Where Should I File My LLC?
Are you ready to form your LLC but not sure where you should register the company? TheN this Post is for you!
Choosing where to form your Limited Liability Company (LLC) can sometimes be as difficult as selecting the best legal structure for your new business. You have two basic options regarding where to register your LLC. You can choose to be: a “domestic” LLC in your home state (i.e. where you primarily do business) or a”foreign” LLC in another state.
A domestic LLC does business in the state in which it was formed. A foreign LLC is an entity that is doing business in a state other than where it was originally formed. Any LLC that does business outside of its registration state must file a "foreign qualification" to permit it to do business in other states. Such issues as increased paperwork, tax treatment, and compliance and disclosure obligations may impact whether you decide to stick close to home or explore out-of-state alternatives.
Many business owners choose to file in their LLC in their home state as a domestic LLC if they are physically located and transact most of their business within that state. For example, if you run a retail boutique and make most of your sales in your home state, it probably makes sense to file your LLC in that same state.
If you decide to register your LLC in another state, but run your store in your home state, you will have to register and pay filing fees as a foreign LLC. Like other local businesses, you will still have to comply with state and local laws, taxes. and fees, but will now have the added costs, paperwork, and complexity of complying with another state's mandates. If your LLC is located within one state and your business transactions occur within that same state, it is typically easier and less costly to file an LLC as a domestic LLC.
Some start-ups plan to transact business in numerous states outside of their home state. If your business strategy focuses on out-of-state business, your LLC might benefit from registering as a foreign LLC depending upon applicable advantages. If you think that might be the case, you may want to consult with an attorney or tax professional to determine if registering as a foreign LLC makes sense for your LLC.
Three states are often hailed as business-friendly bases for registering as foreign LLCs: Delaware, Nevada, and Wyoming. Each of these states offer different benefits for LLCs and you should consult with a tax professional and an attorney to understand what local laws you may need to comply with as well as the tax implications of having multiple foreign registrations.
For more information, please feel free to schedule a consultation with our office!
