Where should i form my LLC [Fact Checked]

Last updated : Sept 17, 2022

Written by : Dillon Crom

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Where is the best place to start an LLC?

Delaware. Delaware takes one of the top spots as the best state to form LLC. More than 50% of all U.S. publicly-traded companies and roughly 63% of Fortune 500 companies are incorporated in Delaware.

Where is it cheapest to form an LLC?

The advantages of forming a Delaware company are numerous and many of the top companies in the world have chosen to form an LLC in Delaware (see 11 advantages here). The cost to form an LLC in Delaware is among the lowest in the country.

Why is Delaware the best state to form an LLC?

Delaware is often considered one of the best states to form an LLC because it has limited fees and tax obligations. In fact, many businesses choose to form an LLC in Delaware even if they don't intend on doing business in Delaware.

Do you have to live in Delaware to form an LLC there?

As long as you retain the services of a Delaware Registered Agent, you can form a Delaware corporation, LLC, LP, benefit company or non-profit corporation without being a resident of Delaware or the United States.

What is the disadvantage of an LLC?

Disadvantages of creating an LLC States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Check with your Secretary of State's office. Transferable ownership. Ownership in an LLC is often harder to transfer than with a corporation.

How much does an LLC cost?

You can file the LLC filing documents online, by mail, or in-person when visiting the local SOS office. The filing costs usually vary from $50 to $150 which is a single-time fee. If you plan to form your company in another state, then you might have to provide additional documentation and pay a higher formation fee.

Which state has the lowest LLC tax rate?

Range for individual income tax rates: None.
Average combined state and local sales tax rate: 1.76% (no state sales tax)
Effective property tax rate for homes: 1.02%
State ranking for business-friendly legal environment: 5.
LLC filing fee: $250.
LLC annual fee: $100.

What state has lowest filing fee for an LLC?

Learn about LLC registration costs in your state in our LLC cost guides. Kentucky has the lowest LLC registration fee at $40 and Massachusetts has the highest LLC registration fee at $500.

Do I need an LLC?

You don't need an LLC to start a business, but, for many businesses the benefits of an LLC far outweigh the cost and hassle of setting one up. by Jane Haskins, Esq. An LLC, or limited liability company, provides personal liability protection and a formal business structure.

Do Delaware LLC pay taxes?

A. Delaware treats a single-member â€œdisregarded entityâ€ as a sole proprietorship for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the State of Delaware.

Is there an annual fee for an LLC in Delaware?

LLC/Partnership Tax Information All Domestic and Foreign Limited Liability Companies, Limited Partnerships, and General Partnerships formed or registered in Delaware are required to pay an annual tax of $300.00.

How much does an LLC cost in Delaware?

ðŸ’µ The cost to file a Delaware LLC is $90. You pay this when you file your LLC's certificate of formation with the Delaware Department of State.

Can I register my business in Delaware if I dont live there?

The answer is, yes, anyone in the world can form a Delaware LLC! The state of Delaware does not restrict non-U.S. residents from owning or managing Delaware LLCs, nor do they require any physical presence in the state of Delaware, or even within the U.S., for that matter.

Why is Delaware a tax haven?

What makes Delaware a tax haven? Companies and wealthy individuals can use Delaware to avoid paying some taxes in other states. So there's a thing called the Delaware Loophole, which essentially enables companies to avoid paying state corporate income tax where they earn the revenue.

What are the benefits of a Delaware LLC?

Advantage #1: Custom LLC Business Structure and Rules.
Advantage #2: Asset Protection Against Creditors.
Advantage #3: Statutory Limitation on Member Personal Liability.
Advantage #4: Beneficial Tax Treatment by the IRS.
Advantage #5: Simple Startup and Minimal Requirements.

How do taxes work for LLC?

For the purposes of federal income tax, LLCs are treated as pass-through entities, which means that LLCs themselves do not pay taxes on their business income. It is rather its members who pay the taxes on their share of LLC's profits.

Why an LLC is the best option?

An LLC lets you take advantage of the benefits of both the corporation and partnership business structures. LLCs protect you from personal liability in most instances, your personal assets â€” like your vehicle, house, and savings accounts â€” won't be at risk in case your LLC faces bankruptcy or lawsuits.

Why are LLC so popular?

Limited Liability The key advantage of an LLC for small business is it protects business owners' personal assets from a company's debts, as would a corporation.

Do I have to pay a monthly fee for an LLC?

A one-time fee paid to the state is called the filing fee of LLC. This is not a monthly fee. No state has a monthly LLC fee system.

Is it better to be a sole proprietor or LLC?

One of the key benefits of an LLC versus the sole proprietorship is that a member's liability is limited to the amount of their investment in the LLC. Therefore, a member is not personally liable for the debts of the LLC. A sole proprietor would be liable for the debts incurred by the business.

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Comment by Belkis Walkenhorst

uh i think all of the hype about wyoming and delaware and everything is um a little overblown delaware and wyoming are great states for opening llcs but if you open an lsd in florida your business will be exactly the same hi youtube i hope you're great today i want to just jump right into it and talk about llc's and what state you should open your llc in because i get this question all the time um if you don't know or if you're just getting new to this a single member or an llc is a limited liability company and it is uh you open it at the state level in the united states so in florida you can open an llc you can open one in arkansas in california and massachusetts and delaware literally in 50 states i think you can open in every state the biggest states are really for most of my clients which are online entrepreneurs people who live outside the united states are delaware new mexico wyoming for different reasons but it's mostly because of the publication they get on the internet first of all if you're located in the united states i recommend you open the llc in the state where you live because if you're doing business in that state you'd have to register that state the llc in that state anyways so if you open if you live in florida with me and you're in miami and you open an llc in delaware but you're doing business in florida you still have to register the llc in florida it's just going to be double filing fees and there's no benefit really for you so if you're an online person and you say hey i don't live in any state you can open in whichever state you want and i have clients that open from all over but i'm going to touch on kind of the the biggest the biggest reasons um and how you make your decision so um no matter what the taxation is the same llcs don't pay taxes it's a pass-through entity the passes through to the owner so if you own an llc you wouldn't ever pay tax the llc would never pay taxes but you might have to pay taxes depending on what you're doing or if your foreign company owns an llc the llc would never pay taxes but the foreign company might have to pay some taxes that doesn't mean there's no reporting requirements so there's nothing you have to share with the government that just means that the llc just won't pay any taxes and that's i guess there's caveats always you can elect for your lcv tax as a corporation in that case it's really a corporation but that's not really what we're talking about here so back to the main topic um paying taxes or not subsidy taxation or not shouldn't make any difference for where you decide to open your llc and i know they clients will say jim i used wyoming because there's no state income tax in wyoming here same with delaware the truth is there's no state income tax anywhere with a debt with a single member llc in california you have some um payments you have to make to keep your llc open it's like 800 a year um as like the base fee to keep your llc open in california if you open an llc in new york you have to do publications in in like three newspapers it's really weird but that's the rule in new york so that's not really a concern paying taxes privacy is a concern in florida if you open llc your name is searchable on the website so you can search up llc name you can find who the owners are and find the addresses of everyone so some people want more privacy i think delaware has the best privacy of all the llc's open an llc in delaware new mexico and wyoming and then search the llc on the state website and see what information you'll find you'll find that on wyoming even though they have good privacy you can still search and see who the directors are of any llc if you know the full name of the llc you can still search for it and find the information of the owners the same goes with um with new mexico but delaware you when you search you can't get information about the owners or directors so delaware has more privacy and that's one of the main reasons we we usually use delaware when we open llc's the other thing is like flexibility with within the state so in delaware you can open different types of series llc's you can convert your llc into a corporation and you can um just do different administrative things with your llc when other states that might not be possible but the short answer is don't spend more than like 30 if you're if you're doing on ecommerce on the internet online and you're just a regular person it doesn't need to be like a five-day decision on which state to open your llc you can just make a decision and open the llc and you'll be fine it's going to be the same in almost every state you need a registered agent in every state you need to have an address which is what you need the registered agent for in every state so it doesn't really matter we usually use wyoming i mean delaware for the the privacy but i've also opened llc's in wyoming they have a better rules for trusts but really if you if you need anything beyond the uh opening an llc for payment processing for e-commerce for just regular stuff if you're doing like high-level estate planning you should talk to an attorney or a tax advisor like myself about your specific situation to see what would be advisable because there are some nuances between the states when it gets to a high level it's just that ninety percent of the people i talk to this doesn't really matter so um when deciding what state to use to open an llc the answer is it doesn't really matter because none of the states pay it will charge you taxes and they're all relatively private you still have to know the llc's name to look it up so delaware is the most private and that's really what it comes down to i don't think i think all of the hype about wyoming and delaware and everything is um a little overblown delaware and wyoming are great states for opening llcs but if you open an lst in florida your business will be exactly the same the fact that there's a registered agent address on there that you can look up i don't think it puts you in any more or less risk or anything at all i don't think there's any issue with that for like the vast majority of people so i hope this video was helpful please make sure to like whatever platform you're watching this on like the video subscribe and comment or email us or contact us if you have any questions or if you need help setting up your llc and if you want us to just do it all for you because that's basically what we do okay so i will see you in the next video thanks

Thanks for your comment Belkis Walkenhorst, have a nice day.
- Dillon Crom, Staff Member

Comment by Alison

are you thinking about setting up an LLC then if so you probably heard that it's better to set up in one place or another what's up guys welcome back to taxes Made Simple I'm your host Carlton Dennis and in today's video I'm going to be discussing all the important questions that you might have as it pertains to where to set up your LLC if you want to know what the best option is for your LLC in order to pay the least amount of taxes and fees while receiving the most benefits and advantages then this is the perfect video for you let's Dive In for many business owners the best option is to Simply form an LLC in their own home state this is especially true if your business is a small business and only operates within your State's borders one of the best reasons why it makes sense for many people to form llc's in their own home state is because they're already familiar with the laws the procedures and the rules of their own state it can be much more convenient to deal with a set of laws procedures and rules that you're somewhat at least Vaguely Familiar with and having to go to a brand new state and trying to learn an entirely new set of rules laws and regulations also if you register your LLC outside of your own home state your LLC will be considered a foreign LLC if you have a foreign LLC you will have to go through the process of filing a foreign qualification in order to get permission to operate your foreign LLC in your home state this can mean extra paperwork and fees it could also mean dealing with some a little bit of additional taxes and compliant difficulties and for many people dealing with the increased paperwork tax treatment compliance and disclosure requirement is a little too tedious early on in their business this is the reason why many people choose to just set up their llc's in their own home States now another thing to consider if you're going to set up your LLC in another state is that you might be required to pay a registered agent to represent your company and accept the services of process I.E collect the paperwork and all the mail in the state on your company's behalf this can cost you a little bit more money and it's just another thing that you're going to have to deal with when you decide to make the decision to have a foreign entity now let's ask this question does it ever make sense to set up your LLC in a different state for some business owners it does actually make sense to set up your LLC in a different state than the one that you live in for example for larger corporations and businesses that are operating in many different states or for businesses that are prone to lawsuits it can make a lot more sense to set up an LLC in a state that has LLC friendly laws and regulations there are some states in the United States that have earned a reputation over the years for being extremely business friendly and ideal for setting up an LLC or Corporation for this reason many business owners actually choose to set up their llc's in these states despite the fact that they can have more paperwork more fees more compliance requirements to deal with for these business owners it's all worth it to get the additional benefits that these states provide here are the top three states that you should consider to set up your llcn besides your own number one Delaware Delaware is the top state when it comes to setting up a business and I want to make sure you know the true reasons as to why in fact more than 50 percent of all publicly traded United States corporations and 63 percent of Fortune 500 companies are Incorporated in Delaware there are no corporate income taxes for llc's that do not do business in Delaware and there are also very low franchise taxes I believe it's 175 dollars importantly there are also no residency requirements to set up your LLC in Delaware and there are limited reporting and disclosure requirements every single year so in other words setting up an LLC in Delaware is very easy compared to other states because the taxes are low there's not a lot of compliance and paperwork that you're going to have to go through every year additionally and perhaps most importantly the state of Delaware has a special business Court called the Delaware Court of Chancery this court has been in existence for over 200 years guys and it specializes in handling Commercial Business disputes and interpreting business law this court also hears business cases this means that disputes and lawsuits are much faster in Delaware than they are in other states where business cases are mixed in with all other types of cases guys the Delaware quarter chantery is one of the main reasons why a lot of businesses and corporations are set up in the state of Delaware number two is Nevada now that is another popular state when it comes to setting up your LLC or Corporation this is because just like Delaware there are many things in Nevada that a lot of business owners view as favorable when it comes to setting up an LLC for example there's no corporate income personal income or franchise taxes in Nevada Additionally the state does not participate in income sharing with the IRS this means that Nevada is an ideal state to set up your LLC from a tax perspective if your intention is to reduce audit risk also the state allows business owners to remain confidential when they are setting up their LLCs this means that if you don't want your name to appear in the public filings with the state regarding your LLC it will not have to you can make a choice compliance is also a lot easier in Nevada than it is in many other states for example operational agreements and organizational annual meetings they're not required for corporations this can make it easier to run your LLC or Corporation in the state of Nevada compared to other states let's jump to number three the state of Wyoming another state in the West Wyoming is also a great place to form an LLC this is because the way Wyoming is very business friendly just like Nevada Wyoming does not impose any corporate income or franchise taxes making it an ideal place to set up an LLC from a tax perspective or a parent company if you're not doing business in Wyoming this state also has very easy compliance and Reporting rules and annual meetings do not have to be held in the state furthermore just like Nevada Wyoming allows for confidentiality when it comes to the names of the LLC owners for public records additionally Wyoming also allows LLC owners to have lifetime proxies a proxy is a person who holds the shares of the LLC on behalf of the true LLC or Corporation however the LLC owner still is able to control the Voting Rights and other privileges this also allows the LLC owner to remain anonymous for the life he or she chooses but also have control of his or her own ownership and percentage of the LLC why I love Wyoming so which state should you choose the state that you should choose to set up your LLC is going to be dependent heavily on the size and specific needs of your business if you just have a basic business that only operates in one state and is maybe doing like a hundred thousand dollars in revenue o

Thanks Alison your participation is very much appreciated
- Dillon Crom

About the author

Dillon Crom

I've studied virology at University of Wisconsin-La Crosse in La Crosse and I am an expert in aerial archaeology. I usually feel anxious. My previous job was aircraft body and bonded structure repairer I held this position for 11 years, I love talking about air sports and needlework. Huge fan of Ross Kemp I practice hacky sack and collect disneyana.

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