Have you ever wondered what is the best state to form an LLC? the most common states would be Nevada, Wyoming, and Delaware. However, the best state to form your LLC would be your home state. Believe it or not the disadvantages of forming your LLC outside of your home state outweighs the perceived advantages. Before we move forward, let’s talk about the differences between domestic LLCs and foreign LLCs. A domestic LLC is when you form an LLC in your home state. On the other hand, if you form an LLC outside of your home state, you will need to register it as a foreign LLC.
Differences between Domestic and Foreign LLCs
Therefore, you now have two LLCs; the LLC out of state, and the one you will register in your home state as a foreign LLC in order to do business in that state. This means that you now have to pay two state filing fees and will need to pay for a registered agent to use their address and essentially pay for two annual report fees. In short, you can conclude that this can easily add up to double the cost of forming an LLC outside your home state since you now have to maintain two LLCs.
Many people are misled into thinking that forming an LLC in a different state means that they will be taking advantage of “tax savings” which is simply not true. “Taxes are paid where the money is made” with that being said once you create an LLC outside your state but, are doing business in your home state it is mandatory that you pay taxes in your home state because that is where you are operating and doing business. As far as doing business strictly online it is still ideal to form your LLC in the state in which you are legally doing business in, you will need to pick a state where you have the greatest connection and network (at home).
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