In Which State Should I Form my LLC?
By Kimberly Burton
updated on August 8, 2002 An LLC is relatively simple entity to file and has a lot of advantages. Learn which states are recommended for LLC formation and consider the benefits of forming an LLC in your home state.
One of the big benefits of forming an LLC is its flexibility that the LLC structure has as a business entity. You get to choose whether you want to be managed and taxed as a partnership (member-managed LLC) or as a corporation (manager-managed LLC – C Corp).
Where should I file?
While you can file in any state you wish, bear in mind the extra fees and paperwork required when you file outside the state that you do business. Even if you are a freelance writer with clients around the world, you are going to be taxed in the place where you are doing business. Even if you travel a lot, pick a state where you live or have the most connection – where you own a house, where you have your driver’s license, or where you pay your state taxes. If your business is more complicated and you have offices in two states, pick one for the LLC and use the other one as a foreign LLC.
Does my LLC have to be in the state I live in?
No, but that is most often the clear choice. If you do business in one state or have a physical address or store, filing in the state you reside in has advantages. Filing out of state requires a registered agent as well as filing as a “foreign LLC” for each state you do business in. It often saves a lot of money to file in your state of residence. However, if you do not have a physical facility or storefront or are planning on conducting most of your business out of state, you can explore filing an LLC in another state.
Best LLC filing services
#1. ZenBusiness
fast & affordable worry free business formation
Pros & Cons
You can register your LLC with ZenBusiness for $0 (+State fees). Their starter package will cover the following: Standard Filing Speed, 100% Accuracy Guarantee (As they state on their site). However, it will not cover all the essentials for your business. The pro package will cover all the essentials to launch your business but we found it a bit pricy at $199 (+state fees).
#2. SwyftFilings
Offers top LLC filing speed
Pros & Cons
You can register your LLC or corporation with SwyftFIling in less than 10 minutes. The standard package includes everything you need to launch your business including: Verify Company Name Availability, Preparation of Articles of Organization, Document Filing with Secretary of State, Online Access to Your Incorporation Documents, Lifetime Customer Support (Phone & Email), Free 30 Minute Business Tax Consultation, ComplianceGuard™ Company Alerts, Free Domain Name, Custom LLC Operating Agreement, Custom LLC Banking Resolution and more.
#3. IncFile
Award-winning LLC formation service
Pros & Cons
You can register your LLC or corporation with IncFile for free (+State fees). The free package will not cover all the essentials for your business, but it includes; Preparing & Filing of the Articles of Organization, Unlimited Name Searches and FREE Registered Agent Service for a year.
Domestic LLC vs. Foreign LLC
A domestic LLC means you file in your state of residence and you do business mainly in that state. This is the most common and cost-effective scenario. A foreign LLC is used when you have filed papers in one state, and you have a physical facility or storefront in another state. In order to do business in that second state, you need to file a foreign LLC. Foreign LLCs tend to cost more and require a registered agent. Conversely, if you file for an LLC in another state for some reason, and you do business in your home state, you will have to file a foreign LLC in your home state in order to do business there.
Tax Implications
Taxes are paid where money is made. It doesn’t matter if you file your LLC in Delaware or Texas, if you are doing business in your home state then taxes and state fees will be paid in your home state. Check out our Best LLC formation services list for our recommended LLC formation services. The top services will guide you through the LLC filing process and they support the LLC filing process in all 50 states.