen.

There are many benefits of incorporating a business to become a separate entity. The corporation can initiate lawsuits the same as individuals, protect its shareholder’s personal property from seizure in the event of a lawsuit, and acquire personal assets, and remain in existence beyond the dispersal of shareholders.

If you launch your own business, you’re the sole investor. Plus, you’re the only one bearing any losses. But if you incorporate your business by forming an LLC, you’ll not be the only one responsible in case the company faces any loss. Instead, you’ll be only liable for the money you invested (rather than the entire investment).

 

Factors to Consider When Choosing the Best State to Incorporate Business

When thinking about incorporating a business, choosing to incorporate in a particular state simply because of your physical location is typically enough.

Typically, you want to incorporate an online business in the state where you’ll be conducting your business.

It does not matter that you’re operating an online business LLC. So for example, if you’re currently in California and operating a Shopify store, you want to incorporate your LLC or Corporation in California.

The term in “doing business” is defined in California as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.”

However, if you are a non-U.S. resident, you have many options on which state to incorporate.

Each State offers various incentives and penalties for incorporating a business, providing tax breaks or imposing hefty charges. Therefore, several factors must be considered before choosing the best state to incorporate business online:

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• Tax filing fees – these are the costs associated with filing the various corporate tax forms with the IRS.
• Laws and regulations for businesses –
• every state has a different law. Once you choose the best state to incorporate your online business in, you’ll be required to follow their laws and regulations.
• Income tax – this is in consideration income tax for the corporation because the corporation is now considered a separate entity.
• Sales tax
• Franchise taxes and regulations – this is only relevant for a business establishing a branch of an already existing business.
• Your choice of moving in the state – you’ll need to give this a thought in case you’re willing to live there

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In most cases, if you’re a non-US resident, you should form your LLC in Wyoming.

Wyoming is the best foreigner-friendly state for non-US residents.

 

Why Wyoming is the Best State to Incorporate Business for Non-US Residents

Wyoming is the best foreigner-friendly state for non-US residents.

Wyoming LLCs offer the best asset protection laws, no state or capital gain taxes, very low annual fees of $50, anonymous ownership (member names are not disclosed) and very foreigner-friendly laws. Benefits such as these, combined with my service, make Wyoming the best state to incorporate a business for non-US residents.

In the past 5 years, all of my non-US clients have been happy with forming their LLC in Wyoming and I’ve never had any issues with Wyoming.

That’s why I always recommend Wyoming LLC for my non-US clients.

Best State for Incorporating a Business

Again, if you want to incorporate online, you should incorporate your LLC or Corporation in the state where you will be doing business. So if you physically live and do business in California, then incorporate in California.

However, if you are a non-US resident, the best state to incorporate a business is among the 3 states: Wyoming, Delaware or Nevada (I recommend Wyoming).

 

Why Wyoming is the Best State If You Plan to Incorporate Online (Most Recommended)

Wyoming is the best foreigner-friendly state for non-US residents.

Wyoming LLCs offer the best asset protection laws, no state or capital gain taxes, very low annual fees of $50, anonymous ownership (member names are not disclosed) and very foreigner-friendly laws.

Benefits such as these, combined with my service, make Wyoming the best state to incorporate a business for non-US residents.

In the past 5 years, all of my non-US clients have been happy with forming their LLC in Wyoming and I’ve never had any issues with Wyoming. That’s why I always recommend Wyoming LLC for my non-US clients.

Why Delaware is the Best State to Incorporate an Online Business

Delaware is considered to be the most business-friendly state to incorporate online business LLC.

What makes it the best state to incorporate an online business in is the fact that the initial filing fee is minimum as compared to other states.

Delaware offers several tax breaks for LLCs, feature lower than market average tax filing fees, and have limited regulations in transacting business across state lines. Furthermore, Delaware is unique because of the Chancery Court. This is a Court established specifically to hear lawsuits for or against corporations.

Also, a business license isn’t required.

Non-residents don’t have to pay personal income tax. Plus, they can take the roles of shareholders, members, directors, or managers of a business. Good news for online business owners is that meetings can be arranged and conducted from anywhere.

Delaware is America’s most popular state to form an LLC or Corporation. More than half a million business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500.

 

Why Nevada is the Best State to Incorporate an Online Business

If you plan to incorporate in Nevada, it’s worth knowing that Nevada offers the best incentives in terms of taxes. This is because Nevada lacks business income tax, franchise fees, capital gains tax, state corporation tax, or inheritance tax. If you are unsure, that means there are zero specific taxes geared towards business. Furthermore, Nevada does NOT have an IRS Information Sharing Agreement at all. This makes Nevada the ultimate tax haven for those who want to incorporate in Nevada.

Nevada LLCs are allowed to issue shares for capital, real estate, personal property, or services. As a director, you can evaluate the value of the transaction and finalize the decision accordingly. The plus point is that LLC owners at Nevada can enjoy the privacy protection right. This means that you can act anonymously while purchasing shares. This keeps you away from the public view.

Read this: Wyoming vs Nevada LLC

 

What Happens If You Incorporate in the Wrong State

Note that even if you incorporate in a foreign state like Wyoming, your company may still be subject to registration as a “foreign entity” and compliance with the laws of states you transact business in.

A corporation or LLC conducting business in one state when incorporated in another is considered a foreign corporation and must qualify as a foreign LLC or corporation to legally do business in that state.

For example, a business incorporated in Nevada that wants to do business in California would be considered a foreign corporation in California, and as a result, the Nevada corporation must qualify (or register) as a foreign corporation to do business in California.

The biggest downside to incorporating in a different state is that your company will be required to file for authority to do business in the state where the business is located, and most likely will also have to purchase a Certificate of Good Standing or Certified Copy of the Articles of Incorporation (or Formation) from the Secretary of State where the company is incorporated.

These additional filing and documents fees make the use of an alternative state substantially more expensive than incorporating at “home.”

Obtaining a foreign qualification in your state is a legal obligation. In case you fail to register your business, you may come across fines and back taxes liability. Besides, if you’re not registered in a specific state, it means that you’re unable to sue in the same state.

 

Should I Incorporate?

Still wondering how to incorporate online? Unless you have a compelling reason otherwise, it’s generally best incorporating a business in the state you will be doing business.

Otherwise, if you are a non-US resident, then I would suggest forming your LLC or Corporation in Wyoming.

Wyoming is very efficient and foreigner-friendly. Forming your company in Wyoming is generally the easiest and most efficient.

If you are still in doubt about the best state to incorporate an online business, email me Sam Mollaei, Esq., at sam@mollaeilaw.com I will assist you.

 

Best State To Form LLC FAQ Schema

What is the best state to form a LLC?

The best state to form an LLC is Wyoming, as long as you do not have a business presence already in another state. Otherwise, it is better to establish your LLC where you have a business or industry influence. Wyoming is a good choice, as its fees are lower and the state offers asset protection and does not charge taxes for capital gains or taxes. Businesses also experience more privacy, as the members’ names are not disclosed.

Does it matter what state you form your LLC in?

Yes. It does matter where you establish your LLC. Usually, you should form your LLC in a state where you have a predominant business influence. However, if you are a non-resident, you can choose from one of various states to support business activities. Usually, it is best to choose Wyoming. The state’s annual fee is only $50, and you can own a business anonymously. The state also offers one of the best asset protection laws, and does not charge taxes for state earnings and capital gains.

What is the best state to start a business?

The best state to form a business is the place where you plan to base your business operations. For example, if you want to base your operations in California, you need to set up your business entity in California. However, if you are from another country, Wyoming has proven to be both business-friendly and low-cost with respect to business formations.

Do I need to form an LLC for an online business?

You do not have to form an LLC for an online business. However, it is a good idea to do so, as an LLC can protect your personal assets and provides more tax flexibility. If you want to do business, online or off-line, you should carefully consider your business priorities, and how you can protect yourself legally and financially.

Can I start an LLC in another state?

Yes. You can start an LLC in another state, provided that you do not have a prevailing business influence in the state or location where you live. Otherwise, if you are a US resident, it is better to form an LLC where you actively do business. If you live in another country, you can start a business in low-cost states such as Wyoming, Delaware, or Nevada. The state that offers more privacy with respect to filing and a lower annual filing fee is Wyoming.

Email me at sam@mollaeilaw.com with your questions