Contrary to popular belief, you can file paperwork to form an LLC in any state you like, but, the advantages offered by different states vary. Making a decision can be tough if you have too many options to choose from. This guide will help on how to choose the best state to form your LLC. So let’s dive right in with the basics first. What Is A Limited Liability Company (LLC)? A Limited Liability Company (LLC) is a type of business structure where the business is less unincorporated and more of a flow-through business entity. In this structure, the business income flows through the business directly to the owners and investors. The best part of it all? Your personal liability is limited to the amount of investment you’ve made in the company, as the name suggests. Limited liability is a very appealing aspect of running any safe and profitable business, and it combines both sole proprietorships and partnerships in a fine mix. The convenience of the concept is what makes it a popular business structure. Domestic LLC VS Foreign LLC: Which is For You? The answer to this question depends on two things: Where is your business formed? Where does your business operate? If your business operates exclusively in the state you formed it in, then it’s considered a domestic LLC. Even if it’s an online business, the focus stays on where your business is, not the area of your business activity. If you’ve formed your business in one state while operating in multiple states (like an online business), your business has to be registered under a foreign LLC in each state you choose to operate in. If you plan to choose a state where the fees are low to file an LLC, you’ll have to register your true state of origin as a foreign LLC as well. Also, you’ll need to set up a registered agent where you choose to file a domestic LLC since you need a physical representation of your business in said state. Which Is The Best State To Form An LLC In? The top three best states to set up an LLC in are: Wyoming Nevada Delaware 1. Why File an LLC in Wyoming? Our first choice also happens to be the most popular and the best state to start an LLC in for these five reasons: Wyoming is the best choice for startup LLCs due to the low cost of the initial filing fee ($100) and annual report filing fees ($50). You can complete the LLC filing process online in Wyoming, and it doesn’t require your physical presence to complete the paperwork. The tax structure of Wyoming is the most business-friendly, as it has no corporate taxes or personal income taxes. Like any other state, Wyoming also has sales taxes; the sales tax rate is just 4%, which is one of the lowest tax rates. Wyoming’s regulatory environment has fewer “corporate red tapes” around them. The asset protection laws of Wyoming are considered to be the strongest in all of the USA, along with the added benefit of liability protection. 2. Why File an LLC in Nevada? We compiled five reasons to file your LLC in Nevada: The tax benefits of Nevada are lucrative for ambitious business owners such as yourself, as there is no personal tax or corporate income tax. Also, there are no franchise taxes either! Talk about cost savings Asset protection laws of a Nevada LLC are almost a clone of Wyoming’s asset protection rules, which is highly valuable. Since Nevada isn’t in an information-sharing agreement with the IRS, so you can rest assured that any information about your business that counts as “identifying” is completely safe, even in public registration filings. The benefits of filing an LLC in Nevada come at a high price of $425, and the annual reporting fees are also high. But the security of business information and the financial advantages are well worth it. Nevada allows you to operate without creating an operating agreement or holding annual meetings. Minimal reporting obligation makes things much easier if you don’t have enough time to take out of your busy schedule. 3. Why File an LLC in Delaware? Here are five reasons why filing an LLC in Delaware is a good idea Delaware is well-reputed for being one of the most business-friendly states, with no sales tax. But individual income taxes and annual income taxes still apply. Delaware has a fast filing process and low processing time. The Fee for filing LLC in Delaware is only $90! The annual filing fees come in at $300. It’s a bit high, but the privacy protection is worth it in the long run. The laws of Delaware offer increased asset and liability protection for the business owner filing an LLC, which also applies to public filings. Delaware comes out on top regarding lawsuit fairness and legal protections, all thanks to the professionals handling business affairs in the Chancery Court. Should You File an LLC in Your Home State? Now, filing a domestic LLC would be ideal if your business is formed in one of the three states above. If not, it’s in your best interest to file an LLC in one of these three states and come back to register as a foreign LLC in your home state. The only two downsides of the process are the additional paperwork and the extra costs (initial filing fees, annual report fees, etc.). If you’re not feeling like taking care of all the paperwork, consider working with a third-party registered agent service like Nearside.