Best State to Form an LLC

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

Short Answer: It’s best to form your LLC in your home state.


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.

Need help with your LLC? Have a professional LLC service file for you:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)

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.

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Matt Horwitz
Founder & Educator at 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! We teach people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your entrepreneurial journey.

355 Comments

  1. Antonio Oliveira Neto December 18, 2016

    Hello, I want to start a LLC in the US just for investment in the Financial Markets. I live overseas and I don’t have a US address. I thought in starting it in a low cost State (NM, OH or SC).

    My question is: Do I have to get a virtual address in that state or not? If so, any suggestion on a low cost alternative? Thanks and Kind Regards.

    reply
    • Matt Horwitz December 18, 2016

      Hey Antonio, non-US citizens and non-US residents have a lot of options when it comes to what state they choose. And apologies for any confusion, since the video and webpage don’t pertain to you. I recommend checking with a tax professional who understands international taxes, as you may (or may not) need to file/pay US taxes, as well as taxes in your own country. I recommending making a few tax phone calls and then selecting the US state with the most favorable tax treatment for how your income is derived. International tax law is quite gray, so I’d talk with at least 5 people to get clarity. In general, non-resident aliens who have capital gains, and have their money held in a USD denomination, in a US brokerage account, will not pay capital gains tax in US. But you likely need to pay capital gains tax in your country. Also, dividends are taxed differently. You likely need to pay a 30% tax on dividends that are paid by US companies. That is just “in general” though. There are many exceptions (ex: dividends paid by non-US companies) to your situation though, so again, best to consult a number of tax professionals knowledgable and experienced in US/international tax law. Hope that helps a bit :)

      reply
    • Matt Horwitz December 18, 2016

      And as far as an address goes, yes, you’ll need a physical/street address on your LLC forms. This is called the Registered Agent in most states. I would avoid the virtual office services, as those are more expensive. I recommend just hiring a Commercial Registered Agent. The company we recommend is just $125 per year: Northwest Registered Agent. Any mail that is sent to your LLC will be scanned by them and uploaded to your online account. Hope that helps!

      reply
      • Dieggo February 2, 2018

        Hey Matt, nice video! I will invest in real estate in the near future, and I’m wondering where to form an LLC. I currently live in NH and do not plan to stay for long. My first investment will be in GA, but I plan on doing business in various states. Is Delaware or any of the hyped up states a good option?
        Thank you.

        reply
        • Matt Horwitz February 3, 2018

          Hi Dieggo, thank you! You’ll want to form each LLC in the state where the property it will own is located. The reason for this is because the state where the property is located is the state where the LLC will legally be doing business. Depending on the value of your real estate and whether or not the state where you’re forming the LLC has charging order protection, some investors do form a parent LLC (Wyoming being the most popular), and then that Wyoming LLC will own the LLC formed in the state where the property is located.

          reply
    • Paul Young August 13, 2017

      As a foreigner your tax is automattically witheld when you invest in US stocks. The tax rate is 30%. You dont even need to file a tax return as a foreigner as tax is automattically with held by the broker and paid to the IRS.

      reply
  2. Karen December 28, 2016

    Hey Matt:

    Thank you for your information! I live in New York and I just formed an LLC here. But I just found out that the article publication fee is so high and I can’t afford it, since my company doesn’t make money in this moment. What will be my other options? And will I still pay lots of taxes even if there is no revenue?

    Thanks a lot! Karen

    reply
    • Matt Horwitz January 1, 2017

      Hi Karen! You’re very welcome. You will have to file taxes, but you will likely not owe anything with no revenue. You’ll need to pay for someone to do your taxes, so there might be some small fees there, but it shouldn’t be too bad. There aren’t really any other options, since if you closed this LLC ($60) and formed in another state, that wouldn’t help – it would actually be more expensive. If you form an out-of-state LLC, you’ll still be required to register your out-of-state LLC as a Foreign LLC in NY. Now you’ll have 2 LLCs, additional costs, 2 annual fees, AND you’ll still need to meet the publication requirements in New York. There’s a small catch, which I think will help though… you can fulfill the newspaper publication requirement at a later date (as in, after the deadline). Your LLC will still be valid, but you cannot sue in the NY court system until meeting this requirement, as per state law. In essence, your LLC is “not in good standing” but it will not prevent you from doing business and protecting your personal liability. We haven’t published an article on this yet, but please check out these resources: Ignoring the publication requirement and What if I don’t publish in NY (last section on page).

      reply
  3. cici January 13, 2017

    Hi Matt, thanks for the info.
    How do you form a ” Series LLC ” ?
    Been reading about asset protection -real state- not sure how to go about it. Please advise
    Thanks
    Cici.

    reply
    • Matt Horwitz January 13, 2017

      Hi Cici! We generally don’t recommend Series LLCs, as there is not a lot of case law supporting them, and taxes are quite “gray”. They can be overly complex, especially for businesses with less than $1M in assets, and for small business entrepreneurs. We currently don’t offer information/guides on Series LLCs, but recommend speaking with an attorney for more information. Thanks.

      reply
  4. John January 18, 2017

    Hello Matt. Thank you for all the information you provide. I and a partner are looking at purchasing a small existing company in our home state of CA. We are looking to establish an LLC during due diligence to protect us with the intent to later dissolve it since the business is already a corporation in CA. CA fees are high. If no income is made by the made by the LLC does creating in your home state matter at this point? Looking to not pay high state fees while we do research

    reply
    • Matt Horwitz January 18, 2017

      Hey John, you’re very welcome! Regarding your situation, this is not something I’ve come across, so let me ask, is there a liability risk in the due diligence process? Or do you just need a company name on an LOI or similar document? All LLCs in CA, regardless of activity or income are subject to the FTB’s annual franchise tax ($800 per year).

      reply
  5. Ami February 6, 2017

    Hi Matt,

    We are thinking of starting an LLC, we r 3 or 4 partners, one from Canada and 3 of us reside in NJ, PA, and CA. We r using this for investment purposes only, would it still be better to open in one of our home states or in one of the other ones – ie. Nevada, Delaware. The investments are in CA.

    reply
    • Matt Horwitz February 6, 2017

      Hey Ami, great question. I’m assuming you mean real estate? If that’s the case you’re “doing business” in the state where the property is located, so you’ll want to form your LLC in California. If you were to create the LLC out-of-state, you’d be be required to register as a Foreign LLC in California. Hope that helps! Let me know if you need anything else.

      reply
      • Ami February 6, 2017

        Hi Matt, Sorry I think I miss phrased the question. Its not real estate but the investment company office is in CA.

        reply
        • Matt Horwitz February 6, 2017

          Hey Ami, thanks for clarifying. It sounds like you’ll still be doing buisness in CA, so we would recommend filing there. This article may also be helpful: What defines doing business in California

          reply
  6. Samuel H. Saltzman February 14, 2017

    Hi Matt,

    Thanks for the article. Currently, we have a Delaware registered entity operation out of Arizona. We did this because we are going through a multistage divestment and were advised that Delaware is the most flexible. I am currently forming a related entity that will be responsible for the trading aspects of our business. This entity will not go through divestment. Would it be better to incorporate this in Arizona or Delaware? It consists of four members with equal control.

    reply
    • Matt Horwitz February 17, 2017

      Hi Samuel, apologies for the slow reply. It’s best to form the LLC in the state where you are transaction business, but this could be a bit gray in your setup (as in: what legally defines transaction business in AZ). I recommend getting in touch with a business lawyer to run this question by them. Hope that helps.

      reply
  7. George February 20, 2017

    What if I wanted more specific asset protection? Say for example, I wanted charging order protection for a single member LLC. Is it true that only some states provide this? Would it be beneficial to start a single member LLC out of state if my home state did not provide this protection?

    reply
    • Matt Horwitz February 20, 2017

      Hi George, yes, you are correct. A common setup for charging order protection is setting up an LLC in a state that offers charging order protection (you own that LLC), and that having that LLC own your LLC in your home state.

      reply
  8. goi February 21, 2017

    IF you form an LLC for R/E investing purposes (ie: take title in the LLC name), and then buy property in ‘4’ different states, WHICH state would be best for the ‘owners LLC’…? doesn’t make much sense IF you have to pay ‘4’ other states a ‘foreign LLC’ fee each year… let me know

    reply
    • Matt Horwitz February 21, 2017

      Hey Goi, you’d either form an LLC in each state where you own property, or form 1 LLC in your home state, then do a Foreign LLC registration in each of the other states. I’d check pricing on Foreign LLCs though, as they are usually more expensive. We have some info here on pricing for Foreign LLCs. Another setup in your situation is to form a holding company (say in Wyoming), then have that Wyoming LLC own each of the 4 other LLCs, each which are formed in their respective states.

      reply
      • Ray November 5, 2017

        Great info, how do you have the Holding company own the 4 separate LLCs? Is there something we need to put in the filing or some sort?

        reply
        • Matt Horwitz November 8, 2017

          Hey Ray, it depends on the state where the child LLCs are located. Some states’ Articles of Organization (or similar document) ask for Member information, but many do not. In that case, you would just list the holding company as the Member in the LLC Operating Agreement. Or you’d enter the holding company as Member if the Articles of Organization (or similar document) asks for it. Make sure to form the holding LLC first. Hope that helps.

          reply
          • ray November 9, 2017

            Very helpful Matt, cant appreciate your comments and expertise enough. I formed a parent Holding company in Wyoming, and an LLC in Detroit where i plan on investing property.

            When i register for my EIN would the business be considered in Detroit or CA? Sorry for the questions but your site has been helpful. I used Northwest registered agents which was easy as well. Cant TY enough.

            reply
            • Matt Horwitz November 13, 2017

              Hey Ray, thank you for acknowledging! I aim to be as helpful as possible. During the EIN application, you’ll want to use your WY address as the LLC’s location address, but check off the box about having a different mailing address, and use your Detroit Michigan address there. Hope that helps!

              reply
              • Ray November 18, 2017

                Thanks Matt, just to be clear when applying for the EIN the physical address i should put the LLC WY address?

                Shouldnt the physical address be my home where i live in CA? And put the LLC address for the location of the WY LLC? Sorry just want to be clear.

                Also, when you say Detroit address you mean the LLC Detroit address? I would think you would use my investment property address.

                Thanks again.

                reply
                • Ray November 18, 2017

                  meant wouldn’t use my investment Detroit address.

                  reply
                  • Matt Horwitz November 22, 2017

                    Hi Ray, which LLC are you getting the EIN for? The Wyoming LLC or the Michigan LLC?

                    reply
                    • Ray November 22, 2017

                      Im getting it for the Wyoming LLC as that is the Holding company which will oversee the LLC investment properties in Detroit. I live in CA fyi..

                    • Matt Horwitz November 22, 2017

                      Hi Ray, in step #3 (“Addresses / “Where is the LLC physically located”), I recommend using your Wyoming LLC address here, and then checking off “Yes” underneath for the “Do you have an address different from the above where you want your mail to be sent?” question (and listing your California mailing address). This way, all correspondence from the IRS will be sent to your California address. Then later in Step #4 (“Details / “Tell us about the LLC”), I recommend listing the county in Wyoming where your LLC is located, and selecting Wyoming for the following two drop downs (“State/Territory where LLC is located” and “State/Territory where articles of organization are filed”). Hope that helps clarify things.

      • Dee July 28, 2018

        Hi Matt,

        Thank you for providing this website. If you form a parent/holding LLC located in (DE, WY) that owns an operating LLC for LOI & P&S contract located in (NM, WY) that buys existing companies globally, would I have to foreign file either of these in my home state MA?

        reply
        • Matt Horwitz August 14, 2018

          Hi Dee, if I understand correctly, you have not yet formed or filed any LLCs, but you’re thinking of a Parent/Child LLC setup, say for example, a Wyoming LLC is formed first and then that Wyoming LLC owns an LLC that is formed in New Mexico. Unless you have a “usual place of business” in Massachusetts, as per Section 15.01, it doesn’t sound like you’re doing business in Massachusetts and therefore wouldn’t need to register any LLC (Parent or Child) as a Foreign LLC. However, that’s a general overview and you may want to run this by an attorney or two in more detail. Hope that helps!

          reply
  9. Andrew February 22, 2017

    Hi Matt,

    Appreciate the articles – very informative. We have a group with 4-5 partners (located in 3 different states but with equal control), and are looking for the best place to file for a domestic LLC. We will be primarily offering online courses via a membership-based platform and occasionally have live, in-person seminars, though they will never occur with any frequency in a specific state or locale. It seems as though we “could” be classified as doing business in multiple states and needing a few foreign LLC registrations, which could be cost-prohibitive to our startup. Is there a better way to approach this? Or, is an LLC not the best structure for our needs? Thank you!

    reply
    • Matt Horwitz February 22, 2017

      Hey Andrew, thank you! In a cross-state multi-member setup it’s common to the form the LLC in the more affordable state, then if Foreign qualifications are needed, worry about that as you expand and your business grows.

      reply
  10. Lang February 22, 2017

    Hello Matt,
    I have owned 3 different LLCs in 3 different states. We have moved every 5 years, and I have stopped the LLCs in the old states and registered in the new states. I am now without an LLC and want to register a new one. My last state was Arizona and it had no annual filing requirements of fees. I’m now in Maryland and the annual filing is $300. #1) Income will be solely from Android apps from google play store or pay per click ads from google in California either way. Not sure what state the business is transacted in. Do I have to file foreign LLC in all states? #2) I will be moving to Florida or California in 5 years. No employees… just me. Which state do I form LLC in? I realize I have to pay income tax in Maryland, but why should I have to register a foreign LLC in Maryland if I choose to register it in another state?

    reply
    • Matt Horwitz February 22, 2017

      Hey Lang, thanks for question. Your situation certainly doesn’t apply to our simplified article/video lol ;) Since you’ll be working out of MD, as it sounds from your message, you’ll want to form the LLC their. Later, when you move to CA or FL, you can either open a new LLC (and close the old), file a Foreign LLC qualification, or domesticate/re-domicile (if allowed). I know MD is a paid with their $300/year fee, but it’s cheaper than getting caught illegally operating in the state. Although your business is digital, you operate within state borders, therefore, transacting business in Maryland. Hope that helps. Let me know if you need anything else.

      reply
      • kurt April 12, 2017

        I have to say I really disagree. This article makes it sound like it’s always a good idea to be in your home state, but Lang is a perfect example of why that’s not true. No employees & no sales in the state.

        I agree taxes are not a good reason, but state fee’s and ease of filing and maintaining the company vary widely and can make a big difference in ongoing costs. Also registering in a state is not the same as a whole new incorporation.

        If working under a foreign llc applies to your business, and that is the real question as it doesn’t to all businesses as you noted, then this article misinforms people. Maybe the best of intentions, but it doesn’t make clear who this applies to.

        I have had foreign incorporations and lived worked out of NY and NC, in both cased I didn’t need to ‘create a duplicate’ of my incorporation to be compliant with the state.

        reply
        • Matt Horwitz April 13, 2017

          Hey Kurt, I appreciate your comment and insight. You’re right, this article does need to be expanded to cover more scenarios. However, in Lang’s situation, just because he does not have employees and does not need to collect sales tax, does not be mean he isn’t doing business in his home state. And you’re correct, a Foreign LLC registration does not “duplicate” the LLC, it simply gives it authority to transact in a certain state.

          But you mentioned your concern being about fees and annual fees. In that case, registering out of state, and then later needing to register as a Foreign LLC only increases your fees (filing fees, annual fees, and most likely Commercial Registered Agent fees for the out-of-state LLC). Let me know if I misunderstood, or missed something. I’d also advise digging into the “doing business” statutes of your home state to really get a good overview. I hope this reply has been helpful. Thank again for your comment.

          reply
  11. Deana March 5, 2017

    When we were researching the possibility of investing in Tax Liens & Deeds, we were advised to form two LLCs in Wyoming or Nevada even though our home state is Texas. The first LLC will run the business. We were also advised to establish a Qualified Retirement Plan (QRP) & roll our IRA’s & 401k into the QRP. (QRP is similar to a self-directed IRA but we are the plan administrator). Our QRP should be the member/owner of the 2nd LLC. Texas (& possibly AZ) properties and tax liens/deeds will be purchased with the QRP funds by the 2nd LLC & these funds must be returned to QRP upon sale.
    Do you have any advice concerning this plan? Do you still recommend forming both LLCs in our home state?

    reply
    • Matt Horwitz March 5, 2017

      Hi Deana, in this case, if you want the extra asset protection (WY has the advantage over NV), you can form 2 LLCs in WY and then have them own an LLC in Texas. Or form them in WY and Foreign Qualify in Texas. Regarding the setup of the QRP as owner, I’d recommend getting professional help on that one. Seems like there are a lot of nuanced maneuvers that require experience. In short, you’re supposed to either form a domestic LLC in TX (again, can be owned by a WY LLC), or Foreign quality a WY LLC to do business in Texas. Hope that helps.

      reply
  12. Deana March 5, 2017

    Hi Matt, Thank you for your prompt reply. So are you suggesting WY for extra asset protection due to the fact that we may invest in tax liens/deeds? If we are only investing in real estate (not tax liens/deeds) in TX do you recommend forming it in our home state of TX instead of WY?

    reply
    • Matt Horwitz March 6, 2017

      Hey Deana, it’s really hard to say and we can’t advise in “black and white”. In short, whichever you are more comfortable with. If you’re investing in TX, you can either form a Texas LLC (owned by you) or you can form a Wyoming LLC (also owned by you), which then in turn owns your Texas LLC. Hope that helps! If you want to flesh it out with an attorney, check out Avvo Advisor. It’s a great service: https://www.avvo.com/advisor

      reply
  13. Robert March 8, 2017

    Hi Matt,

    My partners and I are buying real estate in TN for investment purposes. We want to form a LLC; is your recommendation that we should form the LLC in TN, because that’s where we will be “doing business”? Or, because it’s passive income, can we form the LLC in another state with lower annual fees (such as Wyoming), and not have to worry about registering as a foreign LLC?

    reply
    • Matt Horwitz March 9, 2017

      Hi Robert, in this setup, you’re doing business in Tennessee, so that’s the state where you should be forming the LLC. With Real Estate LLCs, forming an LLC in the state where the property is located is the route to go. The income being passive does not matter in this case. You’re still doing business in TN. Hope that helps.

      reply
  14. Web Trekker March 22, 2017

    Hi Matt,

    Recently, I have been exploring the possibility of starting a business and veered towards establishing that business as an LLC. The information that you have provided has helped out a lot, thank you so much for getting the information out there, but there are a few other matters that I am unsure about.

    Backstory: I have a YouTube channel that I would like to monetize but won’t do so until I have established a business in connection to the channel. I would like to link affiliate websites that correspond to the topics that I plan to cover in my videos.

    Question 1: If my LLC receives commissions paid from the Corporation that I would be affiliated with is located in another state in the U.S.A., would my LLC owe taxes to that state?

    Question 2: Could my domestic LLC do business with a company located in another state in the U.S.A.?

    Question 3: If I decided to establish my business as a domestic, single-member LLC, how would I find insurance to provide an extra veil of protection for my assets?

    Question 4: If my LLC is established by April 15th 2017, would my LLC be required to file the annual required on May 1st 2017, or would that roll over to May 1st 2018?

    I hope that I didn’t overstep and ask too many questions.

    Kind regards,
    WT

    reply
    • Matt Horwitz March 22, 2017

      Hey WT, thanks for the kind words. I’m glad to hear our information has been helpful.

      1) Most likely no, but please check with your accountant. If you need help finding one, take a look at this article. 2) Yes. 3) You’ll need to shop around and make calls to insurance agents. The search term is “general liability business insurance”. 4) Which state is this for? Having asked that, the answer is most likely no. In most states, the first Annual Report is due in the year following the year of formation. Hope that helps! Let me know if you need anything else.

      reply
  15. denise April 8, 2017

    I want to set up an LLC or LLP with my daughter and her two friends. They are a performing group and I manage them. I live in Ohio and they live in California. Can I set up the LLC in Ohio if there will be a K-1 issued to all four of us individually?

    reply
    • Matt Horwitz April 8, 2017

      Hey Denise, it sounds like you’re doing business in both states actually. In that case, if most of the business is being done from Ohio, you can form an LLC in Ohio, and if later, you need to register in California, you can then register your Ohio LLC as a Foreign LLC in California. We recommend working with an accountant after the LLC is formed (helpful article on that here), but yes, your accountant should issue K-1s to the members, file your Partnership Return (Form 1065), and also help each member file personally for federal, state, and local taxes. Hope that helps!

      reply
  16. Roger April 18, 2017

    Matt — some good advice here, but I’ve got a unique situation not yet completely covered in this blog. I’m looking to open an onshore IRA LLC (probably in WY at this point). Ultimately, that IRA LLC will invest in an offshore IRA LLC (as well as some USA-based passive investments). I currently live and am a non-citizen resident of Peru (SA, not Indiana). When I leave Peru in a couple of years I’ll probably live in the Caribbean somewhere from where I’ll manage the passive investments. Since I’m required by law to declare a state of residency for income tax purposes I chose California since it was where I lived before moving to Peru. But, like others, I have no desire to cough-up $800/yr in franchise fee. I’m probably stuck with being a CA resident until I establish residency in another state even though I don’t own RE or live there. Any thoughts?

    reply
    • Matt Horwitz April 20, 2017

      Hey Roger, although you are not really operating in a particular state, because you have California as your state of residence, one could argue that you are “doing business” there. I recommend running this question by a few California attorneys though as interpreting the CA statutes regarding “doing business” can be gray. I recommend using Avvo: https://www.avvo.com/business-lawyer/ca.html. Additionally, I recommend speaking with your accountant (or a few accountants) regarding changing your residency to a more tax-friendly state. Apologies I could not be more specific here. There is no black and white answer to this one. Feel free to keep me posted. I’d love to hear what you come up with. Hope that helps a bit.

      reply
      • Roger April 22, 2017

        Thanks, Matt. I’m a retired tax accountant and financial consultant but, this is indeed a “gray” area. Changing residencies is not a slam-dunk and generally requires one to actively live in the new state. Many states (particularly CA) take a very dim view of retirees (or any citizen for that matter) just changing addresses to avoid taxes or for other business reasons. I have children that live out-of-state so maybe I should just surrender my CA driver’s license and “move in with them.” I’ll will keep you posted on what the attorneys say.

        reply
        • Matt Horwitz April 22, 2017

          Hey Roger, I completely understand. I think moving in with the kids is a good route to consider. Thanks for the followup!

          reply
          • Roger April 26, 2017

            As recommended, I did talk with a few attorneys. Some were more concerned with my unnecessarily complex proposed structure that might bring unwanted attention from the IRS (Form 5498). As you correctly pointed out in other blogs, filing requirements and the definition of “doing business” does vary from state-to-state and is akin to trying to grab a greased pig. Therefore, it would be very wise to consult with a business formation attorney and particularly one that has experience in e-commerce for internet-based businesses. This is NOT something that you want to do on your own unless you have this background. For CA, they have safe-harbor provision in their business code which provides some, but not complete guidance. A lot seems to be predicated on the extent of “entering into repeated and successive transactions within the state” and/or other “activities common to businesses” to determine whether registration is required. If in doubt, get a legal opinion letter or contact the Secretary of State’s office.

            reply
            • Matt Horwitz April 27, 2017

              Hey Roger, thanks for the update. A lot of tax code is intentionally ambiguous and open-ended (open to interpretation). This helps the state collect more tax revenue. The “greased pig” analogy had be cracking up lol! So true.

              reply
  17. Meg April 20, 2017

    I am planning on investing in RE in Texas and wanted to set up a LLC there since that is where the money will be made. My CPA has recommended that i register that LLC in my home state of CA as well as Foreign LLC.

    Do i really have to register it in CA?

    reply
    • Matt Horwitz April 20, 2017

      Hey Meg, if you’re buying real estate in Texas, then yes, a Texas LLC is the way to go. Whether or not you really need to register your Texas LLC as a Foreign LLC in California is a bit gray. Your accountant is implying that you are doing business in California, and therefore should also register there. I’d also run this question by a few California attorneys because the statutes around “doing business” in California are open to interpretation. Apologies I can’t be more specific, but this one isn’t very black and white. If you make any progress or get any new information, please keep me updated. I’d love to hear what you come up with. Hope that helps. You can find CA attorneys here: https://www.avvo.com/business-lawyer/ca.html

      reply
  18. George Boshae April 24, 2017

    Hi Matt, Thanks for the information. I own several rental properties in Colorado but I reside in Nebraska. I plan to start an LLC in Colorado as you’re video suggests. However, to one property from liability on another property, should I start an LLC for each property. or, Is there a rule of thumb for number of properties or equity value an LLC should be before starting a second LLC ? Also, do you know if I need to register the LLC in Nebraska as a Foreign LLC?

    reply
    • Matt Horwitz April 24, 2017

      Hi George, you’re correct, Colorado is where the LLCs should be formed. You do not need to register your Colorado LLCs as Foreign LLCs in Nebraska, since you working from home on real estate matters is considered “telecommuting”. I just spoke to the Nebraska Secretary of State’s office to confirm this. How many properties per LLC is an interesting question. I’d say in Colorado, since the filing and annual fees are so low, you tend to see 1 or 2 properties per LLC. Of course you can also put 5 properties in one LLC, but then all of your eggs are in one basket, and this isn’t the best setup from an asset protection standpoint. Having said that, you’ll also need to consider internal logistics and organization. Meaning, managing 12 banks accounts for 12 rental properties can be a little tedious. But then again, it’s often done. In summary, the answer is gray re: how many properties per LLC. I recommend going with whatever makes you feel most comfortable when balancing asset protection and internal organization.

      reply
  19. Mike H April 27, 2017

    Matt – thanks for the very informative article.
    I’m looking to set up an LLC to hold title to an agricultural development in Panama. Currently residence is Illinois, but anticipate move to Florida. Establishing a FL LLC seems more appealing, but you suggest I’d have to set up a foreign LLC in IL.

    Since LLC will not be doing business in US, let alone IL, is an Illinois LLC required?

    reply
    • Matt Horwitz April 28, 2017

      Hi Mike, you’re welcome! In this case, you would not be doing business in Illinois, so you won’t need to register as a Foreign LLC there. I also recommend speaking with a few accountants and attorneys (both state-side and in Panama) as you may want to look at the pros and cons of a US LLC vs. a Panamanian LLC. Hope that helps.

      reply
    • Mike H May 1, 2017

      Awesome. Thanks much.
      Have been looking at Panama LLC, but complications of doing business there and potentially expensive local registered agents seem a roadblock. Our IL attorney seems to prefer setting up in IL, no surprise. Guess due diligence takes some diligence – Mike H

      reply
      • Matt Horwitz May 2, 2017

        Hey Mike, thanks for the update. I hear you re: the Panamanian complications. I also recommend speaking with a few attorneys in Florida as well. And yes, due diligence takes some time and some digging. Keep me posted.

        reply
  20. Kris May 1, 2017

    Hi Matt,

    Thanks for the great article. I have a question pertaining to my situation. I am a pilot, and I will be moving from Arizona to Florida to work as a contract pilot (will be getting a 1099 from my employer). Many contract pilots form LLCs, and I’m looking to do that as well. What state would you recommend I form it in? While Florida may be my “home state” for the next couple of years, as a contract pilot I am likely to be moving around. Is it possible to still maintain a Florida LLC (for example) even if I take a contract pilot position in say Texas? I am currently an Arizona resident – would it be a viable option to form the LLC in Arizona, and maintain residency here despite having contract work in Florida?

    reply
    • Matt Horwitz May 2, 2017

      Hey Kris, this is a bit gray, but since you’re moving to Florida and will move residency there most likely, I’d lean towards a Florida LLC. You can still take contracts in any state, regardless of where the LLC is formed. I’d also recommend chatting with a few attorneys in both Florida and Arizona to get a few different opinions on your situation. Apologies I could not be more specific.

      reply
  21. Rich May 2, 2017

    Hi Matt-I am NY resident looking to invest in out of state properties in PA, so the above states that “But if you are investing in real estate located in another state, it is best to form your LLC there”, thus would mean PA would be the logical choice to set up the LLC. To confirm, I would not pay any double fees in NY my home state in this situation, only PA? And wouldn’t i need a physical address in PA? Thanks in advance for your assistance.

    reply
    • Matt Horwitz May 2, 2017

      Hi Rich, you are correct. Since you are investing in real estate in Pennsylvania, then you are doing business in PA, and you should form a Pennsylvania LLC (or multiple ones as your portfolio grows). You would not need to register the LLC in New York, so no worries about double fees. Yes, in PA you need a Registered Office Address. This needs to be a street address. No PO Boxes. You can use an address you have or hire a Commercial Registered Agent. Note: in PA, the official name for a Commercial Registered Agents is a Commercial Registered Office Provider. They are the same thing though. Hope that helps!

      reply
  22. Judith Scott May 19, 2017

    i always work for a company that took care of deducting my income tax and social security now a days i found a job that pays me by invoice and i will have to take care of paying my own taxes social security & state tax. some one suggested i create an LLC my question i am 3 years away from retirement and don’t know if i will be working like this for the next 3 years i does it make sense to create an LLC or make the quarterly estimated payments to the IRS & the state.

    thank you

    reply
    • Matt Horwitz May 19, 2017

      Hi Judith, this is more of a tax-based question, where the answer varies. I recommend speaking with a few accountants. Here’s our recommendation. Apologies I couldn’t be more specific.

      reply
  23. Paul Paquette May 19, 2017

    Are there any advantages to forming a llc in another state in order to protect intellectual property from creditors.

    reply
    • Matt Horwitz May 22, 2017

      Hi Paul, there may be, but we don’t get into this level of detail. You may want to run this by a few attorneys to see their thoughts. Apologies I could not be more specific here.

      reply
  24. Paul Paquette May 19, 2017

    I found your article and comments very helpful. I currently have a manuscript that is yet to be formally copyrighted. I Plan to sell the book online only, since it is most beneficial as an ebook. I plan to create a multi members LLC (MMLLC). I currently have personal debt and I will like to make it next near to impossible for a creditor to lay claim to the intellectual property.

    What is your thoughts in regards to creating a MMLLC for holding intellectual property in one of the following: Mexico, Missouri, or Arizona (but not operate or generate revenue). Then have a licensing agreement for a MMLLC in my home state of KY to use the intellectual property. The MMLLC in KY will perform the operating and generate the revenue.

    reply
    • Paul Paquette May 19, 2017

      I have decided Arizona the best for asset protection, and I do not have to file annual report.

      reply
    • Matt Horwitz May 22, 2017

      Hi Paul, this sounds like a good asset protection plan, but we can’t comment specifically. There are certainly pros and cons to each situation and I’d advise hiring someone (namely an attorney) to help advise you on this.

      reply
  25. Elaine D May 28, 2017

    Hi Matt,

    Want to set up a LLC for an e-commerce business, 2 members both equally invested. We live would work out of different states. What is the best way to determine what state to set it up in. And it being online only, would the other member have to still apply for a foreign entity in their own state?

    reply
    • Matt Horwitz May 30, 2017

      Hi Elaine, if there is more “activity” taking place in one state over the other, then we’d recommend forming there. If not, you can pretty much pick either state you want. Additionally, for questions like this (which fall into somewhat of a “gray area”), we recommend speaking with a few accountants and attorneys as there are likely additional pros and cons, from a legal and tax standpoint, from one state to the other. Either way, whichever state you form in should be the only state filing to worry about. You won’t need to register a Foreign LLC in the “non-filing” state.

      reply
  26. Christopher Gray June 4, 2017

    Hi Matt,
    Just wanted to thank you for posting this information publicly. I live in Indiana and I had a real estate business a couple of years ago doing some house flipping. I formed my LLC in Delaware based on information I got from a “trainer”. Even then I later realized that I should have filed here in Indy because that is where I was doing business. I have created a new company just doing home repairs and was curious if it would still make sense for tax reasons to file my LLC elsewhere, and you have answered that question. Thanks again! So glad I found this information from you before I essentially created 2 LLC’s when I am just doing business here at home.
    Best wishes,
    Chris

    reply
    • Matt Horwitz June 5, 2017

      Hi Chris, thank you very much for the lovely comment! I’m very happy to hear you found our information before being led too far down the incorrect path. Best wishes in life and in business!

      reply
  27. RTP June 23, 2017

    Hi Matt,

    Thanks so much for clearing up all the hype about “cheap” states. It’s great to know that I should still do out-of-state if my purpose is protecting real estate. However, I want to form the LLC *before* I buy any property. Do ANY states at all allow a P.O. box as the agent address? Or will I absolutely need to hire an agent in that case?

    The pupose of the LLC is privacy, which is why I want the LLC to do the purchase.

    And yes, I realize my name is on the documents, but someone would have to be LOOKING for it, so it private info wouldn’t be easily available to the public in general.

    reply
    • Matt Horwitz June 23, 2017

      You’re very welcome. Glad it has been helpful :) Off the top of my head, the only state that has a PO Box Registered Agent “quirk” is Ohio. But forming an LLC in Ohio and then purchasing property in another state will create the need for Foreign LLC registration. If you want privacy, considering forming a parent company (say, in Wyoming) and then creating Child LLCs (owned by the Wyoming LLC) in each state where you are buying real estate.

      reply
  28. Stan June 25, 2017

    Matt,
    I am planning to create an independent mfg’s. rep company with territorial agreements covering New York, New Jersey, Delaware, West VA., Pennsylvania, Ohio, and Arkansas. I live in Wisconsin and would operate the company in WI. I would travel to each of the aforementioned states for business. Must I register as an LLC in each state or register in WI only? Would it be better to create a parent company in WI and setting up child LLC’s in each state? I expect to generate revenue in each of the states mentioned. I do not anticipate employees outside of WI but I do expect to have 1099 contractor relationships.
    Thank you in advance for any clarity you may offer.

    reply
    • Matt Horwitz June 26, 2017

      Hey Stan, great question. In your case, it sounds like there is a chance that you may cross the gray line for the legal definition of “doing business” in some states. However, statutes for this legal definition can vary by state, and you’ll need to speak an attorney (in each state) or two to get their thoughts. Apologies we can’t be more specific here. Having said that, I’d form the LLC in WI, start operations, and then if things get quite active in a particular state, then see if you need a Foreign LLC registration. I’d say a Foreign LLC registration is far easier and less complex than a parent/child company setup in your case. Just having clients in a particular state does not constitute doing business… however, constantly going there and operating out of that state gets more into the territory of doing business. Again, this stuff is gray and I wish we had a more black and white answer for you.

      reply
  29. Ali July 15, 2017

    Hi,

    I am looking to setup a new business with my brother. I live in NJ but my brother lives in CA. We are flexible as to who could be the owner of the LLC, as in we are ok with it being just me, just him or both. Of course, being an infant company with no guarantee to sustainable success, our goal for first few years is to save as much $$$ in LLC and taxes as possible. Most actual work for the business would take place in CA but i would be managing operations from NJ behind the scenes.

    Given the above, and provided that CA LLC fee is a massive $800, where should we register our LLC? In california or in NJ?

    Options that we are considering are setting up in NJ but having my brother as an employee or setting in CA and having him as the owner for taxation etc.

    What’s your advice?

    reply
    • Matt Horwitz July 16, 2017

      Hey Ali, this is a tricky question to answer and I’m afraid I can’t be too specific here. There is far too much information to sort out here and there a lot of legal and tax questions… both of which we cannot answer. Based on what you said though, this does sounds like a multi-member LLC that should be setup in California since that is where business activities are legally taking place. We have more details here on what is doing business in California. Regarding the ownership/employee stuff, what you shared sounds complicated. If you both actually own the business, then maybe you should both just own the business. Beyond this, any followups would need to be addressed to an accountant and attorney. Apologies I can’t be more specific, but hopefully that helps a bit.

      reply
  30. John July 18, 2017

    Just wanted to reassure.

    I’m beginning to start an ecommerce business. I reside in CA but i’m hearing alternatives to ‘save’ on annual fees since CA is so high; others suggested to file in WY.

    Base on your explanation if I were to file an LLC in WY while still living in CA then I would be paying both WY and CA annual fees, tax, etc. due to LLC in WY and foreign LLC in CA. So this is still applicable to ecommerce business I presume?

    If yes, then I would actually be saving money by filing in CA correct?

    Your response is greatly appreciated,
    John

    reply
    • Matt Horwitz July 19, 2017

      Hey John, some people roll the dice and try to get around CA’s taxes and fees, but I don’t recommend it. In short, yes, you are correct on all fronts. It’s cheaper and less risky to just form the LLC in California.

      reply
  31. Tammy July 27, 2017

    Hi Matt,
    My husband & I are US citizens living and working abroad. We’ve formed the local equivalent of an LLC in Europe and now are considering opening an LLC in the States, primarily at this point so we can keep some US investments that now, due to new regulations or regulations previously loosely enforced, are no longer open to us (such as mutual funds). The fund manager has said we need a US address and says we could move the fund to an LLC. This would not only allow us to keep this investment intended for retirement but also would shield it from “wealth tax” (tax on worldwide assets) in the country where we live.

    We intend to return to the States in 3 to 4 years when I reach Medicare age, but to continue working on a part time basis, so would want an LLC at that point in any case. We have no property in the US at the moment, and are not subject to state income tax (though we of course file Federal returns and Fbar, etc and file returns and pay income tax in the country where we reside). So in our case, where do we base our LLC? And is it difficult/expensive to move it from one state (for instance, Delaware or Wyoming) to the state we will eventually reside in when that time comes? We have not settled on a location.

    Thanks much for any help/advice you can give us!

    reply
    • Matt Horwitz July 28, 2017

      Hi Tammy, this is certainly an outlier and an interesting one, as there are many US citizens in similar situations. Let me start backwards: “Is it difficult/expensive to move an LLC?” There are typically 3 ways to move an LLC: 1) Dissolve current LLC and form in new state, 2) re-domesticate if the incoming state allows, and 3) file a Foreign LLC registration. There isn’t enough room to go into the details and all the pros and cons here, but there are a few (things like cancelling vs. keeping existing bank account + EIN)… having said that, we’re working on an article regarding moving an LLC very soon. Overall though, it’s a bit of a headache and has a number of logistics. It’s not entirely expensive, but it can take some time and the paperwork can be a little tedious.

      Now back to the top: In your case, you can pretty much pick any state you’d like, however, it might be a good idea to pick a state you may likely return to and setup some sort of logistics (difficult to pick, I understand). Yes, there is a chance that you’ll need to move the LLC at a future date, but there is also a chance that you may not need to move it (which would be more guaranteed then say, setting up in Wyoming). There are a lot of ways to cut and chop this one, but as a final tip (and since you’ll need a Registered Agent listed anyway), I recommend hiring Northwest Registered Agent after you pick the state. You can list their name and address as your Registered Agent, but they’ll also let you use their address for other places on the filing too (for example, principal business address, mailing address, and the Organizer’s address)… which can help if you don’t have a reliable long-term address to use in the states.

      reply
  32. Richard August 18, 2017

    Hi Matt,

    At present my permanent address is in New York State. I do have property in Delaware which I plan to move into after selling my NY property. This move should take place within the next 6 months or so.

    My question is, should I form my LLC in Delaware and pay NYS the foreign LLC fee for that time or register my LLC in NY and then change to Delaware after I move?

    Thanks,
    Rich

    reply
    • Matt Horwitz August 19, 2017

      Hey Rich, this one is a little gray, so you may want to double-check my answer with an attorney. I would form the LLC in Delaware, since you’ll soon enough be residing there. I wouldn’t worry about the NY registrations as unwinding activity up there will be a pain. Also, “moving an LLC” is quite complicated, so if you can avoid that, I would. Hope that helps.

      reply
  33. Eli August 20, 2017

    Hi Matt

    Thank you so much for this information! I was looking at the 2 LLC option as well, being subjected the $800 yearly tax as a CA resident. You made the scenario very clear and understandable. Until your articles, I didn’t realize how much more we are taxed (whole other conversation!).

    So that said I am more inclined to avoid the SMLLC, I’m just one person, as I don’t feel it really protects more than a Sole Proprietorship? In addition, the Schedule R, 586, LLC1, LLC12, 1120S, Excise confirmation, etc, etc. seems like overkill for an apparel drop shipping company.

    I know this is state specific and was wondering if you have insight on “the piercing the veil” I was reading about for CA if you are only one person SMLLC? Not sure an operating agreement makes a difference…

    reply
    • Matt Horwitz August 21, 2017

      Hey Eli, thanks for the nice comment. Regarding Sole Proprietorship vs. LLC, I feel the liability protection is not the same (most others would agree), but you should run this question by a few CA lawyers to get more information. I’d just hire an accountant for all your tax concerns. Just keep your bookkeeping solid. Just make more sales ;) That’s the solution. You mentioned “insight” on piercing the veil, but didn’t ask a specific question, so I’m not sure what you’re looking for. In short, run your entity as a separate entity. Operating Agreement helps. Solid bookkeeping, documentation, and keep business and personal funds separate. Hope that helps.

      reply
  34. Tony August 21, 2017

    Hey Matt,

    Excellent video! I know in the video you said you should start your LLC out of the state you live in, but what if I’m moving around every 6 months or so? My girlfriend and I have been running a Cooking Blog for about a year now and we’re looking to start an LLC. We plan on traveling to different states and possibly different countries about every 6 months or so. Would this be a case where starting an LLC in a state like Wyoming would be beneficial or would we want to register as an LLC in each state we move to? I appreciate your insight!

    Thank you,
    Tony

    reply
    • Matt Horwitz August 28, 2017

      Hey Tony, no, it’s a major pain to “move” your LLC or dissolve and register a new LLC for each state you are in. You are currently a resident of some state. That’s probably the best state to use. Where are you or your girlfriend originally from, where do you work from when in the states (or where will you work from when you return), and where do you pay state taxes? Although Wyoming can work, the state where you are/were residing and pay taxes might be the best.

      reply
  35. John September 4, 2017

    Great information! I am a full time resident of Colorado. I have an opportunity to do some consulting work in Wyoming. If it goes well I may have another opportunity in Arizona with a possible employee. I will be doing zero work in Colorado. Because of that, I initially thought I would form a Wyoming LLC with later forming a foreign entity in Arizona.

    Am I still correct in my thinking to do it this way or would Colorado ever think I am “doing business” here?

    reply
    • Matt Horwitz September 6, 2017

      Hi John, if you are mostly working from home/CO when not meeting clients, then yes, you’re likely doing business in Colorado. Your situation falls into the gray category regarding what qualifies as “materially doing business” in WY and AZ. Apologies I can’t be more specific here, but I recommend speaking with a few attorneys to get their take on the situation.

      reply
  36. Jared September 7, 2017

    Appreciate the video and insight! I am opening an LLC, sole owner and no employees, which therefore means I will be taxed personally, as opposed to the LLC being taxed directly. Therefore, doesn’t it make sense to file my LLC in Nevada, where personal income tax is 0%, as opposed to my home state which is roughly 3.8% – 5.99% depending on the bracket? Even including the foreign LLC fee for my home state, it still appears I will come out on top by filing outside of my home state.

    reply
    • Matt Horwitz September 8, 2017

      You’re welcome Jared. You’ll pay taxes where the money is made. Forming an LLC in Nevada will still require you to file taxes in your home/operating state, so there are essentially zero tax advantages. You can use our “knights of the roundtable” strategy and run this by a few accountants to double-check.

      reply
  37. Cameron September 13, 2017

    Hi Matt. Can you help me decide where I should open a LLC.
    I’m Canadian and live in Ontario so there are several states I can drive to when setting up my bank account. The reason for the LLC is to open up a trading account in the US. That is the only business I will be doing. I will claim my income with Revenue Canada and will be taxed by them. Are there states that will not tax my capital gains on stock investments?
    I have friends and Family in Michigan, Vermont, Pennsylvania, Ohio, Kentucky, Florida, Arizona and South Carolina.
    Can you help me?

    reply
    • Matt Horwitz September 13, 2017

      Hey Cameron, good call on keeping in close for opening the bank account. Regarding capital gains tax in your situation, I’m not familiar as this is currently outside of my wheelhouse. Apologies I couldn’t be more helpful. Feel free to followup if you gain any insight on the topic :)

      reply
  38. Yardell September 18, 2017

    Hello Matt,

    First, I’d like to thank you for the insight you provided in this video. I have a small developer business that I opened a single-member LLC for in my home state of Pennsylvania a couple of years back. However, I myself had heard all of the grandiose press and musings about all of the corporations that had set themselves up in DE and how it was supposed to be so amazing and great from a tax and legal perspective. I was actually in the process of setting up calls with people to see about how to move my LLC there so I could feel more like a “Big Fish” LOL. Your emphasis on DE being great for “CORPORATIONS” pretty much convinced me that I’d do myself a favor by not rocking that boat.

    I do have one question thought: Given the nature of my business – largely software and website development – I really don’t have to be physically in any one place. I’m planning to leave home soon and just travel about the states for a bit while continuing to do that work. Is there anything else I’d really have to do or consider as far as my LLC filing or taxes given that I really don’t plan to be anywhere specific for too long for a while?

    reply
    • Matt Horwitz September 19, 2017

      Hi Yardell, thank you for the thoughtful comment! Glad the video was helpful. Although your business is digital, state laws and tax codes haven’t caught up to this growing trend (and they won’t for a while). The short version of the story is that you still need to claim a state of residency and operate your business from somewhere. The easiest way to think of it, is make the business look “stable and stationary” and you go where you please. Since you’re likely residing in PA, file state taxes in PA, and have a home office in PA, that is where you have “substantial presence”, so it’s easiest in your case to keep doing business in PA, even if you have to take a trip or two. The state and the IRS don’t need to know about all your excursions and travels. Just keep doing business in PA if you catch my drift. We don’t get into depth regarding taxes. #1, it’s not our expertise yet; and #2, the sheer amount of variance and nuances across businesses is overwhelming. Your setup sounds fine to me, but make sure you’re working with competent accountant and are staying compliant with federal, state, and local taxes.

      reply
  39. Rick Stoll September 24, 2017

    I’m sure this has been answered, but here goes. I live in Arizona. I am a member of a crypto currency trading company that operates internationally.
    I am planning to receive payment through my llc. Is there any benefit to creating my llc in Nevada?

    reply
    • Matt Horwitz September 25, 2017

      Hey Rick, great question. This one is tough to answer in a black and white format. I don’t think you need to, however there are more details one could get into. Arizona lawyer Richard Keyt has expanded upon this better than we have. Hope that helps.

      reply
  40. Fernando mejia September 27, 2017

    I am buying a rental property in NY, but live an Florida. I would like to an llc to be owned by My S corp company i own in FL.What is the best way to structure this?

    reply
    • Matt Horwitz October 2, 2017

      Hi Fernando, I recommend speaking to an accountant to double-check that this is the best setup. Since the new LLC will be a pass-through entity, income/losses/credits/deductions will flow through to your S-Corp before flowing through to your personal tax return, so there may be pros and cons to this setup. Either way, you’ll want to form the LLC in NY since that is where the property is located and that is where you are legally doing business.

      reply
  41. Joshua September 29, 2017

    I am active duty military. My resident state is WA for tax purposes. I live in NC for duty station. I plan to retire and work as a consultant or gov contractor. My work will likely take place in VA, CO or possibly overseas. I would like to move to CO when I retire so I will be required to become a resident there. I would like to incorporate before I retire. Where should I form my LLC? should I form an Scorp for any reason?

    reply
    • Matt Horwitz October 2, 2017

      Hi Joshua, how far off is retirement? Regarding S-Corp, please see our LLC taxed as S-Corp article.

      reply
  42. joshua October 4, 2017

    I plan to retire in less than two years. I read the S-Corp article. I think I will have to wait to see how much I’ll make and then decide if I want to set my current LLC as an S-Corp.

    But original question is where should I incorporate?

    reply
    • Matt Horwitz October 4, 2017

      Good call on waiting on the S-Corp. You can always make that election later. Since you’ll be retiring in CO in 2 years or less, I’d form the LLC there.

      reply
  43. David November 5, 2017

    I am planning to invest on real estate in other states outside my home state, California. Is it appropriate to create an LLC in Nevada, Delaware, or Wyoming and not report to my home state since the money is being made elsewhere like Indiana or Florida?

    reply
    • Matt Horwitz November 8, 2017

      Hey David, since you’ll be doing business in the states where the property is located, you’ll need to register your LLC their. There are a few ways to do that. 1) Form an LLC (likely in your home state) and then register as a Foreign LLC in each state you buy property (this is all technically 1 LLC though). 2) Form an LLC for each state and for each property. 3) Form a holding company (say a Wyoming LLC), then form an LLC in each state you operate. Each LLC will then be owned by the holding company (and not you personally… for better asset protection). Depending on the state, you’ll like need to file a return with the Department of Revenue (or similar body) and apportion the revenue to your home state. But that’s not set in stone and there are a few ways to file. I recommend giving our “knights of the roundtable” strategy a try for your tax question. Hope that helps.

      reply
  44. Steph November 5, 2017

    Hello, I moved to Florida and have a construction business operating in Illinois that will remain there. I will not be doing any business in Florida and I will not live in Illinois any part of the year. The manager of the construction business lives in Illinois and handles all the day to day. I would like to have the shares of the construction business LLC owned by my living trust.
    I also have a property currently in a land trust in Illinois which the beneficiary is to be an LLC and I plan to acquire additional real estate in Illinois in the future.
    What would you suggest here? thank you!

    reply
    • Matt Horwitz November 8, 2017

      Hi Steph, can you ask a more specific question? I’m not sure what you need help with. Thanks.

      reply
      • Steph November 8, 2017

        Hi Matt, yes of course. What I am wondering which of the following is the best option based on my situation:

        1) Open an LLC in Florida for my business that is operating in Illinois and open an LLC in Illinois for my real estate holdings in IL
        2) Open an LLC in Florida for both my business that is operating in Illinois and for my real estate holdings in IL
        3) Open an LLC in Illinois for both my business that is operating in Illinois and for my real estate holdings in IL
        4) A different option that I am not aware of

        I am a bit confused as where to incorporate due to the fact I live in Florida while having real estate and a construction business in IL

        Does this help at all? I hope I am not complicating things with the way I am asking my question

        Thank you

        reply
        • Matt Horwitz November 9, 2017

          Hey Steph, because the construction business and the investment property constitute doing business in Illinois, you’ll want your LLC to be formed or registered (as a Foreign LLC) in Illinois. Most people tend to live in the state where they do business, but in your situation, that’s not the case, so you really don’t need to form/register any LLCs in Florida. That would make #3 the winner. I’d form 2 Illinois LLCs. One for the real estate and a separate LLC for your construction business. Hope that helps.

          reply
          • Steph November 11, 2017

            Really appreciate it the advice Matt, thank you very much!

            reply
            • Matt Horwitz November 13, 2017

              You’re very welcome Steph!!

              reply
  45. Lennox November 14, 2017

    Sir- I read your article and was not impressed. It misses so much information about why one would choose one state over another when considering opening an LLC. Your entire article focuses on the “cost” issue ONLY. That is just part of doing business for what you’re really paying for when you choose a certain state to register your LLC…..It is about ASSET PROTECTION!!! You never discussed that area and I have to assume that you may not have sufficient experience in this subject.
    For example, opening an LLC for real estate investing in California is suicidal! It’s know as a state that offers the WEAKEST ASSET PROTECTION in America!
    Please do your research before giving these kind folks insufficient advice. There are many books by attorneys in Asset Protection that you can reference. Pay attention to the ruling in Florida on Single Owner LLCs and “Charging Order” and compare it to the reaction by Nevada, Wyoming and Delaware, for example. That’s the primary reason for those states, especially the first two, being so attractive for LLCs.
    It’s ASSET PROTECTION!!
    It would be a great service to your readers if you leave out your biasness. Thank you.

    reply
    • Matt Horwitz November 15, 2017

      Lennox, you’re right. This article needs to address more points. At the time I recorded this video and wrote the article I was trying to keep it simple and help the majority of our readers, which are beginners. Getting into parent/child LLCs, foreign LLC registration, and charging order protection can overwhelm people and lead to inaction (and not everyone needs that kind of setup, at least the majority of our readers). But you’re 100% correct, I did fail to mention information. We’ll soon be revamping this entire video + guide due to all the helpful feedback from people like you, so thank you for input and taking the time to leave your thoughts. It’s been challenging to create guides that help every single person for every single use-case. We’re making improvements though and getting better, so thanks again for sharing.

      reply
  46. EFM November 20, 2017

    Dude, I searched for some common sense info on how to start a business/best state to LLC and found so much noise until I watched your video; it was clutch. Thanks for turning what could have been a 100 hour wild goose chase into a 7.5 minute video. Rock on!

    reply
    • Matt Horwitz November 22, 2017

      Dude, I love your comment!! Thanks for the kind words and I’m glad we could help you avoid the wild goose chase ;)

      reply
  47. Ruth Teeters November 26, 2017

    Hi Matt,
    Your videos are very easy to understand and follow.
    I plan to start an LLC in Ohio, educational consulting, however, I have a home in Ohio and Florida, and would like to work with schools in both Florida and Ohio.
    What will I need to do to make that happen?

    reply
    • Matt Horwitz November 29, 2017

      Hi Ruth, where do you primarily reside and operate the business from? Based on your comment, I’m guessing it’s Ohio. If that’s the case, I’d form a Domestic LLC in Ohio and operate the business that way (even while working with schools in Florida). Later, if you need to register to do business in Florida, you can register your Ohio LLC as a Foreign LLC in Florida.

      reply
  48. Jeann West November 30, 2017

    Hey Matt, Thanks for all of the great info.

    I run an online/telecoaching business. I have a primary address for an LLC in SD, but all of my work is done via phone or web. Does the physical location that I do the work matter? Like if I am traveling to another state, or even have a secondary residence in another state, does it matter as long as the business is managed and taxes paid in the primary business location state?

    At what point exactly does it become “doing business” in another location that one needs to register another LLC, instead of simply being able to do business procedures there and file through the primary location?

    reply
    • Matt Horwitz December 12, 2017

      Hi Jeann, thanks for the nice comment :) We’ll soon be updating this “best state for LLC” page with more context as we get this question a lot. Rather than thinking about where your customers/clients are, think about what state you primarily run/operate/manage the business FROM. In your case, and especially if you reside there, it sounds like this would be South Dakota. When does it become “doing business”… great question! Unfortunately, most states leave their statues “wide open” and don’t state what doing business is… but rather, what isn’t doing business. This gives them more latitude to enforce rules in their favor, if needed. Let me know if you’re curious about a particular state and I’ll see if I can dig up the statute link for you ;) Hope that helps.

      reply
  49. David W. Garcia December 7, 2017

    Mark, well i found your website a little to late. I formed an LLC in Wyoming, but will work an internet base business in Colorado. From what i’m reading i’ll have to file a foreign entity in Colorado. Can i form an LLC in Colorado as well?

    thank you,

    David

    reply
    • Matt Horwitz December 12, 2017

      Hi David, there’s a few things you could do. First, you could keep things as-is and wait until the state notifies you of the requirement to file as a Foreign LLC. Although, they do have the right to impose fees/fines for illegally operating. Not likely, but possible. Once you get notice, you could register as a Foreign LLC or dissolve your Wyoming LLC and then file a Domestic LLC in Colorado. Alternatively, you can form a Colorado LLC now and then dissolve the Wyoming LLC. On a positive note, you’ll save some money on the Annual Report. Colorado is cheaper than Wyoming. Hope that helps.

      reply
  50. David W. Garcia December 7, 2017

    Matt, my apologies I addressed you as Mark.

    David

    reply
    • Matt Horwitz December 12, 2017

      Hi David, it’s okay. It happens often lol. Thanks for your comment though!

      reply
  51. Paul K December 8, 2017

    Question?
    Hi Matt,
    I lived in Texas and ready to launch an online business in Texas. I like to know; Can LLC be converted to C Corp down the load?

    Reason for asking: I have to registered business logo with company name & EIN number.

    Thanks.

    Paul

    reply
    • Matt Horwitz December 12, 2017

      Hey Paul, I’m not sure how the logo + EIN number have to do with converting an LLC to a Corporation. Can you provide more details? Did you obtain an EIN and state your LLC was a Corporation (or something similar)? To answer your question though, yes, a Texas LLC can file a conversion to a Corporation.

      reply
  52. NC December 11, 2017

    Hi Matt,

    Thanks for going through such detail here! I appreciate the video and how active you’ve been throughout the discussions that followed.

    I’ve received conflicting advice from various sources so I wanted to ask for your two cents on the matter.

    I’m currently in CA and am starting to freelance (working from home doing digital marketing consulting for people in other states and other parts of the world). I am moving to CO in the next 6 months and will continue to freelance. If I form the LLC in CA now, when I move to CO, should I a.) open a new LLC (and close the old) or b.) file a Foreign LLC qualification or c.) re-domicile? What are the pros/cons for each of these options?

    Or would it be more beneficial to form the LLC in CO now and register as a Foreign LLC here in CA for the next 6 months that I am here?

    Or is there a secret option 3 that I haven’t been informed of?

    Thank you in advance!

    reply
    • Matt Horwitz December 12, 2017

      Thank you for your thoughtful comment! First, will you be changing residency from CA to CO? In that case, you could likely just form the LLC in Colorado and not worry about the Foreign LLC filing in California. But to do everything Kosher/proper, it’s recommended to form in Colorado, then Foreign register in California. This will be cleaner to “unhinge” from California later.

      reply
  53. JC December 15, 2017

    Hi Matt, thanks for this enlighting article! I’m a Canadian citizen and I live in Canada. I’m planning to start a e-business that will only offer online learning courses. In order to save on taxes, I’m thinking of forming a company in US. In this case, which business structure is more ideal? a LLC or a C-Corp? and in which state to incorporate? Nevada or Wyoming? I’d really appreciate your response. Thank you!

    reply
    • Matt Horwitz December 22, 2017

      Hi JC, I don’t know all the ramifications for Canadians forming US LLCs, but I do know this. When you declare the income in Canada, the Canada Revenue Agency (CRA) will treat your LLC as a Corporation, which will lead to you paying taxes twice (double taxation). You may want to consider another US entity besides an LLC. I recommend speaking with a few Canadian tax lawyers who work on both sides of the border. You also don’t have to limit your options to just Nevada or Wyoming (I’d choose Wyoming over Nevada though)… I’d also consider a state close to where you live in case you want to drive over a few hours and open your US business bank account. Hope that helps! I’d love to hear what you find out and come up with. Feel free to keep me posted.

      reply
  54. Rich Lazarow December 19, 2017

    Wouldn’t it be much less expensive to pay NO state corp income tax than to file 2 registration fees? So if I have an LLC that makes $2MM next year, and pay a 5.5% corp income tax on that, that is $110K.
    I would rather deal with small hassles than write a check for $110K, or am I missing something?
    Thank you,
    Richard

    reply
    • Matt Horwitz December 22, 2017

      Hi Richard, in your situation, which two states are you deciding between? And where will the LLC be doing business?

      reply
  55. gurmit singh December 21, 2017

    I live in california but i am buying a business in nevada. in which state i have to make llc? In future if i buy business in diffrent state then i have to make there too?

    reply
    • Matt Horwitz December 22, 2017

      Hi Gurmit, will you be buying into an existing LLC with other members? Or do you want to form an LLC and then have your LLC buy the new business? Is the new business already setup as an LLC?

      reply
  56. Ja December 22, 2017

    Hi Mat! Everything is very helpful here. I want to start a business as an investor. Initially I will be funding my business. I live in CA but the cost is crazy high. I am open to the idea of FL (origin) and AZ for cost/tax purposes. I am open to investing in almost anything/everywhere except real estate (for now). What are your thoughts of if I should pick any state that is not so costly or just start in CA. I don’t plan on living here in about 3-5 year ( I am a nomad)! Thanks in advance!

    reply
    • Matt Horwitz December 22, 2017

      Hey Ja, it would still be best to form the LLC in the state where you reside and operate the LLC from… which in this case is California, but I do hear you on the upcoming move. It’s hard to say in this case as there aren’t “LLC police” monitoring things, but the CA Franchise Tax Board has been known to be strict around this. You could form the LLC in AZ and then if CA sends you letter requesting to register your AZ LLC as a Foreign LLC in CA, you can do that later. They do have the power to impose fines though if they find you illegally transacting business. It’s really tough to say. There’s not a clear black and white answer on this. Apologies I couldn’t be more specific.

      reply
  57. Glenn January 5, 2018

    I am planning on being a full time rv’er and traveler which means I will not have a “home” state. I will be running a travel business from the road as I travel throughout the US and the world. What are my options? Can I simply buy a plot of land, say that is my business location, and register accordingly?
    Thanks for the help!

    reply
    • Leah January 7, 2018

      To add to Glenn’s question, we are in a similar situation. We are U.S. citizens, live overseas, and do not have an address in the states. Our business is internet based and serves clients all over the U.S. My husband does still have a valid Florida drivers license, but that’s just so he can drive when he visits the states. Do we have a “home” state regarding where we should file our LLC?

      reply
      • Matt Horwitz January 15, 2018

        Hi Leah, apologies for the slow reply. Great question. This certainly falls into somewhat of a gray area and I wish I had a clear black and white answer. Although our lives can be flexible with regards to travel and location-independent business models, tax laws haven’t caught up. Who wouldn’t guesses lol. It’s probably best to form the LLC in Florida, but I’d say in your case, you could get away with selecting any state. Hope that helps.

        reply
    • Matt Horwitz January 15, 2018

      Hey Glenn, apologies for the slow reply. I don’t think you’ll need to purchase any land ;) Where do you currently file state taxes? What state is your driver’s license in? Do you reside in any state for the majority of the year?

      reply
  58. Alex January 10, 2018

    Hi Matt. I have a residency in GA, but I am a traveling healthcare worker who does most of my work in WA, OR, and AZ. Would you still recommend forming an LLC in my home state of GA?

    reply
    • Matt Horwitz January 15, 2018

      Hi Alex, yes, I’d still recommend forming in your home state. Hope that helps.

      reply
  59. Aaron January 14, 2018

    Hi Matt,

    My wife and I live in California and we will purchase a rental property in Michigan. It sounds like I set up the domestic LLC in CA, then register a foreign LLC in Michigan (or is it vice versa)? Is that the best way? What about a real estate holding company?

    Thank you for your time.

    reply
    • Matt Horwitz January 15, 2018

      Hi Aaron, you’ll be okay with just forming a domestic LLC in Michigan, since that’s where you’ll be doing business. If you wanted to setup a holding company, Wyoming as the parent LLC is pretty popular among investors. If you get any hassle from CA, you can then register the Michigan LLC as a Foreign LLC there later. Hope that helps.

      reply
  60. Michael January 14, 2018

    Thank you for the great article and educational website.

    My question is…I have filed taxes in California my whole life (when I worked). The past 2 years I left my job and backpacked around the world and didn’t file taxes because I had zero income. However, all of my mail is still being sent to my parent’s residence. When filling out applications, I use my parent’s California residence.

    I am starting an online business with manufacturing in China and selling online (Amazon, website). I have contracted a company in Alabama to handle logistics. I will be staying in Asia to manage the business. I do not foresee a permanent residence in the next few years. I will live out of a backpack.

    Do I need a California LLC? Do I need an Alabama LLC? Is there an advantage in setting up an LLC in Wyoming, new Mexico, or Delaware?

    Thanks in Advance!

    reply
    • Matt Horwitz January 15, 2018

      Hi Michael, this falls into the gray zone (as do a lot of “best state” questions), and I really don’t have a clear black and white answer for you. I’ll look more into things and make a few calls if I have time, then follow back up. In the meantime, I’d recommend calling a few attorneys to see what they think is best.

      reply
  61. John January 15, 2018

    I reside in CT but will be purchasing RE in FL for rental purposes. If I create the FL LLC will CT require Foreign LLC registration? I am looking to do the easiest solution over the cheapest as far as when taxes and revenue is generated. In the long run would FL still be better than CT for an LLC?

    reply
    • Matt Horwitz January 15, 2018

      Hi John, while we can’t say for sure, it is unlikely that CT will ask for a Foreign LLC registration. Because the property is in Florida, that’s where the business will be operating, and therefore, a Florida LLC will be the best route. Hope that helps.

      reply
  62. Michael January 15, 2018

    Thanks for the response. I’m looking forward to your findings. In the meantime, I’ll check with an attorney.

    reply
    • Matt Horwitz January 15, 2018

      Thanks Michael, sounds good. Let’s keep each other posted.

      reply
  63. Sammy January 18, 2018

    I started an online business teaching ESL and American Accent training in Texas as an LLC. I make my own curriculum and teach it online. I moved to California and do not want to move my LLC here as they charge you $900 in taxes if you make money or not! Well I work full-time and this business is very small and so I do not need to make an LLC in California as I work online with anyone who can pay with PayPal. So if there is no “physical business” but rather an online service, Can I just keep my Texas LLC and a physical address there?

    reply
    • Matt Horwitz January 19, 2018

      Hi Sammy, since you’re operating the business from California now, you are supposed to register there. You could either move the LLC, file a Foreign LLC registration, or dissolve the LLC in Texas and then form an LLC in California. Having said all that, since it sounds like you don’t want to do any of that, you can just leave things as they are and continue to operate as is. There is a chance you’ll get a letter from the state requiring you to register in California, but I can’t tell you for sure that will or will not happen. Hope that helps. Apologies for the “gray” answer on this one.

      reply
  64. Ed January 30, 2018

    Hey Matt,

    A friend and I are creating a iPhone game. In order to do all the necessary steps for advertising etc. we need a bank account but we don’t want to use our personal accounts. We thought it would be smart to simply form an LLC and open a bank account for the entity. We are not expecting to make much but want to protect ourselves just in case. He is in OH and I am on TN so my question is does it matter which state we set it up in, are there advantages to one or the other since we will not be opening a physical location in either?

    Thanks,
    Ed

    reply
    • Matt Horwitz January 31, 2018

      Hi Ed, will one person be running the business more than the other? If so, chose the state where the majority of the business activity takes place. I know you’ll both be working from home, but that is still “doing business” in the state. If not, then you can pick either state. Hope that helps.

      reply
  65. Stavroula February 6, 2018

    Hi Matt,
    my name is Stavroula. I am a not US resident and am living in Greece, Europe. I have an Amazon FBA business. I want to form a Single-Member LLC this year.
    Is it better to form a LLC in a state with no sales taxes?
    What about income tax sales?
    Thank you in advance.

    reply
    • Matt Horwitz February 9, 2018

      Hi Stavroula, in your case, being a foreigner, you’ll want to speak with a few accountants in order to find the best state for your tax situation. Check out our “knights of the roundtable” strategy as listed in our how to find an accountant guide. Hope that helps.

      reply
  66. Brian February 6, 2018

    My business is online. I buy wholesale from distributors and manufacturers and sell it on Amazon.
    It was suggested to do an LLC with a state that doesn’t collect sales tax (ie Oregan, Delaware etc)
    Do you see a benefit to this – what are your thoughts?

    reply
    • Matt Horwitz February 9, 2018

      Hi Brian, our team hasn’t fully dove into the research regarding the best state for LLCs which collect (or may need to collect) sales tax and what strategy to follow, so I can’t provide a clear answer at this time. Although you’re business is online, the state where you run and operate from will be the state where you’re legally doing business.

      reply
  67. SHANNON February 8, 2018

    I live in Georgia but I’m from Virginia. I have been doing online selling from my home in Georgia. I plan on opening a store back home in Virginia and I’m confused to what state i should do my LLC in and whether i need a registered agent. I do have family in Virginia so i do have a address to send to. What do you think the best options for me?

    reply
    • Matt Horwitz February 9, 2018

      Hi Shannon, if you’re opening a store in Virginia, then that’s legally where the entity will be doing business, so you should form an LLC in Virginia. And to clarify, all LLCs in Virginia require a Registered Agent. I think you may be referring to a Commercial Registered Agent. A Registered Agent is a person or company who agrees to accept Service of Process (legal/court mail) on behalf of your LLC if it is “served”. You can certainly have a family member be your LLC’s Registered Agent in VA though. Hope that helps.

      reply
  68. Rin Phan February 12, 2018

    Hi Matt,

    Thank for your great article.
    I have some question. Hope you will help me with it.

    I am a Vietnam Citizen but now I live in US and I’m a US permanent resident, live in Arizona. I still keep my VietNam Citizen status while I live in US.

    Now I doing E commerce Business. All my business are online base. I don’t have warehouse, don’t have store…
    Can I form an LLC in Nevada by my Viet Nam information ( Passport). After that can I open an US Bank for my LLC also? If yes do I need to provide any information beside that.

    When I do business in Nevada under my LLC do I need to pay for Nevada State Tax and Federal Tax. When I transfer money from my LLC to my supplier over sea do I have to pay Tax or provide any information for US?

    Thank in advance,
    I’m looking forward to hearing from you soon
    Sincerely,
    Rin Phan

    reply
    • Matt Horwitz February 14, 2018

      Hi Rin, we can’t provide information on taxes, since it varies so much among people and different businesses. We have a guide on how to find an accountant though. You may want to also consider forming the LLC in Arizona instead. If you want to open a bank account for a Nevada LLC, you’ll need to either visit Nevada or call a bank located in both Nevada and Arizona and see if they’ll allow a “cross-branch opening”. They’ll likely want you to visit in-person though, especially not being a citizen yet. Hope that helps.

      reply
  69. John February 12, 2018

    Good Day Matt,
    I’ve found the information you have provided here and elsewhere very informative, but it doesn’t address our situation specifically.
    My wife and I are US citizens and residents of Virginia. We are at the beginning of a process to acquire improved property in a British Overseas Territory in the Caribbean. For the short term we intend to use this property for vacation (4-5 weeks/year) and rental for the remainder of the weeks each year when we aren’t vacationing there. When we “retire” in a few years, we would plan to live there 9/10 months/year and operate the property as a B&B.
    For a variety of reasons, not the least of which is liability protection, we prefer to form a LLC and have the LLC purchase the property and operate the business use. We’ve checked with an on-island attorney and have found that while a US-based LLC can own property there (provided it is registered there as a foreign company), local law prohibits locally-formed LLCs from owning real property (so that option if off the table).
    Since we will not be operating the business in Virginia, is there any advantage (other than perhaps convenience) to form a VA LLC? If not, should our primary criteria for formation, given our situation, be startup/annual cost, asset protection, or some other factor or combination of factors (and what state or states should we be looking at)?
    Thanks in advance for your response.
    John

    reply
    • Matt Horwitz February 14, 2018

      Hey John, congrats on the upcoming purchase. You’re correct in that Virginia will be an easy setup since you reside there, however, I can’t accurately address your question regarding startup/annual cost vs. asset protection vs. other factors. Your situation is not as straight-forward as most, and you’re dealing with multiple jurisdictions, one being outside of the US. I would recommend running this question by a few real estate attorneys and pooling everyone’s ideas together to find the best approach. Apologies I couldn’t be more specific.

      reply
  70. Annete February 15, 2018

    Hi Matt,
    I wish to put real estate properties in three different LLCs (in the three states the properties are located) and have a parent LLC (say in Wyoming or Nevada) hold the 3 child LLCs. How do I do that? I.e. I form the parent LLC. Then I form the 3 child LLC. 1. How do I put the 3 “children” under the parent LLC?
    2. Do you suggest any other state for the parent LLC? (For the purpose of asset protection and privacy)
    3. Any benefit or disadvantage in having the parent LLC in one of the children’s state?

    Thank you for shedding light on this.

    reply
    • Matt Horwitz February 21, 2018

      Hi Annete, for the strongest asset protection in the parent-child LLC relationship for real estate investing, we lean towards Wyoming as the parent. If you go this route, you’ll form the parent WY LLC first and wait for it to be approved. After that, form each of the child LLCs and list the Member as the Wyoming LLC. This will be done a few different ways. If the state’s Articles of Organization has a place for LLC Members, then list the WY LLC. If the Articles of Organization (or similar document) does not ask for LLC Members, then you’ll sign the Articles of Organization as an LLC Organizer (which you’d be doing anyway… a lot of people think an LLC Organizer is automatically an LLC Member… but they are not.) Then sign Statement of LLC Organizer and appoint the WY LLC as Member. Also list the WY LLC as the Member in the Operating Agreement. When you sign the Operating Agreement (and anything else for that matter) for the WY LLC, make sure below your signature it says “My WY Company Name LLC, by Annete LAST NAME, Member”). Also, even if your Articles of Organization does provide room for the LLC Member, it’s still a great and organized paper trail to also sign a Statement of Organizer in addition to the Operating Agreement. Hope that helps.

      reply
      • Annette March 22, 2018

        Thank you Matt. This is very helpful. Per your suggestion I formed the parent LLC in WY. Then I formed the child LLC in the other state and included myself and the WY LLC as the two members. This should protect my child LLC? I have another LLC in a 3rd state which was formed before the WY LLC. How do I protect that asset? Also, I don’t have much personal asset. The LLCs are my assets. Hope they’re protected by the parent child LLC formations? Or do I have to do something further?

        reply
        • Matt Horwitz March 26, 2018

          Hi Annette, it’s not usually common to list a parent LLC and yourself as Members of the child LLC. It’s usually just the child LLC, owned by the parent LLC, and the parent LLC is owned by you. Regarding your 3rd LLC (which is already owned by you), you can sell/transfer the LLC to another LLC, but that’s not something we can show you how to do. You’ll need to speak with an attorney. If the 3rd LLC doesn’t have any assets or activity, you could also consider dissolving it and setting up a new “3rd” LLC (if you really want it to be owned by your Wyoming LLC). But then again, if you don’t have any assets or much liability, all of this could be overkill. I’m just painting a few different scenarios for you, but I’d say it’s best to speak with a few attorneys to find the best course of action. Hope that helps.

          reply
  71. Chris White February 19, 2018

    As of DEC 20th 2017 The State of IL lowered both the upfront cost to open up the LLC – but also lowered the Annual Report Charge from $250 to $75
    My assistant sent the check off for $250 – What recourse do I have to get the $ back – the difference? LLC formed in 2013
    Please advise

    reply
    • Matt Horwitz February 21, 2018

      Hi Chris, I’d call the Secretary of State’s office and ask for a refund. Hope that helps.

      reply
  72. Chris White February 19, 2018

    I have two synergistic business models: One with an existing LLC and the other that needs to be set up – can the one that needs to be set up use a DBA (assumed name) to get started? ($25 vs $250 online in IL) -or should I pursue a new LLC altogether? First Business Model is a Fiduciary based Investment / Insurance Platform to create, protect and distribute wealth and the 2nd is a Fiduciary Medical and Nutritional (Health and Fitness) Vitality Concierge service for both existing clients of the first business and new ones. Set up new LLC or to save a few $ -open DBA under existing LLC?

    reply
    • Matt Horwitz February 21, 2018

      Hey Chris, if you’re talking about a DBA owned by you, that’d be a Sole Proprietorship, which does not offer liability protection in the event of a lawsuit. And your service sounds like it could have some liability risk. If you’re talking about a DBA owned by your existing LLC, yea, this is a route you could take, but honestly, I feel like it’s such a pain in the neck to reorganize everything when you do get around to forming the LLC, that the headache is not worth the “savings”. If it were me, I’d just form the 2nd LLC and keep things separated. Hope that helps.

      reply
  73. Pete February 19, 2018

    Hi Matt…awesome video! Thanks for providing this.

    I live in NC and want to start an LLC just to build an official track record for a stock trading business that I may grow one day. I will have no official employees but may subcontract out work to a couple of friends in other states that will get a 1099 if they receive payment.
    Since I will have no products or sales other than brokerage account investments does it make sense to set up the LLC in NC? Wouldn’t it make more sense to set it up in a NO corporate tax state or no Capital gains tax state? I read that NV doesn’t charge cap gains tax as well.
    Thanks in advance!

    reply
    • Matt Horwitz February 21, 2018

      Hi Pete, this is a good question, and the honest answer is I’m not sure. This enters the gray area. Although it’s all digital, you running the operations from your home in NC could easily be considered “doing business”.

      reply
      • Pete February 21, 2018

        Thx Matt! Appreciate the response. Think I’ll take the easy choice and set it up in NC to avoid potential future problems.

        reply
        • Matt Horwitz February 21, 2018

          You’re welcome Pete. Sounds like a smart and safe choice :)

          reply
  74. Edward February 20, 2018

    Hello!

    I’ve just watched a few of your videos and have a question regarding with state I should register my LLC in or if I should transfer my LLC to a different state because I travel often. My primary source of income requires me to bounce between states every 3-4 years. So, I was wondering if I should transfer my LLC to my gaining state (unknown at this time), register it in my current state (NV), or register it in my state of residency (FL) even though I am not physically there. My business will be operated online and be assessable to all 50 states once I complete all of the legal logistic. Cheers!

    reply
    • Matt Horwitz February 21, 2018

      Hey Edward, I think forming an LLC in the state where you reside (FL) will be the most stable. Then filing a Foreign LLC registration in the states where you move will be the easiest. Hope that helps.

      reply
      • Edward February 21, 2018

        Thanks for your response Matt! Another quick question. Would it save me money if were to bounce my LLC between the states where I reside or would this be too much of a headache? I don’t know if I’ll move back to FL after I retire.

        reply
        • Matt Horwitz February 21, 2018

          There isn’t really an easy way to “bounce” an LLC around. The closest to what you’re talking about (that’s the easiest) is Foreign LLC registrations. You’re looking for a “stable base” (the state where to form the Domestic LLC). I hear you that you won’t move back to FL after you retire. You could form the base (the Domestic LLC) in FL, do the Foreign LLC registrations as needed, then after retirement, “move” the Florida LLC to a new state. You can that by shutting down the FL LLC (and it’s correlating Foreign LLC registrations) and then forming a Domestic LLC in the new state or you could re-domesticate, if the incoming state allows it. Hope that helps.

          reply
          • Edward February 21, 2018

            Thanks a lot for answering my questions Matt! You rock!

            reply
            • Matt Horwitz February 21, 2018

              Thanks Edward! You’re very welcome :)

              reply
  75. Will February 20, 2018

    Hi Matt – great stuff. I’m thinking of creating an LLC solely for the purpose of being able to pool together money from several other people in order to invest in a real estate private equity fund that has a minimum investment and the pool will allow us to reach that minimum. All the people that will be part of the LLC live in New York and the real estate private equity fund is primarily based out of New York but also has offices in other states. The fund will invest in real estate properties in several different states. The only “business” my LLC will be doing is being a passive investor in another fund that itself does business in several states. Does it still make sense to create the LLC in New York or should I do any cheap state?

    reply
    • Matt Horwitz February 21, 2018

      Hmmm… interesting question Will. This is walking the gray line of what it means to “do business” in New York. Good old New York is quite strict, so there could be issues (if you end up in court) by forming outside of NY. At the end of the day though, this is a question for an attorney (or a few). The answer is not black and white. Curious to see what you come up with though, so feel free to send an update once you gain more clarity. Thanks for your understanding.

      reply
  76. Jeff February 21, 2018

    Matt,
    Great articles and references. I want to form an LLC in my home state MI. I will be selling construction equipment as an example. The opportunity will allow me to sell product among a few states of protected territory.
    Will I need to form an LLC in each state I intend to do business?

    reply
    • Matt Horwitz February 25, 2018

      Hi Jeff, thanks for the kind words. “Doing business” is loosely defined in most states, so it’s hard to say for sure whether you’ll be doing business in other states (just based on your initial comment). I’m not sure if you just have customers there or you have a more “substantial presence” in the other state(s). Do you have employees in the other state(s)? An office/storefront? What percentage of your business is done outside of MI and to what context? If you can provide some more details about what you do outside of MI, that would be helpful. Hope my initial reply is helpful.

      reply
  77. Matt February 25, 2018

    Hey Matt – Thanks for all the insightful commentary here. I have an event planning business that I started years ago while living in California. I originally formed it as a California LLC. I recently moved to Arizona, but the majority of the events that I plan are still located in California. I do all of the advance planning from my home in Arizona, and then travel to California only for the day of the event. The clients that hire me for California events are sometimes located in California, but sometimes they are located in other states. I don’t have any employees and no physical business address (other than my AZ home). I would prefer to move my LLC state from California to Arizona for the better fee structure, but I’m not sure if California would still consider me to be “doing business in California”, and therefore still force me to pay the $800 annual tax. Any advice on which state CA/AZ to base my LLC in?

    reply
    • Matt Horwitz February 26, 2018

      Hi Matt, you’re very welcome. I’m glad it’s been helpful. I hear you on the desire to move things to Arizona, however, you’re likely still doing business in California. With the bulk of your events in California, the majority of your clients there, and you making repeated transactions in the state, I’d say this is doing business in California. If you shut down the California LLC and formed one in Arizona, there is a chance you could fly under the radar, but it’s quite risky (and not recommended). You’ll likely need to register your Arizona LLC in California as a Foreign LLC (which defeats your initial purpose), and worse, the state as the right to impose fines and penalties, not only against your LLC, but also against you personally. I recommend reading what is doing business in California, where we’ve linked to the relevant state statues. For example, in the California Corporations Code, Section 2259, it states, “Any person who transacts intrastate business on behalf of a foreign corporation which is not authorized to transact such business in this state, knowing that it is not so authorized, is guilty of a misdemeanor punishable by fine of not less than fifty dollars ($50) nor more than six hundred dollars ($600).” Also check out Section 2203: “Any foreign corporation which transacts intrastate business and which does not hold a valid certificate from the Secretary of State may be subject to a penalty of twenty dollars ($20) for each day that unauthorized intrastate business is transacted.” As you see, things can quickly get dicey and expensive. And the above examples are not all-inclusive. I also recommend calling a few attorneys and see what their thoughts are. I hope that helps you get a little closer to clarity.

      reply
      • Matt March 3, 2018

        Thanks, that’s helpful. So if I keep the LLC based in California, should I register as a foreign LLC in Arizona?

        reply
        • Matt Horwitz March 10, 2018

          You’re welcome Matt. It’s likely the best setup to form the LLC in California and then register as a Foreign LLC in Arizona since you’re doing business in both states. Hope that helps :)

          reply
  78. Maria March 2, 2018

    Hi Matt,
    I have an inquiry. I live in NY but I formed a LLC in NC for a rental property I own in NC. I’m trying to get a EIN# but not sure what address to put as the LLC principal address. Would this be my address in NY? or the registered agent address I put in my LLC application? Also, what county should I select, the NY county where I live or the county my rental property is located? Please advise. Thanks for your help!

    reply
    • Matt Horwitz March 3, 2018

      Hi Maria, in the IRS’s EIN application, #3 Addresses (“Where is the LLC physically located?”), I would use the North Carolina address. At the bottom of this page it will say “Do you have an address different from the above where you want your mail sent?” Select “Yes” then select “Continue”. On the next page (“What is the Mailing Address of the LLC?”) enter your New York address. Then in #4 Details (“Tell us about the LLC”), you’ll enter North Carolina twice (once for “state/territory where LLC is located” and again for “state/territory where articles of organization are, or will be, filed”). The “County where LLC is located” will also be a county located in North Carolina. Hope that helps!

      reply
      • Maria March 5, 2018

        Thank you very much!

        reply
  79. Harry March 3, 2018

    Hi,
    I am not a US citizen and would like to register a service firm ( We provide Industerial Automation Services) in US. Which would be the best state to go with this step. Our client locations are in different states like CA, AL, SC, NC etc.
    We are not dealing with any material trading or any manufacturing activities.
    Please suggest the options from legal point of view.
    Thank you!
    harry

    reply
    • Matt Horwitz March 3, 2018

      Hi Harry, sounds like a greet business. We cannot and do not provide opinions from a legal point of view. You may want to speak with an attorney to properly evaluate your situation. I would personally avoid CA and AL if you’re able. If I were in your situation, I’d consider either NC or SC. Hope that helps.

      reply
  80. Kash March 6, 2018

    Hi – like so many others before me who have commented, really terrific information Matt. Thank you for all of it and for your diligent replies.

    I am considering using IRA assets to invest as a limited partner in a hedge fund that I am forming. I have been told to move the IRA to a custodian that allows such investment and to also form an LLC which will be funded by and control the IRA assets. The LLC will then invest in and become the LP of the fund.

    I have bounced this off a tax attorney and he advised forming the LLC in Missouri which struck me as odd as I reside in NY and the fund’s physical address is in CT. He suggested Missouri apparently because they have same day formation, the annual filing fee is minimal and there is no annual reporting requirement. On the other hand, he said, NY has a very high formation fee and an onerous publication requirement.

    Your thoughts?

    Thank you!
    Kash

    reply
    • Matt Horwitz March 10, 2018

      Hi Kash, my gut reaction after reading your message is “this guy’s an amateur” (referring to the tax attorney you spoke to). Recommending Missouri because they have same-day filing is just an absurd point given your situation. He’s also not considering the fact that you may be legally doing business in both Connecticut as well as New York. I don’t feel your setup is a “knock it out quick” kind of filing. You’ll want to speak to a handful of legal and tax experts before making any moves. Hope that helps a bit and best wishes!

      reply
  81. Houston March 7, 2018

    Hello,

    I am figuring all this out for the first time and am overwhelmed with information. I believe because I am a contractor, generating business with homeowners for repairs on there homes — paid for most of the time by homeowners insurance companies, working under a licensed home improvement company I could benefit from having a LLC with an election of S corp in another state. From what I’m reading on other sites I may not have to do the foreign qualification since I’m not selling products technically. I think I could benefit from doing this because I would not have to pay any franchise taxes or any other corporate taxes. I may be wrong but, paying another state to file might be worth it in my case because of my companies potential income.

    If my company is making over a certain amount of money per year is there a value in doing the LLC with S corp election in another state with no corporate tax of any kind? The State I live in has no income tax as well so I feel this could really be beneficial.

    reply
    • Matt Horwitz March 10, 2018

      Hey Houston, we can’t comment on your tax situation. You’ll need to speak to an accountant about that. However, it sounds like you’re doing business in your state, so I would not form an LLC (with or without an S-Corp election) in another state since you’re legally doing business in your home state. The comment about “because I’m not selling products” is not the only factor to consider. Your state’s legal definition of “doing business” is far more detailed than just than. Hope that helps and thanks for your understanding.

      reply
  82. Miki March 7, 2018

    I would like to form an LLC with the two words in the name where ’’association’’ is the second word. New York City does not allow to register ‘’association’’ in the name unless you are NGO. I’m a resident of New Jersey, but the business will operate in New York. Is making sense to open a company in Delaware or Jersey? Can I operate under that name in NYC?

    reply
    • Matt Horwitz March 10, 2018

      Hey Miki, nope. If you form an LLC in another state and are doing business in New York, you’ll need to register that entity as a Foreign LLC in New York. And when you file that Foreign LLC registration, it’ll be rejected for the same reason.

      reply
      • Miki March 13, 2018

        Thank you very much. It was useful.

        reply
        • Matt Horwitz March 21, 2018

          You’re welcome Miki. Glad to hear :)

          reply
  83. Miki March 8, 2018

    if I live in New Jersey and open a company in NYC where do I pay taxes?

    reply
    • Matt Horwitz March 10, 2018

      Hey Miki, we can’t comment on your unique tax situation. We recommend speaking with an accountant. Your accountant may likely file in both states, but apportion your income as necessary. Hope that helps and thanks for your understanding.

      reply
  84. Miki March 14, 2018

    Thank you

    reply
  85. Christian March 17, 2018

    Hi Matt,
    Thank you for the great insight. I would like to form an LLC with 2 other partners. Two of us are in OR and one is in HI. Does this mean we should form the LLC in OR and a foreign LLC in Hawaii? or does it matter?
    Thank you for your advice,
    -c

    reply
    • Christian March 17, 2018

      This is for an online ecommerce business

      reply
    • Matt Horwitz March 27, 2018

      Hey Christian, apologies for the slower reply. It comes down to where there is more substantial business being done. I’d say with the majority of the LLC Members being in Oregon, you should be okay with forming a Domestic LLC in Oregon. If there is a lot of business activity taking place in Hawaii, then it would also be advisable to register your Oregon LLC as a Foreign LLC in Hawaii. You may also want to run this by a few attorneys and get their take on it; some in Oregon, and some in Hawaii. Hope that helps!

      reply
      • christian March 27, 2018

        Thank you very much Matt. Really do appreciate your feedback.

        reply
        • Matt Horwitz March 27, 2018

          You’re very welcome Christian!

          reply
  86. lisa March 20, 2018

    Hi Matt,

    Very informative.

    I registered a LLC at NV, and bought a rental there. I live in CA. Do I need to register a foreign LLC in CA?

    Thank you.

    Lisa

    reply
    • Matt Horwitz March 27, 2018

      Hi Lisa, glad to hear! Yes, you should register your Nevada LLC as a Foreign LLC in California (the form is Application to Register a Foreign Limited Liability Company, Form LLC-5). The reason is that California has some of the most strict laws regarding “doing business”. Simply by you taking care of your rental in Nevada from your home in California constitutes doing business in California.

      California has these strict regulations in place, not just in the corporate law, but also in the Revenue and Taxation law. Meaning that, not only can the California Secretary of State require a Foreign LLC registration in California (and has the power to impose fines), but the California Franchise Tax Board can assess fines and penalties for illegally transacting business in the state and not paying the $800 annual franchise tax as well as filing other state-level tax returns.

      On top of that, the CA FTB can require back payment for all years which you did not pay the annual franchise tax (whether or not your Nevada LLC was registered in California). And yes, a California LLC is expensive, but that is the cost of doing business in (rather, living in) California. Hope that helps.

      reply
      • lisa March 27, 2018

        Thank you for the reply, and very helpful.

        I forgot to mention that I have an agent who takes care of the property in NV. Does this make any difference?

        Thank you.

        Lisa

        reply
        • Matt Horwitz March 27, 2018

          Unfortunately, that really doesn’t matter for California residents. Hope that helps clarify a bit further.

          reply
          • lisa April 5, 2018

            Thank you !!!

            Lisa

            reply
            • Matt Horwitz April 6, 2018

              You’re welcome Lisa :)

              reply
  87. Kelly March 22, 2018

    Hello! I reside in Virginia, but plan to have my business located in TN. Is it better to set the LLC up in one or the other? I’m assuming that dual filing will be required regardless?

    Thanks!

    reply
    • Matt Horwitz March 26, 2018

      Hi Kelly, you could form a Domestic LLC in Virginia and then register as a Foreign LLC in Tennessee, however if you’re going to do business and run the business from Tennessee, you could just form a Domestic LLC in Tennessee. Hope that helps.

      reply
  88. Travis March 23, 2018

    Hi Matt,

    Thanks for the informative article.

    My question is what if I’m starting a new business and only rent a home and do not have an office in the state I live? In this scenario I cannot register my LLC in my home state (AZ) as they require a registered address unless I use the home I’m renting.

    I would prefer to not list the house I rent as my official business address as it may not be long term and they do not allow me to set up a PO Box for this purpose. Additionally, I refuse to spend money on an office while I’m starting out, especially to form the LLC in my home state.

    Is this a unique situation where it might make sense to file in say Delaware but then file a Foreign LLC in AZ?

    Thank you again and in advance for any assistance Matt.

    reply
    • Matt Horwitz March 27, 2018

      Hey Travis, you can hire a Commercial Registered Agent, called a Commercial Statutory Agent in Arizona. Not all Registered Agent companies allow this, but the ones we recommend do (Arizona Statutory Agent) – In your LLC’s Articles of Organization, you’ll use their address for your Statutory Agent for Service of Process… and you can also use their address as your Arizona Known Place of Business. Any mail they receive for your LLC will be scanned and then uploaded to your online dashboard (and you’ll get an email notification). Hope that helps.

      reply
  89. Moe Iqbal April 1, 2018

    Thank you for the Information. Question: What if I am doing business in Texas but living in PA, Where do I form the LLC? I am also doing business in DE and formed a DE LLC. I do not do any business in PA….

    Thank you

    reply
    • Matt Horwitz April 2, 2018

      Hey Moe, great question. Let me clarify. You’ll want to form the LLC in the state where you’re conducting business. In your case, that means forming a Texas LLC. The reason why “home state” is mentioned so much throughout this article is because most people are doing business in their home state. We’ll do a better job of clarifying that during future updates. Thanks and hope that helps!

      reply
  90. Mark Howes April 3, 2018

    Hi Matt: Amazing site with lots of relevant info and advice.

    My situation is as follows and I need some direction even though I understand your mantra of filing in one’s home state to prevent doubling of effort and fees.

    I am taking over a business that is located and owned by an individual in Arkansas. The member/manager has defaulted on the franchise payments and there are no other members of this Domestic LLC.

    In preparation to take over I acted too quickly and filed Articles of Organization for a Foreign LLC in my home state of New Jersey. I did this knowing that my office in NJ would operate as headquarters whereas the nexus of physical sales currently occur in Arkansas. And from a marketing perspective it reinforced the brand’s namesake to remain a Domestic LLC within the State that the consumer associated with it. But take away all that and you have a BBQ seasoning that is manufactured in Alabama and distributed wherever it is sold which could be Arkansas, New Jersey or any place in the USA.

    I have since discovered that the Franchise Tax Report for Arkansas indicates “incomplete” filings for the last 3 years with another due in May 2018. The status of the LLC is officially listed as “revoked”.

    The listed officer has no intention of paying the delinquent fees prior to my proposed acquisition of the company. I could change the company name, however the real value is conferred in the actual name of the company “Ivan of the Ozarks LLC”. In addition I listed the company name as such when forming the NJ based Foreign LLC.

    I have read that I can file the delinquent annual report/franchise tax and pay past due franchise fees plus penalty and interest to reinstate. I can also edit information to remove the previous member/manager and reflect my involvement. The AR registering agent would remain the same.

    Per Arkansas Secretary of State: “If you do not file your franchise tax report and fees, there is a $25 penalty fee. The secretary of state will charge 10% interest per year on the tax and penalty from the due date until it is paid. The total tax, penalty, and interest for any one year will not be more than twice the tax owed by the corporation.”

    Now I am in a pickle with many questions.

    • Should I ammend my NJ filing from being a Foreign LLC to that of a Domestic LLC using the Ivan of the Ozarks, LLC name as submitted to NJ?

    • Should I file for the dissolution of the Arkansas Domestic LLC filing (and pay associated franchise fees and taxes to do so) and become a fully NJ Domestic LLC?

    • Should I pay related costs to reinstate the company and maintain as an Arkansas Domestic LLC?

    • Should I file for dissolution of NJ Foreign LLC and rectify matters with Arkansas filing to be a Domestic LLC with no NJ filings on record?

    There are so many ways to approach and I want to be make matters better and not worse and do not want to incur any legal ramifications. They all involve cost but it is the long run aspect that I am taking into consideration in conjunction with you advice.

    Thank you in advance!

    reply
    • David April 6, 2018

      Hey Matt, enjoyed looking through your site. A lot of good info here. I have a question. Looking to set up LLC for start up company with initial target group being Whole Foods, Sprouts, etc. I am currently living in Georgia but plan is to be back in home state of Alabama within a couple years. Should I incorporate business in Georgia and when I move transfer llc to bama or incorporate it as foreign llc? I have family in bama so theoretically I could use their address for business to incorporate initially. Just do not want to cause headaches in future. Am I over thinking this?

      reply
      • Matt Horwitz April 8, 2018

        Hey David, thanks :) No, you’re not overthinking. This is called proper planning. If you know you’ll eventually be doing business in Alabama, then this is an easier setup… since “moving” an LLC is a pain in the rear, it’ll be easier to form a Domestic LLC in Alabama and then register that LLC as a Foreign LLC where you’re also doing business in Georgia. Then after you move, cancel/dissolve your Foreign LLC filing in Georgia. Hope that helps!

        reply
    • Matt Horwitz April 8, 2018

      Hey Mark, you said “I am taking over”, making it sounds like it’s not done yet. So why even buy the Arkansas LLC? Maybe consider just buying the assets the LLC owns. If you’re not working with a competent business lawyer in this transaction there are a HANDFUL of potential pitfalls and liabilities you may be assuming with buying this LLC. If you decide to and are able to just buy the assets of the LLC, then you can cancel your Foreign LLC filing in NJ, form a new LLC, then approach this transaction from a fresh angle and negotiation. As far as your questions, we appreciate you asking us, but there is just far too much going on here for us to even point you in the right direction, besides that of working with a business lawyer. Hope you get to the bottom of things. And thanks for your understanding.

      reply
  91. Mark Howes April 9, 2018

    I totally hear you on the complexity of my situation and thank you for providing some basic insights — will sort it out — thanks for replying!

    Great advice!

    reply
    • Matt Horwitz April 9, 2018

      You’re welcome Mark! Thanks again for understanding.

      reply
  92. Dala April 18, 2018

    I’m from Europe and non USA resident, want to do only Wholesaling of single-family homes in USA. Being non USA as I understand I can only do it with an LLC.
    So if I open in Wyoming an LLC (because it is cheap), and start wholesaling in Arizona, do I also need to register my Wyoing LLC as a Foreign LLC for Arizona and start paying fees for 2 like you mentioned above? If so then I need to choose only 1 state and focus there. Gota be a good state for wholesalers :D

    reply
    • Matt Horwitz April 20, 2018

      Hey Dala, yes, you’re correct. If you’re doing business in Arizona, then the LLC should either be formed there as a Domestic LLC or formed out of state and then registered there as a Foreign LLC. Hope that helps. Best wishes with the wholesaling biz!

      reply
  93. Albert April 20, 2018

    Hi Matt I have real estate properties in florida and have used a family address as the registered agent. The person, whom I nominated as my registered agent no longer lives in the property. It is now a rental. Do I need to change the registered agent. Also does the person who acts as a registered agent have any liabilities.

    reply
    • Matt Horwitz April 21, 2018

      Hi Albert, yes, you’ll need to update/change your LLC’s Registered Agent with the state. We have info on that here: how to change Registered Agent for Florida LLC. The Registered Agent is not liable for actions of the LLC. The Florida Registered Agent requirements are listed in #3 of section 605.0113 of the Florida Statutes. Hope that helps!

      reply
  94. Joe Walters April 23, 2018

    Hello,

    First let me say that I love your site, thanks for being a great source for honest advice. I have a unique situation that I was hoping you could help me with. I an going to be setting up an LLC to operate a small marine charter business, 1 vessel, which will do business between two states, Florida in the winter and Washington, DC in the summer. Until January 2018, I was a resident of Maryland where I held property. I currently live aboard my yacht and no longer own property in any state. I am trying to decide which state I should claim as my residency in and as you advise create my LLC in that state. Are there any advantages/disadvantages, from the LLC perspective, of choosing Washington, DC or Florida? Thanks for your assistance.

    Joe

    reply
    • Matt Horwitz April 27, 2018

      Hey Joe, thanks for the awesome comment! You’re very welcome :) Since we don’t rip apart and compare LLC state statues in great depth (regarding your questions about FL vs DC), I’m not sure. To get that level of granularity, you’ll need to speak with an attorney and/or a tax attorney. However, whichever state you choose as the “base LLC” (the domestic LLC), you’ll need to register that LLC (as a foreign LLC) to do business in the other jurisdiction. And regarding the best choice regarding state residency, that conversation would need to be had with an accountant. Thanks for your understanding and hope that helps!

      reply
  95. AJ April 30, 2018

    Hi Matt,

    Great article with lots of information in forming an LLC!

    I was almost ready to set up a WY based LLC to buy a property in NJ, rehab it and resell through this LLC. But after reading your article, I realized, it may not be a wise strategy.

    Therefore, wanted to get your thoughts on why most advice out there is to have out of state LLC, when eventually, its a pass-through entity and taxes would still be hit the individual investor’s filing. Also, that the WY based LLC still needs to register in NJ as Foreign LLC, essentially making work twice. Why NJ RE vehicle LLC is not prefered?

    Appreciate your thoughts in advance.

    Regards,
    AJ

    reply
    • Matt Horwitz April 30, 2018

      Hey AJ, thank you! There are a lot of companies have a self-interest in promoting certain states. And it’s not that some of these states – like Wyoming – don’t have good laws… I just don’t think a lot of the people who own these sites give a crap about their readers and customers. They don’t property educated them about Foreign LLC registrations and all the details. They seem to always paint a “half picture” (at best). Having said that, Wyoming does have strong asset protection laws in regards to charging order protection, so some investors with more assets may form a Parent LLC in Wyoming and then form an LLC in the property-state, and have the property-state LLC (the Child LLC) owned by the Wyoming LLC. So there is some truth to it. However, you’ll need to weight the benefit of that against the cost and energy in order to rehab and sell one house. And to answer your last question, one of our goals is to inspire the industry to be more transparent. Hopefully we’ll get their with time and patience ;)

      reply
      • AJ May 10, 2018

        Thanks Matt for the response! It makes sense and I agree, patience is the key :)

        reply
        • Matt Horwitz May 16, 2018

          You’re welcome AJ :)

          reply
  96. Vincent May 10, 2018

    Hello Matt, thanks for all the great information. I am still a little confused on my particular situation and am hoping you can clarify. I am a US citizen, in the process of setting up a career coaching business, so the actual conduct of the business will be accomplished over Skype/Internet to whichever State the individual lives in. I currently live and work overseas and no longer have a state of residence. Recommendations on the best State to set up my LLC? I will be the sole proprietor with no additional employees.

    reply
    • Matt Horwitz May 16, 2018

      Hi Vincent, in this case, where you’re doing business is a bit gray. Doing business is about where you’re working from, not where the clients are. The safest route to take would be to form the LLC in the state you use as your US residency… likely also the state on your driver’s license and the state where you file taxes. Hope that helps.

      reply
  97. Wil Warnock May 12, 2018

    I am a resident of California and want to create an LLC for international real estate investment purposes.

    Would it be your recommendation to create a CA LLC

    reply
    • Matt Horwitz May 16, 2018

      Hi Wil, I’m not sure where an LLC should be formed for international real estate. That would be a question for a real estate attorney familiar with the country where you’re purchasing. Having said that, if you form an LLC out of country, there is a good chance – due to CA’s strict rules – that that LLC may need to be registered to do business in California. Hope that helps.

      reply
  98. Jeremy Jackson May 13, 2018

    Hello Matt, thanks for the page and video great info. I hopen you can help me with something. I am in the Army. I am currently stationed in Germany and when I leave here will be going to where ever the Army says. As you can imagine in the military we move every 3 years. I guess you can say my home of residency or rejection order is Texas since that is where I lived when I joined the military, that is the state I claim my taxes through and have my drivers license in. I do not own any property there and have no relatives living there so I don’t have a physical address there anymore.
    My question is I want to create an LLC for an online ecommerce business and I am not sure what state I should set it up in. I do not know where I am going to live when I retire which won’t be for another 3 to 6 years. Should I set up in Texas or somewhere else given my situation?

    Thanks for you help

    reply
    • Matt Horwitz May 16, 2018

      Hi Jeremy, you’re very welcome. In this case, I would form the LLC in Texas. Make that your “base” LLC. If later, you live in another state for some period of time, you can register your Texas LLC as a Foreign LLC in that state, then withdrawal the Foreign LLC registration when you move. Also, if you don’t have an address in Texas, I recommend hiring Northwest Registered Agent. They’ll serve as your LLC’s Registered Agent and they’ll also let you use their office address throughout the entire Texas LLC registration. Any mail sent to your LLC will be scanned by them and uploaded to your online dashboard. Hope that helps.

      reply
    • Jeremy Jackson May 18, 2018

      Matt

      Thank you very much. Yes that helped alot and you are the only one to ever answer me. I have asked atleast 20 to 30 other entities and lawyers and none have ever replied. Thank you..

      reply
      • Matt Horwitz May 18, 2018

        Wow, that’s crazy to hear. However, super happy we were able to help provide some clarity. Best wishes with the business Jeremy!

        reply
  99. Felix Leisinger May 18, 2018

    Hi, I incorporated an LLC in Delaware a few years ago and pay every year some USD550 to dbi for annual tax and filing etc. I’m still overseas and have not made any use of my LLC just paying Delaware tax and agents fees for nothing. I asked dbi to dissolve the LLC and they want about USD1000 all in all. However you say that most states dissolve a company if the tax is not paid. So should I simply stop paying the tax and forget it? Thanks for helping in this.

    reply
    • Matt Horwitz June 17, 2018

      Hi Felix, while you can just ignore the Delaware LLC, it’s better to dissolve it. We have information here: how to dissolve a Delaware LLC. Hope that helps.

      reply
  100. Robert May 19, 2018

    Hi Matt,

    Thank you for very interesting article and video. I have one thing to be clarified. I’m planning to start single-LLC (CA resident currently) and I’m considering Nevada for it. My business is very small and I have only one customer in the Europe (I’m their subcontractor in the US, working across the US and online). How about that case? My customer is in the Europe and I will invoice them. In that case is not precise where the place of making money is (but financially is Europe). Will it be a good move to setup it in Nevada?

    Thank you.

    reply
    • Matt Horwitz June 17, 2018

      Hi Robert, in this context, the state laws about doing business don’t depend on where your clients are, it depends on where you’re running and operating the business from. Which in your situation, is California so you should form your LLC in California. Further, California has very strict laws (corporate laws + tax laws) about doing business. There are some pretty large penalties involved and if caught, those would be imposed… and in addition, you’d need to register your Nevada LLC as a Foreign LLC in California anyway. Hope that helps.

      reply
  101. Stephen May 19, 2018

    Hello I do Internet real estate in other states but I live in New York and I do real estate transactions here also I just recently put together a parent holding LLC but I want to do to children LLCs in all the states was New York a bad decision and how do I change that to say like Wyoming or Nevada

    reply
    • Matt Horwitz June 17, 2018

      Hi Stephen, it’s not as black and white as that, however, the holding company being located in Wyoming is more popular (for charging order protection) and then the Wyoming LLC owns the child LLCs, which are formed in the states where the real estate transactions are taking place. In order to change that, it would be easiest to dissolve the NY LLC and then form the new LLCs. Hope that helps.

      reply
      • STEPHEN June 19, 2018

        but I live and do transactions in ny also and if I do that don’t I still have to pay ny taxes for operating their and what is the difference between ny and Wyoming charging order

        reply
        • Matt Horwitz June 20, 2018

          Then the New York LLC can be owned by the Wyoming LLC or you can just operate the New York LLC. Yes, you’ll still be paying your taxes in New York since that’s where you reside. The differences between Wyoming and New York charging order protection are too detailed for me to spell out here. You’d have to dig into the research on that or speak to an attorney. Thank you for your understanding.

          reply
  102. Naeem Oj May 22, 2018

    Hi Matt,

    I thank you for the valuable information you provide in the page. I need your advice. I am non US resident / non US citizen (LIBYAN CITIZEN) willing to form LLC. My questions are:

    Are there any restrictions on certain countries such as Libya to form LLC in US?

    Is it possible to form LLC for two different activities? online business (DROP-SHIPPING, AMAZON, SHOPIFY) & buying goods from US merchants such as online car auctions. OR this basically fits under Online General Trading?

    Am I going to be able to open a bank account without visiting the US, since I can’t travel to the US due The complexity of the visa?

    Your advice highly appreciated.

    Thanks
    Naeem

    reply
    • Matt Horwitz June 17, 2018

      Hi Naeem, you’re very welcome! No, there are no citizenship or residency requirements to forming an LLC in the U.S. Yes, you can group all your business activities under 1 LLC. No, you’ll need to physically be present in order to open an LLC bank account. Hope that helps.

      reply
  103. Professor.Nahabu June 8, 2018

    Thank you, Mr. Matt, for the video it is really straight to the point…

    reply
    • Matt Horwitz June 18, 2018

      You’re welcome professor. Thank you!

      reply
  104. Nick June 26, 2018

    Hey Matt,

    Thanks for setting up this site – it’s awesome that you’re providing such a resource for entrepreneurs.

    I’m a US citizen living abroad so I think I may be an outlier in your audience. I saw one other comment in this thread from soon-to-be retirees who want to form an LLC in the US before returning but I’m not sure if it applies to me.

    Right now, I think it may be best to create an LLC in my home state (Illinois) and have a family member as the registered agent. I won’t be doing any business in Illinois – but I figure it’s best to have my bank there since that’s where I’ll be going back to regularly. Would there be any benefit to setting up an LLC in a different state if I still plan to bank in Illinois?

    I consulted another expat entrepreneur and he recommended that I register the LLC in another state (Delaware) and then register in Illinois as a foreign LLC. I think this would be more logistically difficult and I don’t know what benefits would arise from this.

    Any feedback would be greatly appreciated.

    reply
    • Matt Horwitz July 30, 2018

      Hey Nick, thanks for the kind words :) Yea, if you’re going to bank in Illinois, far easier to form an LLC in Illinois then form an LLC in Delaware and then foreign qualify in Illinois. Hope that helps.

      reply
  105. Jay June 30, 2018

    Hi Matt,
    Thank you so much for the video. It’s really great.
    I have few rental homes, these homes are in few different states, such as OH, FL, WA, CA. I live in CA.

    Can I just do CA LLC and put all these home in this CA LLC, or do I need to have an LLC for each state where the rental homes are in.

    Thanks
    Jay

    reply
    • Matt Horwitz August 3, 2018

      Hi Jay, you’re very welcome! We recommend speaking with a business/real estate attorney as well as a tax professional regarding the pros and cons of each setup below. This list is not exhaustive, but here are some ideas:

      1. Form a CA LLC. Then register your CA LLC as a Foreign LLC in FL, OH, and WA. It’s the same entity owning all properties. The Foreign LLC qualification allows the CA LLC to do business in the other states.

      2. Form 4 LLCs, one in each state. Better asset protection than #1.

      3. Form 4 LLCs, however, the FL, OH, and WA LLCs are owned by your CA LLC instead of you. Reason for this is that CA has more strict laws (corporate law and tax law) around “doing business”. Also, properties in FL, OH, and WA could be at risk if CA LLC runs into legal issues.

      4. Form a holding company in a state with stronger asset protection laws (i.e. charging order protection), such as Wyoming. The WY LLC is the Parent LLC. Then form a Child LLC in CA, FL, OH, and WA. All 4 LLCs are owned by the WY LLC. The word Parent/Child aren’t a special type of LLC, it’s just easier to discuss them in this manner. Said another way, the LLC Member (owner) of each of the 4 LLCs is the WY LLC and not you. You are the Member of the WY LLC. This is likely the strongest asset protection option in this list.

      Hope that helps!

      reply
  106. Katie July 9, 2018

    Matt,

    Thank you for the information!

    I am wondering if you could answer a question for me. I am starting up a consulting business. I am in a transitional period and living with family in Minnesota, but I also spend quite a bit of time in Florida. Ultimately, I will get a place in Florida and go back and forth between my family’s home in MN and a place in FL, so I will be based in two locations and just work from wherever I happen to be. Do you think it would make sense to set up in both states right away? Or, start with MN and then add FL once I have an address?

    Thank you!

    Katie

    reply
    • Matt Horwitz August 12, 2018

      Hi Katie, you’re very welcome! I’d say it’s easiest to pick the state where you’ll be most. You can’t just “add” a state to your LLC. For example, if you form an LLC in Minnesota, then want to do business in Florida, you’ll need to file a Foreign LLC registration in Florida which allows the Minnesota LLC to do business there. But you’ll need to maintain 2 LLC filings (note: it’s just 1 LLC though). I would pick the state that you end up making your state of residence. Where you’ll have your driver’s license, car registered, pay state taxes (although FL has not state income tax), etc. To add to that, if you think you’ll eventually make Florida your residence, I’d form there for ease. Hope that helps.

      reply
      • Katie November 25, 2018

        Thank you very much, Matt!

        reply
  107. Wes July 10, 2018

    Matt,

    A real estate attorney was recommending that I create an LLC for a condo I purchased that my son is going to be living in (we’ll pretty much only keep it until he’s done with college and then sell it). We don’t really intend to get into the rental business when he’s done with it. Since no money would be coming into the LLC, and any expenses would have to be paid by me personally, is there any reason to do this? It couldn’t function as a true business under these circumstances since no money would be coming in; I was simply trying to give him a place to live without paying rent. Would it be any protection if anything happened at that condo, or should I consider it much as I do my own home? I didn’t form an LLC for my own house to shield myself from any liability that may occur due to someone falling on my stairs, etc., so not sure why I would for this place either.

    Thanks,

    Wes

    reply
    • Matt Horwitz August 12, 2018

      Hi Wes, good question. You don’t have to form an LLC and then transfer the property to the LLC, although you certainly could. It seems the premise here is liability protection. You could either form an LLC or keep it your name and get a good insurance policy, as you do with your personal residence. I should also mention that even a home titled in an LLC should also have an insurance policy. Hope that helps.

      reply
  108. Charles July 12, 2018

    Matt –

    I reside in Arizona but I want to remain completely anonymous when setting up my LLC. Is this possible in Arizona or do I need to look at states that provide anonymous LLC’s then file a Foreign LLC in Arizona? It will be an online business selling in 46 states. Your insight is appreciated.

    reply
    • Matt Horwitz August 12, 2018

      Hi Charles, instead of a Domestic/Foreign LLC setup, I would also consider a Parent/Child LLC setup. For example, forming a Domestic LLC in Wyoming that owns a Domestic LLC in Arizona. Hire a filing company (we recommend Northwest Registered Agent) since they will sign as Organizer, be the Registered Agent, and let you use their address throughout the Wyoming LLC Articles of Organization. Then form a Domestic LLC in Arizona that is Member-Managed and the Member (owner) is your Wyoming LLC. This is recommended since Arizona wants either the Manager or Members disclosed. Form the Wyoming LLC first, then the Arizona LLC second. You could also hire Northwest to form the Arizona LLC since they’ll let you use their address throughout the filing, serve as the Statutory Agent, and sign as Organizer. Any mail sent to your LLC will be scanned by them and uploaded to your online account. Hope that helps.

      reply
  109. Maurice July 13, 2018

    Matt, I am sorry this may have been answered before, 2 questions.

    1. So I live in CA but have a rental house in KY. If I choose to put it under a LLC, do I still need to pay the $800 fees in CA? What are your thoughts on it? Pros and Cons.

    2. I do a lot of trading, mostly options (calls and puts) and I think I can qualify to do it under a business, what are your thoughts? Would LLC be best? And I assume it has to be in CA since I live here. What advantages to do it under a business instead individual?

    Thanks in advance, I loved all you videos. Wish you much success.

    Maurice

    reply
    • Matt Horwitz August 12, 2018

      Hi Maurice, thank you for the kind words :) 1.) Yes, you would still pay the annual fees in California, however, since you’re doing business in Kentucky, you’ll also need to register the LLC there. You can either form a California LLC and then form a Kentucky LLC (owned by the California LLC). And then title the property in the Kentucky LLC name. Or you can form an LLC in California and register it as a Foreign LLC in Kentucky. 2.) Yes, you can set up a California LLC for trading. I’m not sure of the pros and cons as trading is not an industry we’re familiar with. You’ll likely end up paying the same amount in taxes since the LLC – in its default tax classification – will be a pass-through tax entity. However, the pro/con questions could be ran by an attorney and/or accountant. Hope that helps.

      reply
  110. Gerri July 13, 2018

    Hi Matt,

    I’d like to setup an LLC – to be owned by my IRA.
    I live in Illinois

    I currently have a self-directed type of IRA that owns 10 assets which are essentially real-estate notes or contracts. I have purchased the sellers interest in these contract. All of these contracts are secured by real-estate that is located in Iowa. All these contracts are currently in a regular self-directed IRA.
    My intention is to move these assets into an LLC – and then have my IRA invest in the LLC. This will greatly reduce my annual custodian costs and provide increased flexibility in investing

    In the future I anticipate buying investment property in ILLINOIS, thru this same LLC. (ira)

    Question: Should the LLC be established in Illinois or Iowa.

    After reading your website, I prefer to set it up in IL, because its more straightforward, etc… but wondering if I’ll need to also register it in Iowa because these assets are Iowa-based so to speak.

    Thanks for your help.
    Gerri

    reply
    • Matt Horwitz August 12, 2018

      Hi Gerri, although the contracts/notes are secured by real property in Iowa, you’re not doing business in Iowa, so we don’t see a need to file in Iowa. If you reside in Illinois, do business there, and will purchase real estate there, seems Illinois is the state to go with. Hope that helps.

      reply
  111. AMY July 23, 2018

    Hi, I have my 2 rental properties in Las Vegas, NV but I live in California, where do I need to file my LLC? Can I include my husband in my LLC?We are both US citizens. Thank [email protected]

    reply
    • Matt Horwitz August 13, 2018

      Hi Amy, yes, you can include your husband in the LLC (also see qualified joint venture LLC). The corporate laws and tax laws about doing business in California are strict so you may need to form an LLC in California and then register it as a Foreign LLC in Nevada or you may want to form a California LLC and then form a Nevada LLC where the Member (owner) is the California LLC. I recommend running it by a few accountants and attorneys as there isn’t a clear black and white answer. Either way, you’ll need to title the property into the LLC that is either formed in Nevada or qualified as a Foreign LLC to do business there. Hope that helps.

      reply
  112. Joanna July 23, 2018

    Hi Matt,

    I am not a US citizen. I want to start an LLC in Nevada, using https://physicaladdress.com/pricing/ service which gives me address and registered agent service. I will run my company from my laptop, clients will be mainly from US, but can be from all over the world. Profits from access to my app I want to get through business paypal account. I plan to live in NYC on tourist visa for the next 5 months.

    Please kindly let me know if:

    1. Starting an LLC in Nevada is a good idea in my case ( main reason for picking Nevada is the $400 cost/year and no taxes)

    2. Is living in US on tourist visa, while i run a business is not a problem. I understand I can’t be on a payroll on tourist visa, but as an owner I wouldn’t be.

    3. Is the fact that the LLC is registered in Nevada and I will be residing in NYC is not a problem. On many forums, this included I read that it is best to open LLC where u reside, but I am not creating and selling goods nor hiring employees. My business doesn’t require me to do anything tother that making sure servers are up and responding to emails if costumers have any questions or concerns.

    Thank You for any advice you could provide.

    reply
    • Matt Horwitz August 17, 2018

      Hey Joanna, #3: Since you’re a non-US resident and you’re just here temporarily (and you don’t have an office or employees), you don’t have to form the LLC where you are temporarily visiting. That rule applies to US citizens/residents who are “doing business” where they reside. So you don’t have to form the LLC in New York. However, you may want to consider opening an LLC where you will be since it’ll make opening a bank account a heck of a lot easier. If you form an LLC in Nevada, you’ll need to fly there to open a bank account or register your Nevada LLC as a Foreign LLC in New York. Please check out our bank article for foreigners (opening an LLC bank account in the U.S.) and make a few phone calls to banks before deciding on the state where you form your LLC.

      #2: We’re not sure since we don’t get into the details regarding visas and immigration. We recommend doing more research and/or calling an immigration attorney to check.

      #1: The Nevada state taxes won’t apply. Nevada Corporate taxes only apply to a Corporation (or an LLC taxed as a Corporation). And $350 per year ($150 Nevada LLC Annual List + $200 State Business License renewal) is more expensive when compared to other states’ LLC annual fees. However, I think more importantly (and as mentioned in #3), the ease of opening the LLC bank business account will be more important than comparing annual fees of different states.

      Hope that helps! And let me know if you have any new findings or follow-up questions.

      reply
  113. Hassan July 25, 2018

    hi , i live in pakistan and want to establish a LLC in US for leather business and crowd funding for new products .please tell me which state would be the best for the complete online virtual business operations in US from my home country Pakistan

    reply
  114. Nathan July 25, 2018

    Hi Matt, I provide IT services and my home state and the place I am doing most of my business is Ohio, but I also have a few clients and 2 employees in North Carolina. Should I also file for LLC in NC or can I get away (for cheaper) with Just having an LLC in Ohio?

    reply
    • Matt Horwitz August 13, 2018

      Hi Nathan, in this case, you’re doing business in both states. For that reason, it’s best to form an LLC in Ohio and then register your Ohio LLC as a Foreign LLC in North Carolina. Hope that helps!

      reply
      • Nathan August 13, 2018

        Yes, that’s what I was debating between so this helps a lot! Thanks you so much for your help, and thanks for putting together such a great, in depth, and straightforward website!

        reply
        • Matt Horwitz August 16, 2018

          You’re very welcome :) Thank you for your awesome comment, Nathan!

          reply
  115. Dennis Williams July 29, 2018

    I have a registered LLC in Pennsylvania. I’m moving to South Carolina, how do I transfer my LLC to my new place of residency?

    reply
    • Matt Horwitz August 14, 2018

      Hi Dennis, there are usually 3 ways to move an LLC:

      1. Dissolve the old LLC and form a new LLC. This is usually the cleanest (record-wise), however, you’ll need a new EIN and new bank account opened in the new state.

      2. File a Foreign LLC qualification (allows existing LLC to do business in the new state). You can use the same EIN and bank account, however, this can be expensive since you’re maintaining 2 LLC filings (note: it’s still one LLC though). You have the cost of the Foreign LLC Registration/Qualification, Registered Agent fees in both states (if applicable), and Annual Reports in both states (if applicable). Note: you may not have these fees in PA though since you may still have an address you can use as the Registered Office and PA LLC don’t have Annual Reports.

      3. Redomesticate (sometimes called “conversion” or merger”) old LLC from current jurisdiction (old state) to new jurisdiction (new state). You can keep the EIN and the bank account, but the filing may be more complicated.

      However, South Carolina doesn’t allow for redomestication of LLCs (only Corporations), so you’ll need to choose option #1 or #2 above.

      HOWEVERSenate Bill 189 (see “Section 33-43-1013”) is working its way into law and if passed, this will amend the South Carolina LLC Act and allow domestication of out-of-state LLCs. So if you are not in a rush, you may be able to exercise option #3 at some point in the near future.

      reply
  116. Linda July 31, 2018

    Hi Matt, my husband and I wish to create an LLC in either Oregon or Washington state (we maintain two houses and travel frequently between these two states). Besides annual fees/initial filing where WA probably edges out a little, we would like to know the tax advantage comparison between these two states. WA has the notorious B&O tax with sales tax, and OR has state income tax though no sales tax. Business is mainly online business. Can we get some advice from you? Also, will forming an S-corp or C-corp help with benefiting tax purpose?

    reply
    • Matt Horwitz August 15, 2018

      Hi Linda, we don’t get as deep into taxes as LLC formation, so this is a conversation that you’ll need to have with an accountant regarding Oregon LLC vs Washington LLC. It’s likely that an LLC taxed as a C-Corp won’t offer tax advantages, but an LLC taxed as an S-Corp will offer tax savings on self-employment tax, but that’ll really only be worth it once the LLC’s net income can justify the added expenses (like accounting + payroll). Also, if the LLC is formed in Washington, check out our article on the qualified joint venture LLC (for husband + wife LLCs in community property states) where the LLC can elect taxation as a Sole Proprietorship instead of a Partnership. Hope that helps!

      reply
  117. Lisa July 31, 2018

    Hi Matt,
    Thanks for the great info. We are looking for anonymity and registering in a state that does not fully disclose the ownership structure. In this case, is Wyoming a better option to form a LLC, given this primary motivation?

    reply
    • Matt Horwitz August 15, 2018

      Hi Lisa, Wyoming will work for this, as well as a handful of other states. You just need to review the Articles of Organization (or equivalent document) and Annual Report filings to see if Members need to be disclosed. However, you’ll need to take it a step further and consider a Parent/Child LLC setup. For example, forming an LLC in Wyoming and then that LLC owns an LLC formed in the state where you reside or are doing business. This offers privacy, stronger liability protection, and takes care of having the LLC registered where you’re doing business. You’ll also need to consider – for privacy reasons – which addresses need to be listed in both the Parent LLC and the Child LLC (Registered Agent address, main/principal address, mailing address, etc.) as well as how the Articles of Organization (or equivalent document) is signed by the LLC Organizer. If you want to use a filing company and a registered agent for privacy, we recommend using Northwest Registered Agent ($39 + state fee). Their packages are built for privacy: they’ll sign as the Organizer, serve as the Registered Agent, and they’ll allow you to use their office address throughout your LLC filing. Any mail that is sent to your LLC will be scanned by them and uploaded to your online account. Hope that helps! Let me know if you have any follow-up questions.

      reply
      • Josh November 2, 2018

        Our primary concern is also privacy – Florida appears to make quite a bit of information public record where it appears Wyoming may not… The businesses money will be made in FL but we have considered WY and other states for privacy reasons…

        Sounds like we are on the right track with registering domestically in WY and as a foreign entity in FL. We would use a registered agent in WY because we don’t reside there as well as a registered agent in FL on behalf of the WY LLC.

        After reading through comments, I wonder, is it possible to register domestically in FL using a registered agent and still maintain anonymity?

        Thanks in advance and for this resource.

        reply
        • Matt Horwitz November 22, 2018

          Hi Josh, you could form a Domestic LLC in Wyoming and then register as a Foreign LLC in Florida. You could also form a Wyoming LLC and then form a Florida LLC that is owned by the Wyoming LLC (Parent/Child LLC). Another thing to note, the Cover Letter (for both Domestic and Foreign LLC filings in Florida) is not required. Double-check this, but you can likely get the anonymity you’re looking for in Florida with just a Domestic LLC filing. Hire a filing company (so they sign as Organizer). Hire a Commercial Registered Agent. List the Manager as one of your other LLCs (or another business entity). Make sure to hire someone to file your Annual Report each year too, since those are made publicly available on the Sunbiz entity search. Northwest Registered Agent can take care of all the above. Regardless of who you hire to form your LLC, make sure you get a Resolution or Statement of Organizer. This shows the Organizer stepping down and appointing the Members (or Managers). That along with your Operating Agreement will prove ownership. Hope that helps!

          reply
  118. Johan V August 1, 2018

    Hi Matt,

    (great website!)

    Question: Can I obtain an EIN without having an SSN?

    I am a non-US citizen and a non-US resident, and planning to form an LLC for my US business. As I don’t need a physical presence in the US for my operations there I understand that I can select any state for the LLC. But to open a bank account and I do need an EIN. But is it correct that I require an SSN for that (which I have not) ?

    Thanks, Johan

    reply
    • Matt Horwitz August 15, 2018

      Hey Johan, correct, as a non-US resident you can pick any state you’d like. However, if you’re visiting the U.S. to open an LLC bank account, you’ll want to consider a state that is easy for you to travel to. Please see our article on opening a bank account: non-US resident opening a U.S. bank account for LLC.

      As for a social security number (SSN), you don’t need one in order to get an EIN for your LLC. We have instructions here: how to get EIN without SSN. Make sure to only apply for an EIN after your LLC is approved.

      As for not needing any physical presence in the U.S., that is partially correct. You don’t need to be physically present, however, you will still need a Registered Agent address and a main/principal office address as well as a mailing address sometimes (note: they can all be the same U.S. address). The Registered Agent will usually serve as your LLC’s main point of contact with the Secretary of State. If you need to hire a Registered Agent, we recommend Northwest Registered Agent ($125 per year). They’ll serve as your LLC’s Registered Agent and they allow you to use their office address throughout your LLC filing. Any mail that is sent to your LLC will be scanned by them and uploaded to your online account. Hope that helps!

      reply
  119. John August 1, 2018

    Currently, I live in MD but in December I will move to PA and live there permanently. I conduct online business there not selling or collecting taxes there. I want to register LLC in PA but don’t want to file for out-of-state LLC in MD and pay double fees. What are my best options? Thank you.

    reply
    • Matt Horwitz August 15, 2018

      Hi John, instead of forming an LLC in Maryland and then later filing as a Foreign LLC in Pennsylvania or filing a conversion/domestication (converting a Maryland LLC to a Pennsylvania LLC), you should be fine just forming the LLC in Pennsylvania now since you’ll be moving there soon. Hope that helps. Let me know if you have any follow-up questions.

      reply
  120. khaled August 5, 2018

    i read the article and i totally understand that i have to form a LLC in the state i live in . before reading the article i was thinking to register in NM because the names of the owners and officers are not public . how do i for an Nevada LLC and hide the names of LLC officers/managers ? because they are public in Nevada . can i form a NM LLC to be the officer of the NV LLC? . would that be a problem when obtaining EIN or opening a bank account . if not what is the best set up to hide the officers/ managers name in Nevada ? thank you

    reply
    • Matt Horwitz August 15, 2018

      Hey Khaled, if you reside or do business in Nevada, then yes, a setup where your New Mexico LLC is the LLC Manager for your Nevada LLC will work well. Check out my reply to Lisa (it’s a few up from this) – it goes over things to consider when privacy is your aim. You shouldn’t have issues opening an LLC bank account since your Nevada LLC’s Operating Agreement will show the New Mexico LLC as the Manager, but you as the Member (I just emailed you a manager-managed Operating Agreement template). And if the bank is curious as to who owns the New Mexico LLC, just bring your New Mexico LLC’s Operating Agreement. You could also have your New Mexico LLC own your Nevada LLC (instead of just being the Manager). Either way, since both entities are separate legal entities, they should each have their own bank account and EIN Number. Hope that helps!

      reply
  121. Lindsay August 14, 2018

    Hi Matt,

    I live in AZ but am forming an LLC with a business partner that lives in CO. Does it matter which state we form the LLC in? Also, if I form in AZ and move out of the state, will I have to re-file in my new home state down the road?

    Thanks!
    Lindsay

    reply
    • Matt Horwitz August 16, 2018

      Hi Lindsay, will you guys have an office or employees located in one of those states? If so, that’ll be the state to go with since that’s where you’re doing business. If not, either state could work. Depending on the outgoing and incoming states, there are usually 3 ways to “move” an LLC:

      1. Dissolve your Arizona LLC and form a new LLC in the new state. This is usually the cleanest (record-wise), however, you’ll need a new EIN and new bank account opened in the new state. It’s kind of like starting a new business.

      2. File a Foreign LLC qualification (this allows your Arizona LLC to do business in the new state). You can use the same EIN and bank account, however, this can be expensive since you’re maintaining 2 LLC filings (note: it’s still one LLC though). You have the cost of the Foreign LLC Registration/Qualification, Registered Agent fees (if applicable), and Annual Reports (if applicable).

      3. Redomesticate (sometimes called a “conversion” or merger”) the Arizona LLC to a new jurisdiction (new state). You can keep the EIN and the bank account, but the filing can be more complex. If allowed, this is usually a solid option for maintaining business activities without having to follow Option 1 (dissolving and forming a new LLC).

      You may also want to consider forming the LLC in the state you are soon moving to. Hope that helps.

      reply
  122. Tirzah McPherson-Lewis August 20, 2018

    Matt, thanks so much for the good information. I am starting an online professional development business – I create content and my friend is an instructional designer. I live in MN and she lives in NC. From some of your replies to earlier questions here it seems we can file in either state… other than MN has no annual fee and NC’s annual fee is $200 do you know of any reason why one state would be more beneficial than the other? Also would we have to set up a foreign LLC for the other state? (We plan to sell online courses throughout the US.) Last question, would it make best sense since we are both heavily involved in creation and living in two different states for us to use a company like Northwest Registered Agent? I hope you can reply… I am very impressed with you and your colleague’s level of knowledge and willingness to share it with others!

    reply
    • Matt Horwitz August 31, 2018

      Hey Tirzah, thank you for the kind words! If one of you would like to be the Registered Agent for the LLC, then you don’t have to hire a Commercial Registered Agent. The benefit of doing so would be if you’d like to keep your address off of public record. Northwest Registered Agent will allow you to use their address as your Registered Agent address, principal office address, Member’s address, Organizer’s address, etc. You don’t have to though, so it’s personal preference. In your situation, you’re correct, you can pick either state. It might be a good idea to speak to an accountant to see if there are any tax considerations. Hope that helps and thanks again :)

      reply
  123. Rich Perilli August 21, 2018

    Very informative video Matt, thank you! I do have one question regarding forming an S Corp or LLC in Colorado but having a headquarter address in Boston. I live in Colorado and my business partner lives in MA, we are thinking of renting a WeWork office space in Boston, but we are an employment staffing firm and do all of our work over the phone and all over the country. If we incorporate in Colorado, do we have to register as a foreign entity in MA if we rent office space in Boston?

    Rich

    reply
  124. michinori kaneko August 28, 2018

    Hi,

    I though i submitted a question yesterday but I don’t see it so I’m posting again!

    you mentioned that for RE Investments, it makes more sense to register at the state your investment property is located in. However, you will still need to register at your local state as Foreign LLC. So how is RE investment related LLC different from any other LLC where you say registering at your local state is cheaper? Thank you.

    reply
    • Tim September 5, 2018

      I have the same question as Michinori. Any additional insights are appreciated!

      BTW, thoroughly enjoyed reading through the various articles on this site. You are amazing and please keep up the great work!

      reply
      • Matt Horwitz October 10, 2018

        Hey Tim, thanks so much! I just replied to Michinori. Please see above. Thanks.

        reply
    • Matt Horwitz October 10, 2018

      Hi Michinori, unless you’re in California, most people don’t need to register their LLC as a Foreign LLC in their local state. It’s just a Domestic LLC in the property state. Hope that helps.

      reply
  125. Denise Johnson September 5, 2018

    Hi Matt,

    I appreciate the advice and insight I’ve been reading! I would like to rephrase/clarify a scenario that you have addressed. My husband and I are starting a real estate property investors company in New York State. We have been advised to establish an LLC in Wyoming as our holding company and establish a NY LLC for each rental property purchased/operated in NY. My question is related to how this impacts taxes, fee, reports and filing for the holding company. Would we have to register the holding company as a Foreign LLC that you have mentioned? Are there any tax implications related to spouses from one state to the other?

    Thank you for your help!
    Denise

    reply
    • Matt Horwitz October 12, 2018

      Hey Denise, the Parent/Child setup you’re referring to is quite common among real estate investors. I’m a fan of this setup. It’s a Domestic Wyoming LLC that owns multiple “Child” LLCs in the state(s) where the property(ies) is/are located.

      From a federal tax perspective, it all “flows up”. Meaning, the Child LLCs are “disregarded” and are taxed as a branch/division of the Parent Wyoming LLC. Then your Wyoming LLC will be taxed as a Partnership by default (unless you elect S-Corp treatment; a good idea after net income is closer to 6 figures). So the parent Wyoming LLC is the one that files a 1065 Partnership Return and issues K-1s to you and your husband.

      Regarding state and local taxes, you’ll want to dive into those with a New York accountant. We have some tips on finding an accountant here: how to find an accountant for your LLC. I do know there is a $25 “Partnership, LLC, and LLP Annual Filing Fee” due to the New York Department of Taxation. I believe this would apply to all child LLCs, but not 100% sure; so again, please check with a local tax professional (and feel free to share any findings). Note, the $25 tax is in addition to the Biennial Statements that are due for each LLC (every 2 years). A lot of info, I know ;) Hope that helps!

      Oh, and p.s., the Wyoming LLC doesn’t need to register as a Foreign LLC in New York since holding Child companies is not considered “doing business”.

      reply
  126. Angelica September 19, 2018

    Hello Matt,

    I’m starting a real estate investment company in Georgia but will be moving to the state of Washington within one year and intend to continue the business there. My question is, can I start a business in GA and move it, that is register it, in Washington as the same business? I wonder this because I intend to build business credit and would not want to start fresh with a new EIN later on, but I do not want to have to have a foreign qualification for the remainder of the time for fee saving purposes.

    reply
    • Matt Horwitz October 17, 2018

      Hey Angelica, “moving” an LLC can be a real pain. If you’re certain you’re moving to Washington and will continue the business there, it’ll be easier to just form the LLC in Washington from the start.

      reply
  127. Monica Loza Marquez September 25, 2018

    Hello Matt,

    You are very kind for giving away all these advice ;) my question is: I´m from Mexico, and I want to form an LLC in USA because to get an specific payment gateway for my shopify store (called Stripe), I have to form an LLC…

    So I know you recommend getting an LLC depending from where you live… In this case what should I do? I have seen some tutorials on your tube which are recommending delaware and wyoming… But I don´t know the bes scenario… could you kindly help?

    Best,

    Moni

    reply
    • Matt Horwitz October 20, 2018

      Hi Moni, thank you :) For non-US residents, we recommend working backwards and figuring out your LLC bank account. That’ll need to be opened in the same state where the LLC is formed and you’ll need to visit the bank in person. We’ve written about this here: non-US resident opening LLC bank account. Hope that helps.

      reply
  128. Andres October 4, 2018

    Hi Matt,

    First off, congrats on a great site and post. Best one I’ve found on this topic by far.

    Would love your help with the following. I’m looking to form an LLC with one other partner strictly for the purposes of investing in online businesses. I live in CA, partner in CT. I will be a 70% owner, he will be 30% but that doesn’t mean I will do any more of the work / management. In fact, all the day-to-day management of the businesses we buy will be handled by a 3rd party service provider (similar to a real-estate management company) meaning that our “business activity” as owners will effectively be zero, other than getting reports. The asset(s) we buy will earn revenue through things like advertising, affiliate marketing, etc which could come from anywhere.

    Ideally, we register in CT and avoid the CA foreign registration / LLC formation. Does this seem like a reasonable approach given this unique set of circumstances?

    Appreciate all the help,
    Andres

    reply
    • Matt Horwitz October 25, 2018

      Hey Andres, thank you very much. While I hear what you’re saying, California may still construe your situation as “doing business” in the state. California has strict laws (both corporate laws and tax laws) around “doing business” (related article: what is doing business in California) and after you file state taxes, that could trigger the fact that your LLC isn’t registered as a foreign LLC (one example). So you could form in CT and wait for the letter from the state (likely with fines/penalties attached), or – what we recommend for California residents, is just bite the bullet and form an LLC in California. The area as a whole can be a bit gray, but we recommend keeping it by the book for best long-term setup. Hope that helps.

      reply
  129. Amber October 18, 2018

    Thank you so much for this article! I’ve been asking some of these questions for months. But, a lot of information I’ve been finding wasn’t always clear. Adding this to my bookmarks so I can refer back to it frequently. Thanks again!

    reply
    • Matt Horwitz November 22, 2018

      Hey Amber, you’re very welcome! Glad we were able to help clarify a few things :)

      reply
  130. Steve Clarke October 21, 2018

    Great information. Thank you for opening my eyes to the difference in Corporations and LLCs. My question is if I currently have a company in Kentucky and will soon be moving to Tennessee, which state do I form an LLC? Do I form an S Corp?

    Steve

    reply
    • Matt Horwitz November 22, 2018

      Hi Steve, you’re welcome. Do you have an existing entity or are you running this current business as a Sole Proprietorship in Kentucky? If it’s a Sole Proprietorship and you’re going to move to Tennessee and operate your new business there, it’ll be easier to form an LLC in Tennessee. If you have an existing LLC in Kentucky, do you want to keep the existing bank account and EIN? If so, you can file a Foreign LLC registration in Tennessee. If not, you can dissolve the old Kentucky LLC and form a new Tennessee LLC. You can’t “form” an S-Corp. An S-Corp is a tax election made with the IRS that “sits on top of” either an LLC or a Corporation. We recommend an S-Corp election once annual net income is about $70,000 to $100,000. We have more info on S-Corps here: LLC taxed as S-Corporation. Hope that helps!

      reply
  131. Shawn October 24, 2018

    Hi Matt!
    I haven’t seen my question covered here, so here goes:
    I am a couple of friends are forming an LLC for a mobile vehicle detailing service. I live in Tn, but my friends live in Vt, Va and Ohio. While much of the business will be done in TN, as it is mobile, some will also be done transiently between Florida and Virgina (targets of opportunity while we are travelling).

    My questions are:
    As a mobile business, do I need to register Foriegn LLCs in each state that it is possible for me to work in, or is there some sort of business threshold? As an example, I will often be in an area along the Tn/NC border. In a week, I might be in TN 4 days and NC 1 or not at all.

    Have you seen this before?

    Looking forward to your thoughts –

    Thank you,
    Shawn

    reply
    • Matt Horwitz November 22, 2018

      Hey Shawn, if most of the business is done in Tennessee and your “mostly responsible” for things, I’d consider forming an LLC in Tennessee. There is not a real clear threshold regarding what is doing business. If you’re just popping in and out of North Carolina, you may not need to register as a Foreign LLC there. However, if you being to do a lot of work in Virginia, Ohio, and other states, you’ll likely need to register as a Foreign LLC in those states. Hope that helps.

      reply
  132. Colleen October 27, 2018

    We live in Washington, but have a rental property in Idaho. I created an LLC in Washington, thinking it was best to create a Foreign LLC in Idaho. Idaho requires a Registered Agent in Idaho. The property is fully paid for, and we have not yet transferred the title to the LLC. Since I’ve already created the Washington LLC, is it best to move ahead with the Idaho Foreign LLC with Idaho Registered Agent, or should I consider just creating an LLC in Idaho for the property?

    reply
    • Matt Horwitz November 22, 2018

      Hi Colleen, if you’re concerned about costs, it’ll be cheaper to just form a Domestic LLC in Idaho then transfer title to that LLC. You’ll still need an Idaho Registered Agent though, regardless of whether it’s a Domestic or Foreign LLC. However, you or someone you know can serve as the Idaho LLC’s Registered Agent. If that’s the route you end up choosing, you can then dissolve the Washington State LLC if it’s no longer needed. Hope that helps.

      reply
  133. Mike October 30, 2018

    Hi, Matt! I am surprised you’ve been able to answer these questions since 2016! I am doing a video production service while active-duty military. Should get my business license here and form my LLC in California? I am moving in a year. Thanks!

    reply
    • Matt Horwitz November 22, 2018

      Hey Mike! Thanks man! It’s been thousands of questions :) I’m not sure what you mean by “here”. Where are you a state resident and where do you pay taxes? Where are you moving to? Where will business activity take place? Any employees? Store front? We have some helpful info for you here: best state to form an LLC if you’re in the military. Hope that helps.

      reply
  134. mike October 30, 2018

    Hi Matt,

    My sister and I live in CT and RI and jointly own a condo in Florida that we will be renting out. Since the property is in Fl, am I correct in assuming that the LLC should be formed in Florida? Even tho all business will be conducted thru me in RI

    reply
    • Matt Horwitz November 22, 2018

      Hi Mike, that is mostly correct. It’s a bit of a gray zone. To be more thorough, you may want to consider forming an LLC in Rhode Island and then registering as a Foreign LLC in Florida. Hope that helps.

      reply
  135. Nancy November 4, 2018

    Hi Matt,
    thanks for your great work and help! I’m planning to purchase up to 10 properties in Florida and would like to have those under a LLC. But I also plan to provide Property Management Services. However, the Property Management will do Business in California, because I reside in California. Where would you recommend to have the Foreign LLC, in Florida or in California? Or could one of them also be the parent LLC? Basically, it should be a LLC providing multiple Real Estate Services like renovation of the purchased properties in Florida (possibly reselling or turning them into short-term vacation rentals) and providing Property Management Services for other property owners in California (because I live there).

    reply
    • Matt Horwitz November 23, 2018

      Hi Nancy, you’re welcome! There are a number of ways to set this up. If all were ran under 1 LLC, it might be a bit easier to form the Domestic LLC in California (where you reside) and then register as a Foreign LLC in Florida. You could also form a Domestic CA LLC that owns a Domestic FL LLC too. And there are even additional ways to structure things. However, you’d really want someone to do a deep-dive with you. We recommend speaking with a few accountants and/or attorneys to weigh the pros and cons. Hope that helps.

      reply
  136. Robert Johnson November 8, 2018

    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 Entity, since I needed a sellers permit for wholesale purchases. I’ve already paid the $800 LLC tax for my first 4 months. I’m considering domesticating the LLC to California and dropping the Utah LLC. Is there a best time of the year to do it? If I do it now, does it generate another $800 LLC tax in 4 months?

    reply
    • Matt Horwitz November 23, 2018

      Hi Robert, at least you caught the issue early on. I’m not sure about how the timing of the domesticating affects the $800 franchise tax. We recommend speaking with the Franchise Tax Board for clarification.

      reply
  137. Ali November 12, 2018

    Hi Matt,

    I am a Canadian working in the US under TN visa and planning to form an LLC. I have a volunteer to manage it so I will not work in it. Can you please advice on where I can form it and do I need a physical address?
    If I leave the country (US) can I manage my LLC while outside the US e.g in Canada

    Thank you

    reply
    • Matt Horwitz November 23, 2018

      Hi Ali, while yes, you can manage your US LLC while not in the US, we recommend speaking with a few tax professionals first. From what we understand, Canadians that form an LLC in the US face a form of “double taxation”. Meaning, you’ll have tax obligations to both the Canada Revenue Agency (CRA) and the Internal Revenue Service (IRS). I believe there may be other legal entities or setups which are more ideal for Canadians who want to do business in the US. It’s not an area we deal with a lot, so if you’d like, we’d be very happy to hear about any of your findings. Thanks.

      reply
  138. Elaine November 20, 2018

    Thanks for sharing all this info! If I’m currently living in NY but plan to move back to CA (my original home state), which state should I set up my LLC in? I’ll technically be starting my business while I’m currently in NY, but will no longer be here in year or so.

    reply
    • Matt Horwitz November 23, 2018

      Hi Elaine, it’ll be easier to form the LLC in the state where you’ll soon be residing; California. Hope that helps.

      reply
  139. JOHN November 21, 2018

    What is the process of converting a 3-member LLC into a 1-member LLC? The other two members are in VA and NJ who are inactive members and needs to be cut off. The active member is in MD. Thanks and looking forward to your reply.

    reply
    • Matt Horwitz November 23, 2018

      Hi John, here is the overview: sign a Resolution where existing Members agree to the upcoming changes. Have an Assignment of Membership Interest Agreement written up between you and each of the exiting Members. Amend the Operating Agreement. Amend the state Articles of Organization (if applicable). Update tax classification with IRS from Partnership taxation to Sole Proprietorship taxation. Make any similar updates with State Department of Revenue (or similar agency). Let your accountant or tax professional know about the changes. Hope that helps.

      reply
  140. John Terrone November 27, 2018

    Hey Matt, great video and thank you for taking the time to put this together for everyone. This is my first time on your site.

    I’ve read through a bunch of your comments (to try and avoid having to post something you might have answered) but still have a few questions based on my scenario.

    I will have 2 LLC’s and already have 1 501c(3) Non-Profit. I will be operating all of them from the state of Florida and currently have no assets. In the future, I will likely be purchasing FL land for one of the LLC’s. I’ve been reading about setting up a holding company so that I can start seeking investments to pour into the other businesses/non-profit. Since everything is happening in Florida, does it make the most sense to start the holding company here as well? I could see potentially purchasing land outside of Florida in the future. Also, what makes an LLC a “holding company” (i.e. is there some other process to get this status). Lastly, are there any issues with holding companies and non-profits?

    Thanks again for the post and any information you can provide.

    Take care!

    reply
    • Matt Horwitz December 3, 2018

      Hey John, you’re very welcome! A holding company is simply an entity (like an LLC or Corporation) that is owned by another entity (owning 50% or more of the membership interests/stock). The IRS refers to a company owned by another company as a “subsidiary”. In your example, if the LLCs were taxed in their default status (not being taxed as a Corporation), then all the taxes would “flow up” to the Parent LLC, and then ultimately “flow up” again to your personal tax return as the owner of the Parent LLC.

      A holding company is usually not considered to be “doing business”, so while it could be formed in Florida, it could also be formed in another state. Whether or not your 2 LLCs and your Non-Profit Corporation should both be owned by a Parent LLC or if it should just be the 2 LLCs owned by a Parent LLC is something that would need to be discussed with an attorney (in addition to where your holding company can be formed). Additionally if you’re going to purchase real estate with an LLC (or future LLC) and that LLC will be developing homes or earning income, than you’ll want the LLC that owns the land to be formed in the same state where the land/real estate is located. Hope that helps!

      reply
  141. Alex December 1, 2018

    Hi Matt!

    Great article!

    I live in NY, I`m going to start online business. 75% of my customers will be non-US residents (form Canada, EU, Russia India etc.).

    In this case still NY best choice for me? Or maybe I can choose DE or NV?

    reply
    • Matt Horwitz December 5, 2018

      Hey Alex, thank you! In this example, where you’re doing business has to do with where you are running things from and not where your customers are. Since you reside in New York and are doing business in New York, a New York LLC is likely the best route. If you register out of state, you’ll need to register as a Foreign LLC in New York. Hope that helps.

      reply
  142. Jasen December 2, 2018

    I am an active duty service member stationed in IL but am a NV resident. If I do contract work on the side in IL, would it be more beneficial for me to create an LLC in IL or NV?

    reply
    • Matt Horwitz December 5, 2018

      Hey Jasen, thank you for your service! Do you plan on continuing to do business when you return to Nevada? Or will this LLC only be used while your in Illinois? Do you know how long you’ll be in Illinois for?

      reply
  143. Mike December 6, 2018

    My wife is and independent contractor in the healthcare field. We live in Ohio and she has a home-office but the clients she sees all live in Michigan. Would our home state of Ohio still be best to start and LLC?
    Thank you,
    Mike

    reply
    • Matt Horwitz December 6, 2018

      Hi Mike, you’ll want to follow-up on this with an attorney, but it sounds like your wife would be doing business in both states. With the home-office, she’ll be doing business in your home state of Ohio. And with repeated transactions taking place in Michigan, she’ll be doing business in Michigan. You may want to consider forming an LLC in Ohio and then registering your Ohio LLC as a Foreign LLC in Michigan. Hope that helps :)

      reply
      • Mike December 6, 2018

        Do you have any recommendations for LLC attorneys in the Northwest Ohio area?

        reply
        • Matt Horwitz December 6, 2018

          Hi Mike, we don’t have specific recommendations, however you can checkout Avvo. We recommend calling a few people and running the same set of questions by them. This will help you get a feel for each person and see if you’re getting similar information. Hope that helps.

          reply
  144. Dan Zafra December 11, 2018

    Hi Matt,

    First of all thank you very much for all your information and insights in the article, they came very handy.

    I have a couple of questions since my situation might be exceptional.

    I am a non-US resident from Spain living and working in PA with a VISA and work permit in place who wants to start an LLC.

    The business is going to be an online photography website based on one hand in selling videos/tutorials online worldwide and on the other hand I will be doing photography workshops in different US States and different countries in the world.

    1)As a non US-citizen I heard that I might not have to pay any income tax for the earnings coming from the LLC. Is that correct or just partially correct as all my earnings should be taxed according to my home state?

    2)The workshops would cover over 8 States. Do I need to do a Foreign LLC registration in any of the States where I want to operate even if it is for a week a year?

    3)If I decided just to do international workshops out of the US with no employees/office/service in my home state; Do you consider it would be reasonable to incorporate my LLC in one of the “Foreign friendly states” Like DE o WY ?

    Thanks in advance for your help, much appreciated!

    Dan

    reply

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