Best State to Form an LLC

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What’s the Best State
to Form Your LLC in?

Summary: For most people, it’s best to form your LLC in your home state. Since that is where you’re legally transacting business. Even an online business is still transacting in your home state. Forming an LLC in Delaware, Nevada, or Wyoming usually ends up costing a lot more. More headaches, too. Two exceptions: non-US residents can choose any state. And real estate investors often form a parent LLC in Wyoming, then the Wyoming LLC owns a child LLC set up in the property state. One quirk: if you live in California, you’ll doing business in California no matter where you form your LLC. So you’ll need to form an LLC in California or register your out-of-state LLC as a foreign LLC.

Video Transcript:

In this video I’m going to tell you why you shouldn’t form your LLC in any of the hyped up states like Nevada, Wyoming, or Delaware and why it’s best for you to form your LLC in your home state. We hear stuff like this all the time. ‘Nevada has no corporate income tax. Wyoming LLCs are the most affordable. Delaware is the best state to form an LLC in.’ To be completely honest with you, it’s mostly a bunch of BS. The disadvantages of forming an LLC outside of your home state far outweigh the perceived advantages. Let’s first talk about domestic LLCs and foreign LLCs. If you form an LLC in the state where you reside, AKA your home state, this is known as a domestic LLC. If you form an LLC outside of your home state, you’ll be required to register that out of state LLC as a foreign LLC in your home state. For example, if you form an LLC in Nevada, but you don’t live there then you’ll be required to register that Nevada LLC in your home state as a foreign LLC in order to do business in your home state. This means you now have two LLCs. One in Nevada and one in your home state. You have to pay two state filing fees. You’ll be required to pay for a registered agent in order to use their address for your Nevada LLC and you have to pay two annual report fees. We used Nevada as an example, but this same thing applies to any out of state LLC. In short, this can easily add up to double the cost and double the headaches since you now have to maintain two LLCs. We know the reason that most people become interested in Nevada LLCs is because they think they are going to save money on taxes. Many people are misled into forming LLCs in other states to take advantage of tax savings. This is simply not true. In this example, if you’ve formed a Nevada LLC and that LLC is doing business in your home state, not in Nevada, you still need to pay taxes in your home state because that is where you’re making money. A helpful saying to remember is that, ‘Taxes are paid where the money is made.’ Again, your foreign LLC will need to pay taxes in your home state since that’s where you’re operating and doing business. Even worse, you may owe additional taxes and fees in Nevada. Why do so many websites talk about Nevada? It’s a great question. Let’s dive into it a little bit more. Again, most of the benefits of forming an LLC outside of your home state are a far stretch from the truth. Both the states themselves and the companies promoting those states stand to gain financially by LLCs being created within that state’s borders. For example, if 40,000 LLCs are formed each year in Nevada, that’s approximately $3 million in annual revenue for the state. That’s just for the state of Nevada alone. It doesn’t include the tens of millions of dollars made by the companies promoting Nevada as the place to form your LLC. The funny thing is, compared to how much Nevada is hyped up there really aren’t that many LLCs formed there each year. There are far more LLCs formed in the states that aren’t hyped up. Furthermore, Nevada companies rank the highest in fraudulent activity. Look, don’t get us wrong. If you live in Nevada and you’re forming your LLC in Nevada, there is nothing wrong with that. If you don’t live in Nevada, again, it’s much better to form your LLC in your home state. What about Wyoming? Although there’s less fraudulent activity that takes place in Wyoming compared to Nevada, this state is also hyped up. Again, the advantages of forming an LLC outside of your home state far outweigh the perceived advantages and they’re not worth the extra hassle, time, or money. In fact, it will cost you a lot more in the long run. Before we discuss forming an LLC in your home state, let’s talk about Delaware. Although small in geographical sense, Delaware is quite large in terms of business activity. In fact, according to Wikipedia, over 50% of US publicly traded corporations and 60% of the fortune 500 companies are incorporated in Delaware. Did you hear the two words that I emphasized? Corporations and incorporated. You’ll notice that these statistics say nothing about LLCs. The fact is that Delaware is a good state to form a company in if you’re a corporation. Delaware is best suited for publicly traded companies that sell shares on the stock market like Microsoft, Apple, IBM, Chase, Coca Cola, or companies that have multiple investors or need to raise venture capital. Most of our customers don’t fall into that category. If you form an LLC in Delaware, but you don’t live there, you’ll still run into the same situation. You’ll need to register your Delaware LLC as a foreign LLC in your home state, pay annually for a registered agent, and pay the annual reporting fees in both states every year. However, if you do live in Delaware then you should form your LLC in your home state. Takeaways. Again, forming your LLC outside of your home state is just not worth the hassle and costs. This goes for Nevada, Wyoming, Delaware, and any other magical state. Attorneys Alexander Davey and Dana Schultz agree. Most of these states are just hyped up. Form your LLC in your home state. What about internet based and online companies? Even if you have an internet based business, you cannot get around your state’s tax obligations simply by forming your LLC out of state. For example, if you live in Florida and you run your online business from your home or mostly from your home, then you have a Florida business. Your best bet is to form your LLC in Florida. Now, forming your LLC in your home state. This is the least expensive, easiest to set up, and the best long term strategy for your LLC. The reason it is the easiest is because it is the right way to do it. If you have any trouble determining where your home state is, ask yourself the following questions. What state are you a resident of? Where do your employees reside? Where do you pay state taxes? If you own property, where is it located? Where is your office or where do you work from? Where’s the business physically located? Where do the LLC members or owners have a physical address? We hope this information is helpful to you and that it has cleared up a lot of hype and misinformation about which state is best to form your LLC in. Now, there is one exception and that’s real estate LLCs. As we mentioned earlier, when operating a business it’s best to form your LLC in your home state. This is usually not the case for real estate LLCs. Of course, if you’re investing in real estate in the state where you live, then yes it makes sense to form your LLC in your home state. If you’re investing in real estate located in another state, it’s best to form your LLC there. Your LLC is doing business in that state if you’re generating rental income, buying and selling, wholesaling, or basically any method where you’re making money from your real estate investments. If you were to purchase property out of state with an LLC that was formed in your home state, you would run into the same issues that we mentioned earlier. You’ll be required to register the domestic LLC in your home state as a foreign LLC in the state where you are purchasing property. Which means you have to pay filing fees in both states, pay for a registered agent in the foreign state, pay annual fees in both states, and deal with the headaches of unnecessarily managing two LLCs. In summary it’s best to form your LLC in the state where you are buying property. I hope this information is helpful for you. If you have any questions, please contact us.

We see this all over the internet:

“Nevada has no corporate income tax.”

“Wyoming LLCs are the most affordable.”

“Delaware is the best state to form an LLC!”

To be completely honest with you, it’s mostly B.S. and doesn’t apply to the vast majority of people forming an LLC.

The disadvantages of forming an LLC outside of your home state far outweigh the perceived “advantages”.

Let us explain…

Domestic LLC vs. Foreign LLC

If you form an LLC in the state where you reside (aka your “home state”), this is known as a Domestic LLC.

If you form an LLC outside of your home state, you’ll be required to register that out-of-state LLC as a Foreign LLC in your home state.

(related article: difference between a domestic LLC and a foreign LLC)

For example, if you form an LLC in Nevada (but you don’t live there), then you’ll be required to register that Nevada LLC in your home state (as a Foreign LLC) in order to do business in your home state.

This means:

– you now have 2 LLCs (one in Nevada and one in your home state)

– you have to pay 2 State filing fees

– you will be required to pay for a Registered Agent in order to use their address for your Nevada LLC

– You have to pay 2 Annual Report fees

(Note: we used Nevada above as an example, but the same applies to any out-of-state LLC.)

In short, this can easily add up to DOUBLE the cost and DOUBLE the headaches since you have to maintain 2 LLCs.

Now, we know the reason that most people become interested in Nevada LLCs is because they think they are going to save money on taxes.

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Taxes Are Paid Where Money Is Made

Many people are misled into forming LLCs in other States to take advantage of “tax savings”.

This is simply not true.

In this example, if you formed a Nevada LLC and that LLC is doing business in your home state (not in Nevada), you’ll still need to pay taxes in your home state because that is where you are making money.

A helpful saying to remember is:

“Taxes are paid where money is made.”

Again, your Foreign LLC will need to pay taxes in your home state since that is where you are operating and doing business.

Even worse, you may owe additional taxes and fees in Nevada.

So why do so many websites talk about Nevada?

Great question.

Nevada

Again, most of the benefits of forming an LLC outside your “home state” are a far stretch from the truth.

Both the states themselves and the companies promoting those states stand to gain financially by LLCs being created within THAT state’s borders.

For example, if 40,000 LLCs are formed each year in Nevada, that’s approximately $3 million dollars in annual revenue for the state.

And that is just for the state of Nevada alone.

It doesn’t include the tens of millions of dollars made by the companies promoting Nevada as “the” place to form your LLC.

The funny thing is, compared to how much Nevada is “hyped up”, there really aren’t that many LLCs formed there each year.

There are far more LLCs formed states that aren’t “hyped-up”.

Furthermore, Nevada companies rank the highest in fraudulent activity.

Look – don’t get us wrong, if you live in Nevada and you’re forming your LLC in Nevada, there is nothing wrong with that.

But if you don’t live in Nevada, again, it is much better to form your LLC in your home state.

So what about Wyoming?

Wyoming

Although there is far less fraudulent activity in Wyoming compared to Nevada, this state is also hyped up.

Again, the disadvantages of forming an LLC outside of your home state far outweigh the perceived “advantages” and are not worth the extra hassle, time and money.

In fact, it will cost you a lot more in the long run.

Forming your LLC where you reside is your best bet.

Before we discuss forming an LLC in your home state, let’s talk about the first state to ratify the United States Constitution…

Delaware

Although small in a geographical sense, Delaware is quite large in terms of business activity.

In fact, according to Wikipedia, over 50% of U.S. publicly traded corporations and 60% of the Fortune 500 companies are incorporated in Delaware.

But, did you see the two words we underlined above?

Corporations” and “incorporated“.

You’ll notice these statistics say nothing about LLCs.

The fact is that Delaware is a good state to form a company in… if you’re a Corporation.

Delaware is best suited for publicly traded companies that sell shares on the stock market (like Microsoft, Apple, IBM, Chase, Coca-Cola), or companies that have multiple investors or need to raise venture capital.

But, most of our customers do not fall into that category.

If you form an LLC in Delaware (but don’t live there), you will still run into the same situation:

– you’ll need to register your Delaware LLC as a Foreign LLC in your home state
– pay annually for a Registered Agent, and
– pay the Annual Reporting fees in both states every year

However, if you do live in Delaware, then you should form your LLC in your home state.

Home State vs. “Magical States”

Again, forming your LLC outside of your home state is just not worth the hassle and cost.

This goes for Nevada, Wyoming, Delaware, and any other “magical” state.

Attorneys Alexander J. Davie & Dana Shultz agree: most of these states are just hyped up. Form an LLC in your home state.

Online Business

We get lots of questions like this: “My business is 100% online. Where should I form an LLC?

The answer in this case is still an LLC in your home state. Do you think by just being “online” that you can get around corporate law and tax law? That’s not how it works.

Most people run their online business from their home. That’s where you’re legally doing business. And that’s where you should form your LLC.

Even if you travel often or run a location-independent business, the states don’t really care. You’ll need to pick a state where you have the greatest “connection”. This is most likely your home state, your state of residency, where you have your driver’s license, and where you pay state taxes.

My customers are all over the country/world

A lot of people are confused about the legal definition of “doing business”. They think it’s about where the customers are.

It’s not. It’s about where you are running and operating the business from.

You should form your LLC where you’re running the business and working from.

And just because you have customers or clients located in a few state doesn’t mean you need to register your LLC as a Foreign LLC in that state.

Issues with Seller’s Permits

Many LLC University® readers write to us about the issues they face after forming their LLC in the wrong state. We recently received this comment:

I live in California. I got some bad advice and made the mistake of registering my LLC in Utah back in June. Then I realized that I also needed to register in California as a Foreign LLC since I need a sellers permit for wholesale purchases.

If you need a Seller’s Permit (aka Reseller’s Permit or Resale Certificate), you’re likely going to to run into similar issues. What really stinks about this situation is how much time and money has already been invested. In our example above, this reader now has to 1) register his Utah LLC as a Foreign LLC in California, 2) dissolve his Utah LLC and form a California LLC, or 3) Re-domicile (also known as conversion or re-domestication) his Utah LLC to California… which isn’t the easiest process. Then he has to sort out bank accounts, address updates, IRS updates, and all the other registrations that are in place with the Utah LLC.

You’re also likely to run into similar issues if you have to register your LLC with your state’s Department of Revenue (ex: sales tax registration) but your LLC is formed in another state.

LLC in Your Home State

This is the least expensive, easiest to setup and the best long-term strategy for your LLC.

The reason it is the easiest is because it is the right way to do it.

Our friends at Northwest Registered Agent say it best:

“We get a lot of people these days coming up with some pretty goofy ideas. We always try to send them in the right direction before they go off and setup their ‘5 LLC asset protection strategy’ to protect their new Taco stand idea.”

If you have any trouble determining where your home state is, ask yourself the following questions:

– What state are you a resident of?
– Where do your employees reside?
– Where do you pay state taxes?
– If you own property, where is it located?
– Where is your office/where do you work from?
– Where is the business physically located?
– Where do the LLC members/owner have a physical address?

We hope this information is helpful to you.

We hope it cleared up a lot of the hype and misinformation about which state is best to form your LLC in.

Now, there are some exceptions…

Non-U.S. Citizens and non-U.S. Residents

Note: You don’t have to be a US citizenship or a US resident to form an LLC in the USA. Anyone can form an LLC in the USA.

If you are a non-US citizen or a non-US resident, it comes down to how the business is run.

If you’re going to have an office, employees, or physical presence in the USA, then you should form your LLC in that state. If you’re business will have no physical presence in the USA, then you can choose any state.

The type of US taxes and state taxes you pay will depend on how your business makes money. There isn’t a simple answer for the what the “best state” is for the lowest taxes for non-us residents/citizens. It all comes down to the type of business you have.

And this isn’t something we can answer for you. You’ll need to speak with an accountant familiar with international taxes and your business.

Real Estate LLCs

As we mentioned earlier, when operating a business, it’s best to form your LLC in your home state.

This is not the case for real estate LLCs.

Of course, if you are investing in real estate in the state where you live, then – yes, it makes sense to form your LLC in your home state.

But if you are investing in real estate located in another state, it is best to form your LLC there.

Your LLC is doing business in that state if you’re generating rental income, buying and selling, wholesaling, or basically any method where you’re making money from your real estate investments.

If you were to purchase property out of state with an LLC that was formed in your home state, you would run into the same issue that we mentioned earlier.

You will be required to register the Domestic LLC in your home state as a Foreign LLC in the state where you are purchasing the property.

Which means that you now have to pay filing fees in both states, pay for a Registered Agent in the foreign state, pay annual fees in both states, and deal with the headaches of unnecessarily managing 2 LLCs.

In summary, it is best to form your LLC in the state where you are buying property.

Matt Horwitz
Founder & Educator, LLC University®
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! LLC University® teaches people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your business journey.
Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

39 Comments

  1. kevin February 2, 2019

    I own Properties out of state. My understanding is the ideal situation is to form an LLC in Wyoming because it has the most protections for charging orders. Then all the properties are set up in LLCs in the state they reside so you have legal standing there but all are owned by the master LLC in Wyoming. Does this make sense?

    reply
    • Matt Horwitz February 9, 2019

      Hi Kevin, yes, this is a popular setup for real estate investors. We will be putting together a guide on this in the near future. The “parent” LLC is in Wyoming, then all “child” LLCs are formed in the property states and are owned by the Wyoming LLC. Hope that helps.

      reply
  2. kevin February 10, 2019

    Wow Matt, thanks for the reply. That would be awesome. Any idea when? I’ve been putting it off. I spoke with a company that charges $1800+ to set up the LLC in Wyoming and they say they put in clauses that others don’t in their operating agreements that makes theirs superior to others? Ever heard of this?

    reply
    • Matt Horwitz February 10, 2019

      Hey Kevin, it’s towards the top of our list, but there’s a few things in front of it. Not sure the exact timeline yet. In the meantime, I just sent you an email. Thanks.

      reply
  3. Greg February 11, 2019

    Hi Matt,
    I read through many (not all) of the comments and unfortunately did not come across one similar to mine (but apologies if you already responded to something similar). Here is my scenario: I am a resident of and do all my banking in California. A separate Delaware LLC was formed with a separate California foreign LLC for each of the 16 investors in a California rental property. Each LLC was a member of an umbrella LLC. The property was sold and even though the overall umbrella LLC was dissolved, I modified my articles of incorporation to include newly purchased investment portfolios that include properties in multiple states. Every year I pay income taxes in those states for the rental income (my portion of the rental income is so small that I pay between $1 and $15 for the different states where taxes are due). Soooo, here are my questions:
    1. Is there a reason to open an LLC in each of those states (there are 10 states that have income tax requirements)? My real estate dealings are so small and the structure of the investments is such that I’m a small percentage of a big investment that is managed by a management company.
    2. I do not think I need to maintain the Delaware LLC as none of my investment properties are in the state of Delaware. Is it possible to cancel the Delaware LLC and change the California foreign LLC to a domestic LLC without cancelling the California foreign LLC and registering a new domestic LLC?
    (I hope this made sense…. I know, I should consult a tax lawyer….) Thanks for any feedback.

    reply
    • Matt Horwitz February 15, 2019

      Hi Greg, this question feels quite complex. Best practice to run something like this by an attorney or qualified tax professional. Generally speaking, your LLC won’t have to register as a foreign LLC simply by nature of having to file a state return. The later question would imply a “re-domestication”, called a conversion in California. The Delaware LLC can convert into a California LLC. The Delaware LLC can then withdraw its foreign LLC authority and dissolve in Delaware. Hope that helps and thanks for your understanding.

      reply
  4. Esther February 12, 2019

    Thanks for your invaluable info! Question: If I am creating an LLC in order to do airbnb arbitrage which state do I choose? The state I live in (California) or the state I will be doing airbnb arbitrage in or a state that has low fees (Wyoming)?

    Airbnb arbitrage is forming a corporation and then renting corporate units from apartment complexes and using them as rentals on airbnb to make a profit fyi.

    reply
    • Matt Horwitz February 15, 2019

      Hi Esther, where an LLC should be formed (or registered as a foreign LLC) comes down to where it is legally transacting business. California is very strict, both via corporate law and tax law, as to the definitions of “transacting business”. Most California residents’ LLCs will be doing business simply by the nature of being a California resident. Please see when is an LLC doing business in California for more details. Therefore, if an LLC were formed outside of California, it would then need to be registered as a foreign LLC in California. Furthermore, California LLC franchise tax will still need to be paid, in addition to other applicable California returns with the California Franchise Tax Board. Generally speaking, in the example of Airbnb arbitrage, if an LLC were formed in California, it would then need to be registered as a foreign LLC in each state where properties are being arbitraged (since the LLC will be transacting business in those states as well). Hope that helps.

      reply
  5. Marie February 12, 2019

    Hi Matt,
    I live in NY and i own real estate (rental property) in Alabama, do i need 2 LLcs?
    Thanks in advance.

    reply
    • Matt Horwitz February 18, 2019

      Hi Marie, where an LLC should be formed (or registered as a foreign LLC) comes down to where it is transacting business. In this case, you’re transacting business in Alabama (and possibly New York). You could form an LLC in New York and then register the NY LLC as a foreign LLC in Alabama. Another option is to form an Alabama LLC (or LLCs) that is/are owned by an LLC formed in New York. Or you may just be able to form an LLC in Alabama (a “domestic” LLC). It’s best practice to speak with an attorney about this, as there are a few ways to go about setting it up. Once you figure out your setup, you’ll want to transfer title of the property into the LLC. Hope that helps and thanks for your understanding.

      reply
  6. Alonzo Noble February 16, 2019

    Hi I’m looking to set up a LLC and start investing in renal real estate. I will be registering in the state I plan to do business in. My question is I don’t want to limit myself to just one state. So if I decided to do business in other states and I didn’t want to register my LLC as a foreign LLC every time I invested in real estate in another state other then the one I live in, how would I approach that scenario?

    reply
    • Matt Horwitz February 18, 2019

      Hi Alonzo, if you registered your LLC as a foreign LLC in all states where property is held, it’s important to also know that you still have just 1 LLC, not multiple LLCs. Some investors prefer multiple LLCs. There’s one variation. You could also form domestic LLCs in the states where the properties are located. You could also form a parent LLC in one particular state and then form child LLCs in the states where properties are located. The domestic child LLCs would be owned by the parent LLC. The answer isn’t cut and dry. And it’s best practice to discuss your situation and options with an attorney… or a few. Hope that helps.

      reply
      • Alonzo Noble February 19, 2019

        Hi Matt. Thanks for the info. I don’t like the idea of have multiple LLC’s in different states and I think registering in my primary state and paging for a foreign LLC in every state that I do business would be pricey. So I think the parent and child LLC would be the way I want to go.

        reply
        • Matt Horwitz February 21, 2019

          Hi Alonzo, I don’t understand your reply. You said parent/child LLC will be the way to go, but then you said “I don’t like the idea of having multiple LLCs in different states”. It’s implied here that the child LLCs would each be formed in the states where property is located. Furthermore, having child LLCs (which just means an LLC being owned by another LLC) in multiple states will be very similar in costs to registering an LLC as a foreign LLC in multiple states.

          reply
  7. Azif V February 20, 2019

    Hi Matt, Hope all is well. I am real estate investor and i have a question on LLC in multiple state. I own few rental properties.

    1. Property A – in NY – Under Property A LLC registered in NY (Home State)
    2. Property B – in Mass – Under Property B LLC registered in Mass (Foreign State)
    3. Property C – in Alabama – Under Property C LLC registered in Alabama (Foreign State)

    Is it a Good Idea to open a New LLC in Nevada as a Parent company, and have Property A, B, C as a child under the Nevada entity.

    I assume i would have to pay the following:
    1. Pay annually for a Registered Agent for Mass, Alabama and Nevada
    2. Pay annual reporting fee for Mass, Alabama, Nevada and New York

    Thanks,
    Asif

    reply
    • Matt Horwitz February 21, 2019

      Hi Asif, yes, you’d have Registered Agent fees and annual report fees in each state where you have an LLC formed (whether the LLC is owned by you or owned by an LLC). It’s best practice to speak with an attorney about the holding company as you’ll need to assign your LLC Membership Interest for all 3 of the existing LLCs to the holding company LLC, if you take that route. You’ll also need to amend the Operating Agreements. There may be additional filings/changes needed in the states. For example, if you have registrations in place with the Department of Revenue/Taxation (or equivalent department). Hope that helps.

      reply
  8. Daniel Schilling February 20, 2019

    I have residents in two states. Arizona & Washington. My drivers license is AZ and my “primary residence” is as well. I also own a rental property in the state. I have a “2nd home” in WA state of which I spend about 50% of the time there. Most of my business is coming through WA however I bill my clients using my AZ LLC. I want to open another LLC and given that most of my business’ income comes through WA right now does it make sense to open a WA LLC too? I ask this because WA state does not have income tax. I am not sure that even though the business is through WA and I bill through my AZ LLC if I am required to pay state income taxes through AZ for the WA income. Thanks!

    reply
    • Matt Horwitz February 21, 2019

      Hi Daniel, it would be best practice to speak to a tax attorney or tax professional about this. Since an LLC is a pass-through entity, income should be apportioned to the state where it’s made. Meaning, your accountant should be filing in both states, and apportioning the income appropriately. Hope that helps.

      reply
  9. Conrad February 24, 2019

    Hi,

    i was thinking about buying a house to put on the market for rent, do i have to start a business for that? Can i open a bank account without a address over there, and can i get a loan to do this?

    thanks

    reply
    • Matt Horwitz February 24, 2019

      Hi Conrad, it’s not a requirement to form an LLC for real estate. It’s up to you. Yes, you can open a personal business bank account for this. If you qualify, then you can get a loan. That would be a conversation for a mortgage broker though. Hope that helps.

      reply
      • Conrad February 25, 2019

        Thank you for the info!

        reply
  10. Jay February 25, 2019

    Hi Matt,

    Looking to form in Wyoming but live in TN. Apparently I would have to also register the wyoming LLC in TN as a foreign LLC from what you are saying. Registering as a foreing LLC means applying for Certificate of authority which costs the same as forming an LLC ($300). So as far as cost it is more costly to have the Wyoming LLC + Foreign LLC in TN.
    But, what about the protection that Wyoming gives you from creditors vs LLC from TN?
    Wouldn’t that make it worth the extra cost? Also, this would be for a single member LLC, which apparently also makes a difference?
    I’d appreciate you comment on this if possible. Thanks

    reply
    • Matt Horwitz February 25, 2019

      Hi Jay, it this context, it would be more common to form an LLC in Wyoming and then they Wyoming LLC would own a domestic LLC in Tennessee. It’s best practice to speak to an attorney in Tennessee though, just to dive into the details. There may be other options available to you as well. Hope that helps.

      reply
  11. Ray T March 5, 2019

    I’m about to form a Multi Member LLC, I live in Florida and the other member resides in Maine. Our business will be all over the U.S., some could be in FL and some in Maine but not anymore than any other State. We will be producing mostly energy efficiency products as well as some consulting. I’m trying to decide the best State to form the LLC, do you have any advice?

    Thank you,
    Ray

    reply
    • Matt Horwitz March 5, 2019

      Hi Ray, where an LLC should be formed and/or registered as a foreign LLC comes down to where the LLC is legally doing business. These laws vary by state. Based on what you’ve shared, it sounds like your LLC will be doing business in both Maine and Florida. If that’s the case, you could form an LLC in Florida and register it as a foreign LLC in Maine… or you could form an LLC in Maine and register it as a foreign LLC in Florida. Hope that helps.

      reply
  12. Ray T March 5, 2019

    Hi Matt,

    Thanks for your timely response as well as all the information you provide here. I should clarify things a bit. Even though the members of the LLC or whichever entity makes the most sense, most of our business will be outside of FL and ME. I’m leaning towards an LLC based on simplicity and lack of double taxation. I believe for at least the 1st year or so, most of the business will come from CA. but from there on it can be from any State.

    Ray

    reply
    • Matt Horwitz March 5, 2019

      Hi Ray, you’re welcome. The details of what it means to be doing business can be a bit complex. Generally speaking, just selling to customers in multiple states doesn’t mean you are doing business there. While there may be a sales tax nexus if you’re selling physical goods, this is interstate commerce. So you may not need to register your LLC to do business in states just because you are selling to customers there. However, if you’re regularly consulting with clients in California, the state is likely to find you doing business there. Again, in general terms, where activities are happening in the context of running business is where an LLC is likely considered to be doing business. Having regular meetings in a state with clients is also usually considering doing business. Once you determine where to form your LLC, it may very likely need to be registered as a foreign LLC in one, or multiple, states. Hope that helps.

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  13. Doug June 20, 2019

    Hi, Matt. I want to set up an LLC for a consulting business. Currently I live in Alabama, but will be moving to Arizona in 3-4 months. In which state should I set up my LLC?

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    • Matt Horwitz June 20, 2019

      Hi Doug, what most people (with consulting businesses and businesses like that) do who are moving soon is form the LLC in the state where they will ultimately be residing and doing business. That’s usually the state where they are moving to. Hope that helps.

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  14. John June 25, 2019

    Hello, thanks for this information. It makes sense but you’re the only one telling us this. I’m surprised some of the major sites like incfile and legalzoom, etc don’t tell us this. Do you know why?

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    • Matt Horwitz June 27, 2019

      Hi John, while we can’t speak on behalf of other companies and why they make decisions, we can say this: if you dig a bit deeper into the research and/or speak with a few attorneys, you’ll find the same answer. An LLC needs to be formed (or registered to do business as a foreign LLC) in the state(s) where it is legally transacting business. And we’ve also seen articles on both states that talk about forming an LLC in your home state. Hope that helps.

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  15. SK June 25, 2019

    Hi Matt,

    I am considering registering an LLC to manage my real estate investments. I own properties in my individual name currently in the following States:

    1) MD (currently – Home State)
    2) CT
    3) GA
    4) SC
    5) FL (most likely future retirement state)

    Where should the LLC be registered, in MD or FL? I do recognize that it would need to be registered in other states as a foreign LLC. Do I need to have a registered agent or can my property address in that state serve that function?

    Please advise.

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    • Matt Horwitz June 27, 2019

      Hi SK, a property address will likely not suffice since the Registered Agent (assuming that’s you) won’t be there. We’re unable to comment as to where the LLCs should be formed and/or registered. There are numerous ways to structure/register LLCs when there are multiple assets and they are located in multiple states. Ultimately, regardless of where an LLC (or the LLCs) are formed, the LLC that is holding property either needs to be formed in that state where the property is located or registered as a foreign LLC in that state since that is where the LLC is legally transacting business. Apologies we couldn’t be more specific. We appreciate your understanding.

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  16. Douglas July 1, 2019

    Hi Matt

    I am looking at starting remote health coaching business. I am a U.S. citizen but I am currently living in Germany with no plans to move back to the U.S. in the near future. My wife and I are registered as residents here in Germany. Prior to moving to Germany I was a resident of NH for my entire life. I still receive my U.S. based mail at my parents house in NH and have changed my address for my U.S. bank accounts and drivers license to their address. As a remote health coach I could potentially have clients from any state in the U.S. and would be paid electronically. To start I would be focusing on U.S. based clients but in the future I would be looking for clients from Europe as well. Would an LLC be the best type of business for me? Would an LLC registered in NH be considered a domestic LLC even though I am physically living in Germany?

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    • Matt Horwitz July 6, 2019

      Hi Douglas, while we’re unable to say “you should form an LLC” or “an LLC is best for this situation”, it is most commonly used in situations similar to this. We have more information on LLCs and other entities here, if helpful: LLC vs Sole Proprietorship vs Corporation. And yes, even if you are resident in Germany, an LLC formed in New Hampshire would be a domestic New Hampshire LLC. Hope that helps!

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  17. Roger January 7, 2020

    Interesting topic! I am a dual US/Canada citizen, currently residing in Pennsylvania and I have a single-member LLC registered in PA. My only work is consulting for a company in NJ. But I expect to move to Canada sometime this year, and continue consulting for the company in NJ. Can I maintain my LLC in PA when I reside in Canada? Can I report my consulting income (from my LLC) as ‘other income’ on my Canada tax return in the same manner as I do on my US tax return? (As a US citizen, I will still need to file a US tax return when I reside in Canada.) Any guidance will be much appreciated! I realize that I may need to find a Canada/US tax accountant…

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    • Matt Horwitz January 9, 2020

      Hi Roger, yes, you can keep your Pennsylvania LLC while residing in Canada. You’ll want to speak with an accountant familiar with both jurisdictions. Typically, Canadians with US LLCs have to pay tax twice; once to the IRS, and a second time to the CRA. We recommend reaching out to GW Carter as they specialize in taxes for non-US citizens and non-US residents.

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      • Roger January 9, 2020

        Hi Matt, thanks very much for the reply.
        Is there any way to avoid the double taxation? I’ve considered that I could change my consulting agreement and just get paid directly as an individual, not via the LLC. But then I would lose whatever liability protection that I have with the LLC… although I’m not sure that the LLC provides very strong protection anyway, for a single-member LLC.
        Roger

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        • Matt Horwitz January 9, 2020

          Hi Roger, you’ll need to speak with an accountant. We haven’t researched and written in depth about Canadians owning US LLCs yet. Thank you for your understanding.

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