LLC Registration – Choosing a state

For many small businesses forming an LLC in your home state is the simplest and most convenient option. An LLC that does business in a state other than where it was initially registered must register as a “foreign LLC” (foreign meaning from a different state, not a different country) with the state in which it conducts business.

When an LLC is registered with a state, a registered agent must be named. This is the person or corporation designated to accept official documents on behalf of the LLC. This person or corporation must reside in the state of formation. If you are registering an LLC in a state in which you don’t reside, you’ll need to choose a person or corporation residing in that state to serve as your registered agent. There are many companies who provide a registered agent service for a nominal fee.

There are advantages to choosing certain states in which to initially register your LLC. Many large corporations choose to form an LLC in Delaware because of its history, experience and pro-business climate. Nevada is also a popular choice due to its pro-business environment, absence of state income tax, and lack of a formal information-sharing agreement with the IRS.

Wyoming has a very business-friendly climate as well as tax advantages over states such as Delaware. Compared to Nevada, Wyoming offers lower filing fees and reduced reporting requirements.

If you are going to do business outside of the United States without creating a nexus (connection to a state resulting from doing business there) in a US state, Wyoming may be your best option. It has no state income tax, franchise tax, or any other fees other than a nominal filing fee. As the first state to offer LLCs, it has strong, tested business-friendly statutes.

If you are going to do business inside the US, it makes sense to register your LLC in the state in which it will initially do business. If it does business in another state as well, the LLC will also need to register as a “foreign LLC” in that state.

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