When you form a limited liability company (LLC) in the United States, you have 50 states to choose from. How do you decide which one is better? Should you choose your original state? Or should you choose a popular jurisdiction to start businesses like Delaware, Nevada, or Wyoming? A limited liability company (LLC) is a legal entity formed to own and operate a business. LLCs are arguably the easiest business unit to create and are widely used by homeowners who want to protect their personal liability and reap the benefits of direct or “flow-through” taxation. In this way, the corporation`s profits and losses can be taxed at the owner`s personal tax rates. LLC units also provide a simple organizational structure. Most people consider the following states to be beneficial for out-of-state registration: Most states require LLCs to complete a report every one to two years to ensure the state has up-to-date information about the company. Many states request the following information on an annual or biennial basis: In addition to these benefits, LLCs in Delaware, Nevada, and Wyoming offer the same benefits as those available under the laws of most other states. These include: (i) protection of owners` liability; (ii) limited requirements for the initial submission; and (iii) no requirement to have a physical presence in the state, although you may need to appoint a local resident agent (there are companies that offer resident agent services for a small fee). 22.3 million out of 30.7 million small businesses are sole proprietors without employees, and a large portion of these businesses operate through a single-member LLC structure. That`s because the legal structure of the LLC is accessible and easy to establish for businesses like family-owned retailers who run their stores locally. LLCs allow members to protect their personal assets from any liabilities related to the business they operate.
While an LLC can have multiple members, many states also allow LLCs with a single member. An LLC allows you to limit many personal liabilities, but you are still responsible for debts related to the LLC, liabilities related to your business operations, and liabilities arising from the actions of the co-owners of the LLC. For example, while the initial filing fee and annual cost of maintaining an LLC in Delaware, Nevada, and Wyoming may be lower, if you form your LLC outside of the state, you will need to register it as a “foreign entity” in the state where you operate. This requires another initial filing fee and, in many states, additional filing fees in progress. While the documents for maintaining foreign company registration are usually minimal, they are always additional documents, and if you feel uncomfortable with the forms (or if you`re facing administrative difficulties), you may need to hire a lawyer or accountant to help you. A company agreement prevents future disagreements by determining the responsibilities of each member and how profits and losses are shared. It also helps protect your company`s limited liability status. This can save you a lot of trouble in the coming years. Here are the above state requirements: Delaware does not tax income outside the state, which means that even if the majority of your business is operated elsewhere, it is not taxed by the state. To attract LLCs, filing fees and franchise taxes are low compared to other states. First, let`s address the question of why you should even ask the question of where to train your LLC.
The answer is simple: In the United States, LLCs (as well as corporations, limited partnerships, and other legal entities) are creatures under state law. When you form an LLC, you are forming it in accordance with the laws of a particular state – not the federal laws of the United States. Each state`s LLC is unique, and other relevant laws — including those related to liability, privacy, and taxes — also vary from state to state. Any state in the United States allows some form of registration as a limited liability company or LLC. LLC registration requirements and general LLC registration coverage vary by state. If your LLC operates in multiple states, you may need to file registrations in multiple states. The rules for the formation of a limited liability company (LLC) are set by each state. A state`s limited liability company law, sometimes referred to as a state`s LLC or LLC law, creates the legal rules for forming and maintaining an LLC. No matter where you live or where your business will operate, you can form an LLC in any state in the country. In other words, you have the option to manage “Forum Shop” and choose the authoritative legal structure that offers the best set of benefits for your unique professional and personal situation.
It may be that forming an LLC in your home state is the best option. Or, if you live in a state like California or Colorado, filing in your home state may be an option you should avoid. Then there are the vast majority of circumstances that lie in the middle – where an informed decision requires a careful assessment of the various options available across the country. Unlike corporations, LLCs are not required to have officers or directors consisting of a director and trustees. Rather, LLCs have “members” and are governed by their operating agreement, which establishes the ownership, management, and rights and obligations of each member of the corporation. However, LLCs are not exclusive to individual members.