What’s the Best State to Form an LLC (if in the Military)?

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What’s the Best State to Form an LLC (if in the Military)?

If you and/or your spouse are in the military, constantly moving around already has enough challenges. And once you get settled, you’re not 100% sure how long you’ll be there and when the next PCS (Permanent Change of Station) order comes through.

Balancing the move, family life, car registration, and taxes are enough; and now this LLC confusion?! What the heck!

I empathize with you so much here. Not only are you and your family making a serious commitment to our country, but you have to deal with all the ambiguity and uncertainty around the common question, “Where should I form an LLC if I and/or my spouse are in the military?”

Let’s take a look at this message from Robert:

“As a member of the military, if I create an LLC, would I need to dissolve my LLC and create a new one in each state I move? I don’t keep an address in a state but I do plan to keep my state (Florida) as my “Legal residence”… but again, I have to move every couple of years. How would it work in that scenario?”

Domestic LLC and Foreign LLC

Robert is asking, if every time he moves, does he need to shut down his old LLC (known as Dissolution), and form a new LLC.

When “LLCs move state”, there are two basic ways (excluding redomestication) to do it:

  1. Dissolve the LLC in the old state, then form an LLC in the new state.
  2. File a Foreign LLC Registration, allowing the existing LLC to operate within the new state’s borders.

Robert’s question does not mention option #2, most likely because he wasn’t aware of Foreign LLCs.

Based on Robert’s question, we would recommend going with option #2 (Foreign Registration).

This allows the original LLC to operate within new states where Robert moves, and he can keep the same EIN/Federal Tax ID Number and bank account.

The Basics of Foreign LLCs:

First, LLCs can only be formed on the state-level (not on a federal/national level). Therefore, LLC laws are written and enforced on a state-by-state basis (each of the 50 States, as well as Washington D.C., have LLC Acts or Statutes). And an LLC just can’t operate anywhere it pleases, without first registering in a new state.

Wherever the LLC is originally formed is known as the “home state”, and the LLC is known as a Domestic LLC in that state. If you want your LLC to operate and do business in a new state, you must file Foreign LLC registration documents (and pay a filing fee) in the new state.

If you’re in the military and constantly moving around, you can see how this can quickly become a major pain in the ass!

“So What’s the Best State?”

Yes, I can hear you saying, “I get it, I get it… so what’s the best state?”

We recommend forming the LLC in the state you use as your legal residence and/or the state where you have the most “context”. By context, we mean familiarity, a street address (where someone can get your mail), family and friends.

In Robert’s situation, that means he’d form a Florida LLC and if he moves to Arizona for an extended period of time, he’d register his Florida LLC as a Foreign LLC in Arizona. He’d continually register his Florida LLC as a Foreign LLC in all the states he lives long-term.

And yes, unfortunately, this can get a little expensive… but operating illegally and without authorization within a state’s borders carries with it risks:

  • You may be denied access to the court system, which eliminates your ability to bring suit.
  • The state in which you are illegally doing business in has the ability to slap you with fines and penalties.
  • In many states, there is a chance you can lose the liability protection of the LLC and be held personally responsible for actions, which can expose your personal assets.

“What if I Don’t File a Foreign LLC Registration in Each New State?”

Situations may arise where you might only live in, say Arizona, for 3 months. And you’re asking, “Is is really worth the hassle of the Foreign LLC qualification every time?”

There aren’t “LLC police” checking up on you on a weekly basis, so there is a chance you can get away with not registering as a Foreign LLC. But again, there are risks, and we recommend speaking with an attorney if you’re not sure what constitutes “doing business” (doing business in a state is what legally triggers the requirement for Foreign LLC registration).

And although there are no “LLC police”, there are internal compliance departments within each state’s Department of Revenue and Secretary of State’s Office. If you need to consult with an attorney, a service we use and recommend is Avvo Advisor.

If you need to form an LLC in your home state, check out our free LLC guides.

If you need to register your LLC as a Foreign LLC in another state, please see the state resources below.

Documents and Fees for Foreign LLC Registration

Important Notes:

– There are additional steps and fees for Foreign LLCs. The forms and information below is just for registration/qualification.

– Most states will require a Certificate of Authority, Certificate of Good Standing, or a similar document from your existing state before approving your Foreign LLC application.

– The prices below are subject to change by the states, so please make sure to call each state and double-check on fees.

– Foreign LLCs are subject to Annual Reporting requirements.

For a full list of Foreign LLC registration fees by state, please see this table:
Foreign LLC Registration Fees for all 50 States

28 Comments

  1. K. S. January 29, 2018

    I’m contemplating starting an LLC and am also military. Appears to be a huge headache.

    Near as I can tell the “home” state normally requires a registered agent to be physically located within the state of registration. Since the military member is not in the home state this will require hiring somebody to act as the registered agent.

    The other issue that I see arising is that the military member is physically residing in the new state. While I’ve not tried to register as a foreign LLC yet, I imagine the question will arise as to why I am living inside of the new state and want to register as a foreign entity. I see them saying, no, no, no….. you are a domestic entity now since you reside here and are engaged in a business venture.

    I hope this is not true, but I foresee being a transient LLC as not being a very smooth road.

    Thanks again for the article.

    reply
    • Matt Horwitz January 31, 2018

      You’re welcome K.S. Yes, unfortunately, constantly “moving” an LLC is a pain in the neck. I recommend setting up the LLC in your “most stable” home state; the one where your driver’s license is, maybe the state where you’re from, where you have family, etc. Just use that LLC until you’re out of the military and have “settled down” or chosen you’re next city/town for the foreseeable future. Then you can move the LLC there in one of 3 ways. Dissolve old LLC and form new LLC, file a Foreign LLC registration, or redomicile (if both states allow). Hope that helps!

      reply
  2. Karen February 11, 2018

    Hi Matt,
    I am a military spouse and considering an LLC, but to complicate matters even further, we are currently stationed in the United Kingdom. My last state of residence(where I vote and have DL) was Virginia, but I have no other ties to the state. The state with the most family ties is Texas, but I also have friends to help in Colorado, where my customer base is located.

    Would I still need to register as domestic in VA, then register as foreign LLC in Colorado?

    Any pointers would be great!!
    Karen

    reply
    • Matt Horwitz February 12, 2018

      Hi Karen, since you’re not really residing in the US, you can really pick any state. It’s best practice however to choose a state where the “substantial” amount of business is conducted. So I’d ask you, if/when you return to the US, where do you think you’ll be running the business from? Sounds like you’d be running a lot from home, so that would still apply. Does that help? Do you have state-specific plans for after you return to the US?

      reply
  3. Dev February 28, 2018

    Wow, this website had all the guidance and clarity I needed. Just wanted to say thank you for putting this together!

    reply
    • Matt Horwitz February 28, 2018

      Hey Dev, super awesome! Our goal is to be as helpful as possible, so thanks so much for your comment. It means a lot :-)

      reply
  4. Chris April 24, 2018

    Hi Matt,

    I am a military spouse and home of record is FL. I have an LLC there now, however, don’t live there. Thanks for putting the info out about the foreign LLC. However, I was wondering would it just be easier to open another LLC in our new state vs filing for a foreign LLC?
    Thanks!

    reply
    • Chris April 24, 2018

      Maybe I should clarify more, meaning keeping the original domestic LLC still in FL but just file for another LLC in the new state with the same name and then just dissolving that one (or each one when moving) while always keeping my FL LLC instead of using filing for a Foreign LLC?
      Thanks!

      reply
      • Matt Horwitz April 29, 2018

        Hi Chris, I think you have the best solution. Keeping the “base” Domestic Florida LLC and registering as Foreign LLC where needed, then when moving, withdrawing the Foreign LLC registration. One small note, in order for a Foreign LLC registration to be valid, that “base” Domestic LLC must always remain in existence (and in good standing in FL). So you wouldn’t be dissolving your Florida LLC in any case that you’ve mentioned. Hope that helps.

        reply
        • Chris Marion April 29, 2018

          Thank you!

          reply
          • Matt Horwitz April 29, 2018

            You’re welcome Chris :)

            reply
  5. R.M. May 2, 2018

    Hi Matt,

    I am a military spouse and currently live in South Korea. My “state” abbreviation is AP (Armed Forces Pacific – if that helps with your answer). My husband and I will be stationed here at the minimum of two – three years. I want to start an LLC for my business that will based out of my home in South Korea and will be providing services to people who live here. My previous address (as of 2 months ago) was in Florida where I have family still living. I am unsure as to what state we will be at once my husband’s current deployment is up. What would your recommendation be??? Any pointers would be welcomed! Thank you!

    reply
    • Matt Horwitz May 13, 2018

      Hi R.M., in this case, I would form an LLC in the state with the most context and familiarity. Which sounds like Florida, since family (and a reliable address) are available. You’ll be able to run this business from South Korea. And later, a few years down the road, if you settle down in a different state, you can either file a Foreign LLC registration, close the FL LLC and open a new LLC, or redomesticate the LLC (if allowed). Hope that helps.

      reply
  6. Christy Horne May 10, 2018

    Hi Matt. I am an active duty spouse residing in Rhode Island but claim residency in FL. We just moved to RI two years ago but plan to keep our residency in FL. I don’t have a physical address in FL but still have my FL driver’s license. I’m not sure which state I should get my LLC in. Please advise. Thank you.

    reply
    • Matt Horwitz May 16, 2018

      Hi Christy, in your case, I think creating a “base” LLC is a good idea. So Florida. Then when needed, you can register your Florida LLC as a Foreign LLC in the states where you temporarily reside. Then when you move, you can revoke the Foreign LLC qualifications. If you don’t have an address in Florida, I recommend hiring Northwest Registered Agent. They’ll serve as your LLC’s Registered Agent and they’ll also let you use their Florida office address throughout your LLC filing. Hope that helps.

      reply
  7. Gigi June 26, 2018

    Hey Matt,
    I’m glad I stumbled across this website!

    Currently, my business is registered in Alabama. We just moved to Florida (military) where we plan on switching over our DL and residency, however, we will only be here for two years at the most. We have no ties to the state other than living here now and Alabama will not let me transfer my business to Florida.

    My husband plans to stay in the military for 10 – 20 more years and I would like to find a state that, in short, is easiest to file with while we move around. I found Alabama’s business system to be extremely frustrating at its best.

    I work solely in digital files from my home office (does that change anything?). Any suggestions on which state to register with?

    It sounds like I’ll be spending some money dissolving my business in Alabama and then registering it in another state, so I’d like to do it right and do it once.

    Thank you!
    Gigi

    reply
    • Matt Horwitz July 30, 2018

      Hey Gigi, I hear you. Alabama is a bit back-dated and cumbersome in many ways. Will you keep Florida as your state of residency after the 2 years there? When you say “Alabama will not let me transfer my business to Florida”, what specifically do you mean? Are you referring to an LLC domestication to Florida or something else?

      reply
  8. Gigi July 30, 2018

    Hey Matt,
    Thanks for the reply back. Yes, we plan on keeping Florida residency while we move around. As for the transferring question, I guess there are some states that have an agreement where you can transfer the business to the new state…? Maybe I misunderstood.
    I’m leaning towards dissolving in Alabama and restarting in Florida, mainly to prevent having to do too many states for taxes (and because Alabama is archaic). Do you think this is the best plan of action?
    Gigi

    reply
    • Matt Horwitz July 30, 2018

      Hey Gigi, you’re welcome :) Didn’t mean to take so long. Just have about 176 questions to reply to ;) I would do exactly the same in your situation. Dissolve the Alabama LLC, form a Florida LLC, and operate with that. Do you have a long-term address in Florida that you can use for the Registered Agent address + principal office address? If not, there are two options to go about it.

      reply
      • Gigi Kahanamoku July 30, 2018

        I 100% appreciate it! Thank you for even getting to my question! You and your site have been a wealth of knowledge and I appreciate it greatly! (I plan on paying for the registered address service once we leave Florida, as I think that will be the best way to keep the business as solid as I can in Florida!) Thank you Matt!

        reply
        • Matt Horwitz August 14, 2018

          You’re welcome Gigi! That sounds like a solid plan. Let us know if you need anything else. And thank you!

          reply
  9. Courtney August 20, 2018

    My husband is active duty military and we just finished a PCS move to his first station. Can we still register an LLC in our state of residency or should we just register for one in the new state? Thanks!

    reply
    • Matt Horwitz August 31, 2018

      Hi Courtney, you may want to consider forming the LLC in your state of residency. If you form the LLC in a state where you will only be temporarily, “moving” that LLC will be a hassle and likely more expensive. Hope that helps.

      reply
  10. Jessica R Witham September 4, 2018

    I am a military spouse and we are currently based in California. We are Florida residents. We have our drivers license still there. I am opening a promotional product LLC. I work out of my home and my customers are in several different states?

    Is Florida my best option to open my LLC? Do I also have to have a foreign LLC in CA? If yes, do I have to pay CA the hefty $800 a year?

    reply
    • Matt Horwitz October 12, 2018

      Hi Jessica, how long will you be in California? You’re likely fine to just form the LLC in the state where are technically residents; in Florida. Hope that helps.

      reply
  11. Marlene October 22, 2018

    My family and I just PCSed to VA from TX recently. I registered a business in TX with the intent to then register in VA as a foreign entity. Then I started thinking: what are the tax implications for doing that? Is it easier for me to just start a domestic LLC here in VA and not a foreign entity and just have two (one in TX and one in VA)? I will not be doing any business in TX though since I am not there so…. a tad confused. Would the one I registered in TX basically just save the name if I don’t open a foreign entity? I met with attorney recently and he wasn’t very helpful so that was disappointing luckily it was a free consult. Any advice you could give would be great.

    reply
    • Matt Horwitz November 22, 2018

      Hey Marlene, bummer about the attorney. You’d have to speak to an accountant regarding tax implications, but likely, a tax professional would apportion the income to the state where it was earned. I would consider just forming a Virginia LLC since you won’t permanently remain in Texas. Hope that helps.

      reply
      • Marlene Mireles November 23, 2018

        Thank you

        reply

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