Best State to Form an LLC in 2024

563 comments on “Best State to Form an LLC”

1. Hello! I have tried to read through as many of these comments as possible, but still not getting my specific answer.

   I live in California but I want to set up an LLC to buy property in Michigan.

   I will also want to buy in other states if things go well.

   I see you say its recommended that I get a Michigan LLC for my property there, but I will still have to register in CA as a foreign agent and pay the 800 yearly tax yes?

   I saw you mention a scenario with a Parent LLC in Wyoming with sub-LLCs in other states – how does this work? Could I start a parent LLC in CA, and then sub-LLCs in every state I buy property in with similar LLC names? Is this unwise?

   Cheers mate!

   • Hi AJ, because California laws are strict about doing business, out-of-state LLCs owned by California residents are usually deemed “doing business” in California and are supposed to be registered as foreign LLCs in California (and they have to pay $800 franchise tax and file Form 568 every year). We have more information here: When is an LLC doing business in California.

     You can form a California LLC as a “Parent” LLC and then form LLCs out-of-state (“Child” LLCs) that are owned by the California LLC. In this setup, the Child LLCs don’t need to be registered as Foreign LLCs. We don’t recommend forming LLCs with similar names because they can get very confusing to manage administratively. Also, if you are forming (or registering) an LLC in California, and you don’t need it open right away, we recommend using a “future file date” of 1/1/2021. This is because of Assembly Bill 85 that was passed in 2020. LLCs that go into existence in 2021 are now exempt from their first $800 franchise tax payment. For California LLCs formed in 2021, their first $800 payment isn’t due until April 15th, 2022. Hope that helps.

     • That does help a lot! Thanks for the info!

       So what benefit is there to opening a parent LCC in CA with child LCCs in other states, over just opening new LLCs in each state I do business in?

       Have a good one.

       • You’re welcome AJ. In that setup, the Child LLCs wouldn’t need to register as Foreign LLCs in California. Your federal tax return would all be filed under the holding company too.

2. Matt

   what if you have an Amazon -type business or Walmart online store how do you determine “where” you do business?

   im in WA state and also I need Delaware-type privacy any suggestions? if i have to file a foreign LLC I guess I may have to

   • Hi Jay, for online businesses, it’s the state where you are running the business from. You can consider forming an LLC in a more private state and then having that LLC own an LLC in Washington. We recommend hiring a Registered Agent and a company to form your LLC, to keep the registration as private as possible. You’ll need to look the Washington LLC filing carefully though (cross your Ts and dot your Is) before moving forward since they also have a required state Business License filing. Hope that helps.

3. Hey Matt,

   I’m a US citizen. I want to invest (trade): Stocks, Forex, etc under an LLC. I live in New York, NY, but was wondering if I could set up the LLC elsewhere to avoid high NY state, NYC taxes. Its strictly an online business. No product, no office, etc. Just working from home. Thanks!

   • Hi Cullen, the laws of “transacting business” don’t work like that. Meaning, because you are running the business from home in New York (or coffee shops, etc.), your LLC is transacting business in New York. You’ll likely need to register your out-of-state LLC in New York. And as a New York resident, you’ll end up paying New York taxes either way. Hope that helps.

4. Thank you for all the wonderful information.
   I live in Australia.
   Looking to get LLC. Partnership
   Doing booking keeping online.
   Which state would be the best.
   My partner is a US citizen I am not.
   We hope to relocate one day to the US.

   • Hi Deborah, you’re very welcome :) The LLC should be formed in the state where it is transacting business. That will most likely be the state where your business partner resides. Hope that helps.

5. Current Background:

   I am an American citizen that is in the process of opening a Multi-Member LLC with two members that are non-citizens of the US. They reside outside of the country and as I am the only one within the US, it has become a question as to whether opening an LLC in Delaware would provide benefits that outweigh that of if I registered the LLC in my home state of Minnesota. I operate between the US and Canada with my primary residence being that in Minnesota. As all business will be digitally based, what recommendations would you make in approaching this? Would it be best to register in my home state, or would it actually have benefits for myself and the others involved to open an LLC in Delaware or another state?

   • Hi Sean, if you form a Delaware LLC, but you are transacting business in Minnesota, you should register that Delaware LLC as a foreign LLC in Minnesota. In the event of a lawsuit, there are multiple factors taken into consideration to determine where a case will be heard. Unfortunately, it’s not a simple black and white answer. So you may not get the supposed “Delaware benefits”. Having said that, forming a Delaware LLC that owns a Minnesota LLC could offer more asset protection (specifically strengthening the remedies of creditors; even though a Multi-Member LLC in Minnesota does offer good protection), but it’s something best discussed with an asset protection attorney in Minnesota. Redden Law PLLC out of Minnetonka has written about some of the changes to the Minnesota LLC Act and they apply to creditors’ remedies. Hope that helps.

6. What does it mean when they say that New Mexico and Wyoming protect an LLC’s privacy? What other states do?

   • Hi Martin, it usually means that the names of the LLC Members are not required to be listed on the Articles of Organization (or Certificate of Organization or Certificate of Formation). Each state’s formation document (and Annual Report document) needs to be examined carefully (we recommend printing them out and test-filling them out and/or going through a states’ online filing). You need to see if Members (or Managers) need to be listed, which addresses are required, and how the forms are signed (if you’re signing them because you are filing yourself… as opposed to hiring someone to file for you; it’s usually better to hire someone if you don’t want information about yourself listed). And if an LLC is formed in a “private” state, but your LLC is transacting in your home state (a very common situation) or another state, you’ll be required to register your “private” LLC as a foreign LLC in the state(s) where it is transacting business. So then you’ll need to look at that state’s foreign LLC filing forms (and annual report form) to see what information is required… since that can sometimes “bust” your privacy. Basically, it’s not a quick and short answer (unlike some sites may lead you to believe). Additionally, you need to decide which person (and which address) will be used for the Registered Agent and for the LLC Organizer (in multiple states; if applicable). While most people can fill these roles themselves, they may not want to if they don’t want their name or address anywhere on the LLC’s public forms/annual reports. Additionally, how an LLC is managed, may affect what information is required. We don’t have a list of all private states published at this time, but it is on our to do list. Thank you for your understanding and hope that helps.

7. Hi Matt,
   Your website has been so helpful, thank you so much! I live overseas so my understanding is that I can register my LLC in any state. I registered in New Mexico since there is no annual fees or reports, and since I do not have New Mexico sourced income, I would not need to file a tax return there either, correct?

   I know New Mexico starting doing a gross receipts tax on services, however since I am not physically there nor are my clients I believe I would be exempt. Can you confirm that I would only file a federal tax return and no state tax return is required? I just want to make sure I am not missing anything as this will be my first time filing. Thanks so much, I appreciate your help!

   • Hi Cole, thanks so much! We’re not able to comment on specific tax situations as things vary far too greatly and depend and multiple factors. We recommend speaking with an accountant to confirm. Thank you for your understanding.

8. First off, thanks so much for all this helpful info!
   I’ve been following along your guide to forming an LLC in New York, as that’s where I currently live, and where most of my clients live. (I’m a florist, work from home, do events mostly in New York, and have an e-commerce store and ship globally.) However, I’ll be moving to Connecticut in a few months. I’m at the step where I’m applying for an EIN number. Should I continue to set up my LLC in New York? Or should I call my progress (and money spent) thus far a wash, and start over once I move to CT?

   • Hey Lauren, you’re very welcome! Is your move to Connecticut something you think will last many years or is there a chance you’ll move back to New York? Will you business activities eventually move over to Connecticut or will you stay relatively close to New York and do business in both states?

   • We’re moving just over the border into CT, and will continue working in NY (both for my LLC and my other salary job). CT will be my home office for my e-store, but the services I provide will be in NY. I expect we’ll be in CT for at least 5 years, probably more.

     • Hi Lauren, it sounds like your LLC will be transacting business in both states. It may be easiest to register your New York LLC as a foreign LLC in Connecticut. Hope that helps.

9. I have rental property in California and an LLC in California. I live in Washington state. Would it be to any advantage to create an umbrella LLC in Washington in which to place the CA LLC? I’m thinking that in the future I may purchase property in Washington.
   Your valuable insight is appreciated.

   • Hi Michael, I actually sent you an email as I had a few followup questions. Did you receive it? Our system shows it was delivered, but not opened yet.

     • Hi Matt, I apologize for not getting back sooner. To refresh our memories here is my original question with a bit more info. I have rental properties in California under an LLC in CA. However I live in Washington state. Would there be any advantage or reason for me to have a “parent” LLC in WA putting the CA LLC as “child”? The reason I ask is that I was told that if the child LLC is the operating LLC and the “parent” LLC the managing LLC. This way if the “child” LLC is sued your assets would be better protected. If I lost the lawsuit only the operating assets would be vulnerable but the operating LLC would not own any thing. Any truth in that? And by setting up the managing LLC in WA I figure I could avoid at least one of the yearly $800 CA LLC “taxes”. WA LLC “taxes”, I think, are about $200 a year. This make any sense?

       • Hi Michael, you mentioned that in the future you may purchase property in Washington. If that property were placed in your Washington LLC, then the “managing LLC” would own assets. Unless you were intending to open another Washington LLC in the future for future property purchases. Sometimes, placing an LLC “inside” another LLC (parent/child LLC relationship) can strengthen your asset protection by limiting the remedies of creditors, however, it’s a bit complicated and there isn’t a black and white answer in a scenario like this. We recommend speaking with an asset protection attorney (or a few) to look at all the different setups and the pros and the cons. In these situations, there are a multitude of ways things can be structured. Thank you for your understanding and hope that helps a bit.

         • Thanks, Matt. Your info helped me get a better handle on what to do. Great site.

           • Thanks Michael! You’re very welcome :)

10. My current domicile is CT, and I’m nomadic so I can in essence establish domicile in any state. What advice do you have? Is there a state that is ideal to both establish domicile and a LLC? I know CT is one of the most expensive states in every way now! I have an online coaching business and I’m the only owner/employee.

    • Hi Yvonne, I hear you on the flexibility of being nomadic. If you are looking to change your state of residency, and that can be to anywhere, and you’re looking to save money, then that conversation is best had with an accountant (or a few). There are many things to consider. Here are some common tax/cost considerations:

      • cost of living
      • real estate taxes
      • LLC annual requirements
      • inheritance and estate tax
      • homestead exemption amount
      • cost of travel to and from
      • cost of education (for yourself and/or children)
      • state personal income tax
      • state business income tax

      A note about state business income tax: This is usually not applicable to an LLC taxed in its default status (Single-Member LLC taxed as a Disregarded Entity/Sole Proprietorship and Multi-Member LLC taxed as a Partnership or Qualified Joint Venture). It usually only applies to LLCs taxed as C-Corporations (not very common) and in some states, LLCs taxed as S-Corporations, something to look into once an LLC begins to net $80k-$100k or more per year (depending on the number of Members; the more Members, the higher the net profit needs to be in order for an S-Corporation tax election to make sense).

      For people on the east coast, Florida is a decent state to look into for residency as there’s no state personal income tax. Florida also has a homestead exemption with an unlimited amount. Florida LLCs are $125 to form and then ~$140 per year. I’m biased though and personally like Florida. Here are states with no state personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee don’t tax earned income, but they do tax investment income. However, Tennessee will become the 8th no state personal income tax state once the “Hall tax” is phased out in 2022, so there’s that. But many of these states have other types of taxes that may affect businesses. Taxes… which is a big category people look into to save money… there are many different types of taxes and it varies a lot person to person and and business to business. Having said all that, a lot of it could be overkill for a business getting started and looking to find product-market-fit/market validation. But if you’re nomadic and it’s already on your list, you could save a good amount of money by changing your state of residency.

      On another note, as an FYI, the owner of a Single-Member LLC (taxed in its default status) can’t be an employee. You are just the owner. Yes, you work in the business, but you work in the business as the owner, not an employee. The exception to that rule would be if you elect to have your LLC taxed as a C-Corporation and become a W-2 employee or have your LLC taxed as an S-Corporation where you have to become a W-2 employee-owner.

      For those reading this that are considering changing your state of residency to save money on taxes, our best piece of advice is this: actually move to the new state and reside there… especially if you are moving from a state that is notorious for auditing people on the way out (California, Connecticut, Illinois, Massachusetts, New Jersey, and New York). Furthermore, you are at a higher risk of a state tax audit if you’re a high-income earner (high 6-figures, 7-figures+), move from a high tax state to a low/no income tax state, and/or you move shortly before selling assets.

      A great way to think about changing residency and establishing domicile, is to picture yourself in an audit or tax court. How would you answer the following questions:

      • Where is your bank account?
      • Where is your health insurance?
      • Where do your kids go to school?
      • Where is your church?
      • Where does your family wait for you while you’re traveling?
      • Where do you most frequently return to after traveling?
      • Where is your main office?
      • Where is your gym?
      • Where is your country club, group, or regular local meetings?
      • Where are your cars registered?
      • In what state is your car insurance?
      • Where do you own homes?
      • Where do you pay rent?
      • Where are your pets?
      • Where is your veterinarian?
      • What states were you in for more than 183 days?
      • Where is your driver’s license?
      • Where do you file a state tax return?
      • If you have other licenses/permits, where are they held?
      • Where are you registered to vote?
      • Where is your doctor?
      • Where is your dentist?
      • Where is your safe deposit box?
      • Where do you receive most of your mail?
      • Where are financial statement and bills sent?
      • From where do your social media posts’ originate?
      • Where are most of your toll records?
      • Where do the calls/text on your cell phone originate? (records have been subpoenaed)

      Hopefully most of the answers to those questions should point to the new state. It’s also important to have legitimate records and documentation that prove those answers. Hope that helps.

      • I can’t thank you enough for this insight, Matt. I feel much more educated on the subject thanks to you!

        • You’re very welcome Yvonne! I’m glad it was so helpful :)

11. Hi Matt,

    I want to setup an LLC as a beneficiary to a living trust. As such it won’t be doing anything other than acting as a placeholder until the trustor dies at which time, it receive all the property and begin managing that property for the members. I live in CA. I don’t want to have to pay the $800/yr franchise fee for a Calif. LLC that isn’t doing any business until it actually starts doing business. In this situation, it would appear that I could form the LLC in a low-cost state(avoiding the annual CA franchise fee because no business id being transacted) until it gets funded through the trust and then convert it to a CA LLC once it actually starts managing the properties. What do you think?

    • Hi Robb, interesting scenario. You could form an LLC in another state and then file Articles of Organization – Conversion (Form LLC-1A) to “domesticate” the LLC into California. You’d also need to dissolve the LLC in the original state. However, you may want to run all this by an estate planning attorney. Maybe there is a simpler setup. For example, as maybe it’s possible to draft language in the trust to make the beneficiary a to-be-formed LLC. So once the trustor passes, you can then form the LLC in CA, and change title, if that’s what the trust entails. If you’re able to do this, it’ll save you the cost of forming the LLC in a non-California state, the conversion/domestication filing, Registered Agent fees in the non-CA state (if applicable), and any annual requirements in the non-CA state (if applicable). Just an idea to explore. Hope that helps.

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

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

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

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

13. Hi Matt

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

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

14. Hi Matt,

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

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

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

    Please advise.

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

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

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

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

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

17. Hi Matt,

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

    Ray

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

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

    Thank you,
    Ray

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

19. Hi Matt,

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

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

20. Hi,

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

    thanks

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

      • Thank you for the info!

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

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

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

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

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

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

    Thanks,
    Asif

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

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

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

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

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

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

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

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

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

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

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

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

    • Hi Matt, I read thru your valuable information. I need clarification regarding llc. I live in Washington and own a mine in Oregon. We bring our product up to Washington to sell. We plan to have seasonal part time workers out of Oregon. Do we need LLC. For Washington and Oregon or just Washington?

      • Hi Deborah, it sounds like you’re transacting business in both states. You can form an LLC in Oregon and register it as a foreign LLC in Washington or you can form an LLC in Washington and register it as a foreign LLC in Oregon. Hope that helps.

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

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

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

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

      • Hi Math,

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

        could you please help to let me know where I can find this exact guideline? I would like to follow your guideline to start to open child LLCs and Parents LLC. Do you know the people who charge reasonable rate to help for these?

        thank you so much,
        your help is greatly appreciated.

        • Hi Duc, we haven’t published such a guide yet. We’re not sure our stance on this as we haven’t had the time to thoroughly research all the pros and cons. While yes, it is sometimes common, we’re not sure it’s always best for every situation. Each person’s “setup” varies quite a lot. If you want to file something like this yourself, you’d form the Wyoming LLC first, then form the other LLCs. If the Member is required to be listed in the Articles of Organization (or Certificate of Organization or Certificate of Formation), then you’d list the Wyoming LLC there and in the Operating Agreement. If the Member isn’t required to be listed in the Articles of Organization (or Certificate of Organization or Certificate of Formation), then you’d just list the Wyoming LLC as Member in the Operating Agreement. Hope that helps.

      • HI Matt,

        thank you so much for your valuable education. I have been talking to many companies, they all charge a lot of money to create the LLC.

        could you pls help to guide me how I can start and who I can hire to do the work at a reasonable cost?
        here is my situation:

        1/ I am resident in CA
        2/ I have rentals in 3 different State: CA, MI, and Ohio.
        3/ I don’t have any LLC yet. Everything was bought under my personal name. Yes, I know this is risky. and I am working hard to correct it.

        I read on internet, and have general idea as:

        1/ I should open 1 LLC in each State, in this case, one in CA, one in MI, and one in Ohio. Total of 3 LLCs. these are consider as child LLC
        2/ Then, I open a Parent LLC in Wyoming to hold the other 3 child LLC
        3/ Since I don’t live in Wyoming, I need to pay to have register Agent so all documents will send to the register Agent. Each letter the register Agent get, when they forward to me, they will charge me a fee.

        Are the above concept correct? here are the question:

        from #1, I will pay an annual fee for each LLC in each of the state CA, MI, and Ohio. MI and Ohio fee is low. CA is $800 per year.

        I read your article about we still have to register the Wyoming in CA, so, I need to pay an extra $800 for the Wyoming LLC?

        Could you please help to guide me? and send me to the people who can help me?
        thank you so much Sir,
        your help is greatly appreciated.

        • Hi Duc, we recommend running this scenario by an attorney (an experienced one) in California since you may need to register some (or all) of the LLCs as foreign LLCs in California. California law (corporate law and revenue and taxation law) is very strict as to their definition of “transacting business”. Please also see this page: Is my LLC doing business in California. And possibly as an alternative, you could have a California parent LLC. You’ll want to look at all options. I wish we could tell you exactly what you “should do”, however, it’s a gray area. Hope that helps.

29. Hi Matt,

    Thank you for all the helpful information on your site!

    I have recently just moved back to the states and established residency in Florida to start a business after living abroad for a decade. A partner and I are currently in the process of developing a hotel resort brand with the plans to open the first location in Puerto Rico with 2 other locations that are in the preliminary planning stages in other states.

    We are planning on setting up an LLC in Florida where I am now living, which will hold the IP for the brand, sell related apparel / merchandise as well as run a related paid membership based online community. We then have additional limited partners for the resort project in Puerto Rico, where we were planning to set up a second LLC specific to that property, with our Florida LLC listed in the ownership of the Puerto Rico LLC.

    We are bootstrapping this until we get a bit more of a firm commitment on investment, but in the meantime want to register our Florida LLC and apply for trademarks on our brand that has been developed so we can start to protect our vision.

    Do you think this is a sensible approach? Due to the complexity of the project with multiple investors unique to each LLC, we will engage with an attorney in a few months. However, we aren’t really keen on waiting a few months to engage an IP lawyer to do a trademark clearance and register our trademark intent to use and figure it best for the Florida LLC to own the trademark rather than assigning it to either of us as an individual.

    • Hey Ryan, great question. Although it seems pretty straight forward (FL LLC owned by you and partner, which then owns PR LLC along with other Members), there are so many ways to set these things up. Small example, maybe there should be another entity that only holds IP, and not IP + sales. Should that entity be an LLC? How should revenue, if any, flow through it? Is an LLC the best entity to hold property in PR? Wish we could give some more information, but it’s so particular to the situation and the details. Best practice is to run the proposed setup by a few attorneys and/or accountants. Would love to hear you findings. Feel free to share any if you’d like :) Hope that helps and thanks for your understanding.

30. Hello,

    I live outside the US and I’m not American. I was thinking to open an LLC for an online business. (Travel Agency-concierge)

    Is the Delaware still the best option for a foreigner to do not pay tax in the US (if I live outside the US and no have employe in the US)?

    The annual fee is quite a lot in Delaware (300 bucks) whereas other states are much cheaper. But is the tax “heaven” of Delaware exists in other states ? which one would you recommend for the activity mentioned. (some

    I would like to be in touch with an attorney or someone who could confirm me legally what can I do or not. Do you have any contact for that purpose?

    Thank you very much,

    Yann

    • Hi Yann, great questions. We don’t have a referral at this time. You will certainly want to speak with an accountant too, as you may still have filing obligations in the US. If you’re the sole owner, you’ll have to report information on Form 5472 each year. Please see Form 5472 for foreign-owned Single-Member LLC. If you’re not legally conducting business in a particular state, then you can pick any state you’d like. Some non-US residents also find it helpful to “work backwards” based on where they want to open a bank account. More info on that here: non-US residents LLC bank account. And this page might be helpful for you too… after your LLC is approved, here’s how to get an EIN from the IRS: LLC EIN without social security number. Hope that helps!

31. Hi Matt, great video but it doesn’t cover my scenario. Perhaps I can get further guidance. I’m interested in starting an online service and creating an anonymous LLC in New Mexico for the privacy protection that it offers, nothing more. I need this because of the industry I will be in and the online trolling that’s prevalent which I need to avoid. As you may know, New Mexico has the best LLC privacy available as the state doesn’t even know the owner of the business. They also have some of the lowest registration fees- initial = $50 and none ongoing. If I’m not mistaken, MD registration fees are also low. Anyway, I was looking at the possibility of creating an LLC and then opening a foreign LLC in MD since this is where I live and will be earning a living. What are your thoughts? Anything I need to avoid, watch out for or be aware of?

    • Hey Jebb, New Mexico certainly is a good state in that regard. Yes, you’ll want to look at the foreign LLC form carefully. Compare that with another scenario: forming a domestic Maryland LLC that is owned by your New Mexico LLC. Other things to be cognizant of are state registrations for taxes or employment. Luckily, most state tax documents are not public record. But overall, just keep an eye out. Nothing worse than investing a lot of effort in your setup only to blow it on some post-LLC-formation form or registration somewhere else. Hope that helps.

32. Hello Matt, thanks a lot for all your articles, very informing. I’ve searched for this answer but I didn’t find any, maybe I didn’t knew where to search.. Anyway, this is my question, I’m from Europe, so non us citizen, what is the best state to start an LLC in?

    • PS: I will need an LLC for e-commerce, I will sell all over the world.
      What is the best state to start an LLC for the long run, taxes for profit, filing fees, annual administration costs etc

      Thanks alot Matt.

    • Hey Andrei, non-US residents have more flexibility and can pretty much pick any state you’d like. However, will you have US employees, physical location, or US LLC members? If so, then, you’re LLC will most likely be doing business in those states. It’s also a good idea to speak with an accountant.

      • Hey Matt, thanks for the reply.

        As I said, I will need an LLC for e-commerce, dropshipping. So no US employees, no US physical location or US LLC member.

        What’s the cheapest for the long run?

        • Hi Andrew, something like that is best discussed with an accountant. You may still have US filing obligations. You may also want to “work backwards” based your LLC bank account, too. We have info on that here: non-US resident opening LLC bank account.

33. Hi! I am looking at forming an LLC for a trucking company. I currently reside in CA but I am military and won’t be here permanently nor am I a CA resident. Should I still form my LLC in CA? How will this be affected when I leave CA?

    • Hi Tewaner, where will your trucking company operate? California is quite strict. Check out what is doing business in California.

      • My 1st truck will be based in California but take loads across the country.

        • Hi Tewaner, it comes down to where you’re legally transacting business. As mentioned, California is very strict about that. From what you said, it certainly sounds like you’ll be transacting business in California.

34. Hi Matt…

    First of all, thank you for all the great insight. Your website is extremely helpful.

    I am forming an LLC with a partner based out of NJ and I am based out of TX. We will be providing consulting services on a national level that help businesses choose IT vendors. We do not charge our clients any fees for our service (at least for now). We are paid a monthly residual (percentage of the monthly cost to the client) from the vendor selected by our client. This payment is filtered through a third party Master Agent. Said another way…the vendor pays the Master Agent…then the Master Agent pays our firm. I hope that all makes sense.

    Anyway, we need to decide where to set up our LLC. Since the payment is coming from one company (the Master Agent), is there a better state to choose? Would it be advantageous to consider the state where our Master Agent is headquartered (CA)? Will one (or both) of us need to register a Foreign LLC in our own respective states in either case?

    Thank you!

    • Hey Ash, you’re very welcome :) Glad you’re finding the site helpful! You’ll want to look at where you’re legally doing business. In this case, it’s likely both states. It’s a good rule of thumb to run this by an attorney. You’ll want to look into forming an LLC in one state and registering it as a foreign LLC in the opposite state. One thing to keep in mind: it’ll be cheaper to form in Texas and then register as a foreign LLC in NJ. Domestic TX LLC is $300. Domestic NJ LLC is $125. Foreign LLC registration in Texas is $750, but foreign LLC registration in New Jersey is $125. Hope that helps!

35. Hello. What happens when you move? I live in Utah but I plan to move sometime this year or early next year at the latest. Would is the process to the get register in the new state?

    • Hi Joslyn, depending on the two states, there are either 2 or 3 ways to go about it. What state are you moving to? And do you want to retain the existing LLC’s history, EIN, bank account, etc.?

36. What about an anonymous Umbrella LLC in Nevada that then owns the Home State LLC?

    • Hi David, that can certainly be done. This page was initially meant as a “basic” overview (yet we didn’t clearly express that). We’ll be adding parent/child setups in an upcoming revision.

37. I am receiving some land and producing minerals. It is in colorado and i live here also. I am setting up parent llc in wyoming and junior in colorado. If i get ein number on junior llc in colorado and bank account also, will that protect my assets or do i need those on wyoming llc?

    • Hi Rod, since the Wyoming LLC is a separate entity and money may flow through it, it’s common practice to get an EIN and open a bank account.

38. Hi Matt,
    I’ve found your tips very helpful and valuable, but I’m still struggling with making a good decision that will fit my current situation. I am starting a new business which is an ecommerce retail store. Currently I reside in CA, might move to HI soon (for a year or so) and later on I will probably relocate to the East Coast. In the future, I will most likely settle down overseas.
    I am aware that I have to register a foreign LLC in every state I will be living in but I just cannot determine in which state I should form a LLC. I am also considering opening a business in my home country, which is Poland, and operating my ecommerce retail store as an international company.
    I will appreciate any advice. Thanks in advance for your help!

    • Hi Angelika, it comes down to where you’re transacting business. For now, that’s in CA, but it sounds like it may shift to HI or the east coast… or overseas. You have legal and tax implications to consider here. It might be a good idea to speak with a tax attorney and develop a entity setup that works now and in the future. Hope that helps.

39. I am expanding my licensed business for Credit Repair into all 50 states. Approx 50% need a “foreign LLC” when registering. It is an internet based business with the original LLC in Florida. Do I have to have a 49 other foreign LLC’s or just 1. I wont have a registered agent or physical office in any of the states except Florida. I am at a loss and no one on the state level in any of the states seem to have the answer for my question. Thanks,

    • Hi Shar, it comes down to where you’re transacting business. Each state has a different set of laws. We’re putting together a piece on this, but it’ll be a few months before it’s out. Try some searches for what is transacting business in the meantime. Hope that helps.

40. Hi Matt,
    I am an expat living in Israel. I am starting an online company that provides a service (not a physical product) and will operate 100% online. Do you have a reccomendation as to which state might be best for me to form an LLC?

    • Hi Boaz, we’re not sure on this one as it falls into the gray zone a bit. You’ll want to consider where you’re domicile is. Also consider: will you be returning to the states at some point, where do you have state residency, where do you file taxes, in what state is your driver’s license. Those are all factors that come into effect re: domicile; which in turn, effects where you may eventually be transacting business. Hope that helps.

41. Hey Matt,

    I know you were stating that one should open an LLC in their home state, but I just moved to California 4 months ago, and am signing to community college here. I would like to open a completely online E-commerce retail business. None of my products will be stored in the US, and I am the sole member that will be working on it here in California, or I might move back to a foreign country, or move states. So what do I do in this instance? Thanks.

    • Hey Daniel, it comes down to where you’re transacting business. If you’re going to reside in California, you will be doing business in California. You could form an LLC in California and then register it as a foreign LLC in the new state. You could also form an LLC in another state (where you may move back to) and register it as a foreign LLC in California. Hope that helps.

42. Why does this VERY long winded article fail to list even *ONE* benefit of using
    an out-of-state LCC?

    Articles should list “pros and cons”…. not just be 100% one-sided “everything is
    horrible if you do it” texts.

    • Hi Mark, thank you for your feedback. You’re right. A bit too one-sided. When this was first written, we just focused on the major issue of people setting up LLCs in the wrong state and then dealing with headaches later. So it first spoke to that concern. However, there’s more we could discuss. This isn’t our final revision. Thanks again.

43. Hi Matt,

    We just purchased our first real estate property in Michigan. We live in Colorado. We formed an LLC in the state of Michigan. Do we have to register our LLC as a foreign entity in CO? We were told to do so in order to open a business bank account for our LLC. Also, our personal CO address is the address for the LLC – I think it should be the address of our registered agent’s company in MI. Is this correct? Is it complicated to change the address? We didn’t form a holding company In Wyoming, but are thinking to do this in the future. Is it better to do this sooner rather than later? Will we pay additional fees for that? (doing it after we formed LLC)

    Thanks in advance.

    • Hi Margo, I just replied to your comment on the LLC bank account page. Article 4 in the Michigan Articles of Organization only allows for a Michigan address (don’t know how you’d have a CO address there). If you form an LLC in Wyoming to own the Michigan LLC (and future LLCs), it would be a good idea to work with an attorney to transfer your interest in the Michigan LLC from yourself to the Wyoming LLC. It’s usually referred to as an Assignment of LLC Membership Interest. Hope that helps.

44. Hi,
    I am trying to form an LLC for a summer camp. The owners live in the state of TN and do all planning and preparation from home, but the camps are held in TX every year. Do we need to create an LLC in Texas, Tennessee, or both?

    • Hi Ora, they are certainly doing business in Texas. As to whether or not they are transacting business in Tennessee, we can’t say. It sounds like they are doing business in Tennessee, but that may be a better conversation to have with an attorney. Tennessee, and most states, usually don’t specifically define what is “transacting business”, however, they tell you what’s not transacting business. You’ll need to look at section 48-25-101 of the Tennessee Code for that. Also, if it’s important, a TX domestic LLC is $300 and foreign registration is $750; a TN domestic LLC as well as a foreign registration is $300. Meaning, it’s more affordable to form an LLC in Texas and then register the entity as a foreign LLC in Tennessee if they are transacting business there. Hope that helps.

45. 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

    • Hi Dan, you’re very welcome. 1) It depends on the details of how and where the income is made, but you’ll need to speak with an accountant. 2) Likely no since they are isolated transactions. 3) That is a reasonable idea. You’ll also want to consider opening a bank account as a foreigner. Meaning, traveling to Delaware may be easier than traveling to Wyoming. We have more info here: non-US resident LLC bank account. Hope that helps.

      • Hi Matt,

        Thanks very much for your reply, things are much clearer now.

        Just one last question: For this type of queries such as LLC formation, best incorporation state according to my needs and future taxation: Do you suggest
        speaking with a lawyer & an accountant or just with an accountant?

        Delaware is just 30 miles from where I live so it would be more convenient than WY in case that’s the best choice.

        Thanks again for the invaluable information and help you provide with LLC University.

        Dan

        • You’re welcome Dan! Both. And multiple. Meaning, make a list of your top 5-10 questions. And speak with multiple accountants and attorneys. We like to call this the “knights of the roundtable” strategy. Some accountants and attorneys are far more knowledgable than others. You want to speak with multiple people to form a consensus. Then though those multiples conversations, you’ll intuitively lean towards one accountant/attorney. Then if you can meet them in person (or Skype video), that’s even better. You’ve found a great match. Thank you for the kind words man. That means a lot!

          • Thanks to you Matt for your priceless help!

            I will follow your advice and once I have a clear roadmap I will share it with you so we can help other colleagues who might find themselves in the same situation.

            Dan

            • You’re welcome Daniel. Sounds great!

46. 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

    • 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 :)

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

        • 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.

47. 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

    • 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.

48. 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?

    • 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.

49. 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).

    • 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.

50. 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

    • 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.

51. 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!

    • 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.

52. 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?

    • 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.

53. 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

    • 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.

54. 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

    • 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!

55. 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!

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

56. 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.

    • 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.

57. 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

    • 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”.

58. 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.

    • 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!

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

    • 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.

59. 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

    • Thanks Rich! From what you’ve shared, it sounds like you’re doing business in both states. So if you form an LLC in Colorado, you’ll want to register that LLC as a Foreign LLC in Massachusetts. That means you’ll need a Massachusetts Registered Agent and you’ll need to file a Massachusetts LLC Annual Report. That’s in addition to your Colorado LLC Periodic Report. Also, you can’t “form” an S-Corp. An S-Corp is not a legal entity. It’s a tax entity, or rather, a tax election made with the IRS. We have more info here: LLC taxed as S-Corp. Hope that helps :)

60. 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!

    • 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 :)

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