There are several factors to consider when forming an LLC in a different state. For some, it may be crucial to your business operations and therefore a simple decision. If your LLC conducts business in a state other than the one in which it is registered, it must register separately in that state. For others, this decision may not be as clear cut. For example, if you run an online business rather than a brick and mortar business, you may be looking to take advantage of benefits that a certain state has to offer LLCs.
Wyoming is a common choice for individuals looking to form an LLC in a state without personal income tax. Be mindful, however, of the tax classification of your LLC. If you elect to be taxed as a corporation (C-Corp), then there may be state corporate tax that applies. If you are a single-member LLC, which is the default tax structure, then your net income passes through your personal return.
Here, we’ll take a look at some of the most popular states people choose to form LLCs and compare their different offerings.
Forming an LLC in Delaware
Delaware is a well-known state for incorporation. One of the main aspects that sets Delaware apart from other states is its Chancery Court, which is a court devoted to settling business matters in an efficient and expert-driven manner. While in other states your business-specific case may take months or even years to be heard, in Delaware your case will be heard very quickly and by a judge with proper training and business knowledge. Delaware has a long history of corporate case law and is seen as a pioneer in the field, paving the way with actions that removed restrictions and lessened corporate taxes.
If your corporation conducts business in several states, or if you intend to take your corporation public in the near future, Delaware might offer much of what you are looking for. However, if you are a small business or single-member LLC, Delaware may not necessarily be the best choice. Additionally, while Delaware offers many benefits that other states do not, it does fall short in a few ways, such as taxes and privacy, when compared to Nevada and Wyoming.
Forming an LLC in Nevada
Thanks to its reputation for being a tax haven, along with the allure of Las Vegas, Nevada is a strong draw for many looking to form corporations and LLCs. Nevada offers no state corporate income tax, no tax on corporate shares, and no franchise tax. Apart from these tax advantages, Nevada LLCs enjoy several privacy benefits and minimal disclosure requirements, such as anonymity for shareholders and members and no corporate income tax information collection to share with the IRS. However, Nevada’s annual fees can be considered a bit pricy in comparison to other states, thanks in part to a business license requirement.
Forming an LLC in Wyoming
Wyoming was the first state to pass legislation that adopted the use of limited liability companies and continues to promote the most favorable LLC conditions. Wyoming enjoys the same tax haven brand that Nevada does: no state corporate income tax, no tax on corporate shares, and no franchise tax. However, it offers even more benefits, less fees, and greater privacy. For example, Wyoming does not require an initial annual report from LLCs, only later on the anniversary of its incorporation date. Also, Wyoming allows continuance for corporations looking to transfer there. Many states offer domestication for corporations looking to transfer, but continuance offers a more seamless transition for your business. Wyoming also has a much smaller annual fee compared to that of Nevada and has no general business license requirement.
How to Form an LLC in Another State
If you are interested in forming an LLC in a state different than the one you reside or currently conduct business, it is important to be aware of the state’s requirements for formation, disclosure, and conducting business. If your business is operating in several states, you will most likely need to register as a foreign entity with those states. If this does not apply to you, it is still possible that you will be required to maintain a registered agent in the state in which you form.
Our formation service can ensure that your LLC is formed correctly according to state regulation, and that any possible fees or penalties are avoided. Additionally, if you require, we can provide assistance registering as a foreign entity or registered agent services.