Best State to Form an LLC

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

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

Video Transcript:

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

We see this all over the internet:

“Nevada has no corporate income tax.”

“Wyoming LLCs are the most affordable.”

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

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

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

Let us explain:

Domestic LLC vs. Foreign LLC

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

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

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

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

This means:

  • you now have 2 LLCs (one in Nevada and one in your home state)
  • you have to pay 2 State filing fees
  • you will be required to pay for a Registered Agent in order to use their address for your Nevada LLC
  • you have to pay 2 Annual Report fees

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

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

States charge fines and penalties

All state governments enforce their rules that require an LLC to be registered as a foreign LLC if it is transacting business in their state. Enforcement can include fines, penalties, interest, court costs, and having the LLC’s ability to transact business completely put on hold.

Some states have higher fines that others, but all states have statutes which spell out the consequences of an LLC illegally transacting business in their state.

In some states, the fines can be a few hundred dollars per year. In other states, the fines can be thousands of dollars per year.

Take for example the Connecticut Secretary of State. In conjunction with the Attorney General, they collected $1.3 million from companies that were illegally doing business in Connecticut (not registered as foreign entities). Some companies were only fined a few hundred dollars, however most companies were charged a lot more. The average fine was $4,600 and the highest fine was $30,795.

As per Section 34-275a of the Connecticut LLC Act, if your out-of-state LLC is doing business in Connecticut but fails to register as a foreign LLC within 90 days:

  • the state imposes a $300 per month penalty
  • your out-of-state LLC owes taxes and fees for all the years (and partial years) it failed to register
  • your out-of-state LLC is also charged interest and penalties for not paying the taxes and fees it should have paid
  • the penalties are levied by the Secretary of State, but if necessary, the Attorney General will sue your out-of-state LLC to recover all the amounts due
  • the Attorney General can also issue an injunction preventing your out-of-state LLC from doing any more business
  • while your out-of-state LLC can defend itself in a lawsuit, it cannot sue another party in Connecticut
  • your out-of-state LLC won’t be able transact business in Connecticut until all civil penalties are paid (including interest and court costs) and the LLC properly registers as a foreign LLC

If you want to form your LLC in one state and then register that LLC as a foreign LLC in the state(s) where it’s transacting business, then this whole thing may not be a big deal.

However, a lot of small business owners don’t want to pay for an LLC filing in multiples states since it requires multiple filing fees, multiple annual report fees (and potentially other annual requirements), in addition to maintaining a Registered Agent in multiple states.

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 LLCs?

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 a Wyoming LLC?

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 (or your LLC in transacting business in Delaware), then you can form your LLC in Delaware.

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.

Many people run their online business from their home (or coffee shops and co-working spaces in town). That’s where you’re legally doing business. And that’s where you should form your LLC. It’s not a matter of where your customers are located (if you sell online); it’s a matter of where you are primarily (or repeated) running the business from.

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 set up, and the best long-term strategy for your LLC.

The reason why is that most people are running their business (regardless of where they form their LLC) from their home state.

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 are primarily running your business from home or from locations in your home state, you are most likely transacting business in that state. And that’s the state where you should form your LLC (or register your out-of-state LLC as a foreign LLC).

Now yes, it’s possible to reside in North Carolina, for example, but have a factory and employees located in Virginia. In this situation, your LLC is most certainly transacting business in Virginia. However, it’s likely that your LLC is also transacting business in North Carolina if you are working from home to run your business activities in Virginia.

Another helpful way of determining your home state (if it’s not clear) is to imagine yourself in a state tax audit. Where would the court determine you are throughout most of the year? Where are most of your ties? For most people, this will most likely be the state where your LLC is also transacting business.

How would you answer the following questions:

  • What state are you a resident of?
  • Where do you pay rent?
  • Where do you own homes?
  • Where is your bank account?
  • Where is your driver’s license?
  • Where do you file a state tax return?
  • If you have other licenses/permits, in what state are they held?
  • Where are you registered to vote?
  • What states were you in for more than 183 days?
  • Where is your doctor?
  • Where is your dentist?
  • 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 are your pets?
  • Where is your veterinarian?
  • Where is your safe deposit box?
  • Where do you receive most of your mail?
  • Where are financial statements 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)

Now not all the things above mean an LLC is transacting business in that state… it’s more so for people who think they are just doing business online… or doing business from “anywhere”. If you were in a state tax audit, the state where the court determines that you’re a resident is most likely the same state where your LLC is transacting business.

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.

Now, there are some exceptions.

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

Note: There are no citizenship or residency requirements to forming an LLC in any US state. Non-US residents can form LLCs 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. This is the state where the LLC will be transacting business.

If your 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 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 non-resident alien taxation and the 60+ US tax treaties.

Having said that, while you can pick any state to form your LLC in (if there is no physical presence), how you obtain and EIN and open a bank account are different. And foreign-owned Single-Member LLCs have an additionally filing requirement with the IRS. Related to all that, you’ll find these articles helpful:

Real Estate LLCs

As we mentioned earlier, when operating a business, it’s best to form your LLC in your home state (since that is where most LLCs are transacting business).

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 since that is the state where your LLC is transacting business.

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

93 Comments

  1. 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
  2. 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
  3. 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
  4. 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
  5. 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
  6. 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
  7. 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
  8. 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
  9. 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
  10. 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
  11. 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
  12. 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
  13. 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
  14. 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
  15. 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
  16. 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
  17. 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
  18. 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
  19. 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
  20. 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
  21. 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
  22. 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
  23. 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
  24. 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
    • Matt Horwitz December 16, 2018

      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.

      reply
      • Dan December 17, 2018

        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

        reply
        • Matt Horwitz December 18, 2018

          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!

          reply
          • Daniel December 19, 2018

            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

            reply
            • Matt Horwitz January 6, 2019

              You’re welcome Daniel. Sounds great!

              reply
  25. Ora December 20, 2018

    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?

    reply
    • Matt Horwitz January 6, 2019

      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.

      reply
  26. Margo January 1, 2019

    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.

    reply
    • Matt Horwitz January 6, 2019

      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.

      reply
  27. Mark January 5, 2019

    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.

    reply
    • Matt Horwitz January 6, 2019

      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.

      reply
  28. Daniel January 7, 2019

    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.

    reply
    • Matt Horwitz January 7, 2019

      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.

      reply
  29. Boaz January 10, 2019

    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?

    reply
    • Matt Horwitz January 10, 2019

      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.

      reply
  30. Shar January 10, 2019

    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,

    reply
    • Matt Horwitz January 10, 2019

      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.

      reply
  31. Angelika January 13, 2019

    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!

    reply
    • Matt Horwitz January 13, 2019

      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.

      reply
  32. ROD January 14, 2019

    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?

    reply
    • Matt Horwitz January 14, 2019

      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.

      reply
  33. David January 15, 2019

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

    reply
    • Matt Horwitz January 15, 2019

      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.

      reply
  34. Joslyn January 21, 2019

    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?

    reply
    • Matt Horwitz January 22, 2019

      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.?

      reply
  35. Ash January 22, 2019

    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!

    reply
    • Matt Horwitz January 23, 2019

      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!

      reply
  36. Tewaner Johnson January 23, 2019

    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?

    reply
    • Matt Horwitz January 28, 2019

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

      reply
      • Tewaner Johnson January 29, 2019

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

        reply
        • Matt Horwitz February 6, 2019

          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.

          reply
  37. Andrei January 25, 2019

    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?

    reply
    • Andrei January 28, 2019

      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.

      reply
    • Matt Horwitz January 28, 2019

      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.

      reply
      • Andrew January 29, 2019

        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?

        reply
        • Matt Horwitz February 6, 2019

          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.

          reply
  38. Jebb January 27, 2019

    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?

    reply
    • Matt Horwitz February 6, 2019

      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.

      reply
  39. Yann January 31, 2019

    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

    reply
    • Matt Horwitz February 8, 2019

      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!

      reply
  40. Ryan February 1, 2019

    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.

    reply
    • Matt Horwitz February 8, 2019

      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.

      reply

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