Best State to Form an LLC? - Form an LLC (4/11)
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It's best to form your LLC in your home state.
The disadvantages of forming an LLC outside of your home state far outweigh the perceived "advantages".
[=================================]
-- DOMESTIC LLC vs. FOREIGN LLC --
If you form an LLC in the state where you reside (aka your "home state"), this is known as a Domestic LLC.
If you form an LLC outside of your home state, you'll be required to register that out-of-state LLC as a Foreign LLC in your home state.
For example, if you form an LLC in Nevada (but you don't live there), then you'll be required to register that Nevada LLC in your home state (as a Foreign LLC) in order to do business in your home state.
This means:
- you now have 2 LLCs (one in Nevada and one in your home state)
- you have to pay 2 State filing fees
- you will be required to pay for a Registered Agent in order to use their address for your Nevada LLC
- You have to pay 2 Annual Report fees
(Note: we used Nevada above as an example, but the same applies to any out-of-state LLC.)
In short, this can easily add up to DOUBLE the cost and DOUBLE the headaches since you have to maintain 2 LLCs.
Now, we know the reason that most people become interested in Nevada LLCs is because they think they are going to save money on taxes.
[=================================]
-- TAXES ARE PAID WHERE MONEY IS MADE --
Many people are misled into forming LLCs in other States to take advantage of "tax savings".
This is simply not true.
In this example, if you formed a Nevada LLC and that LLC is doing business in your home state (not in Nevada), you'll still need to pay taxes in your home state because that is where you are making money.
A helpful saying to remember is:
"Taxes are paid where money is made."
Again, your Foreign LLC will need to pay taxes in your home state since that is where you are operating and doing business.
Even worse, you may owe additional taxes and fees in Nevada.
So why do so many websites talk about Nevada?
Great question.
[=================================]
-- NEVADA --
Again, most of the benefits of forming an LLC outside your "home state" are a far stretch from the truth.
Both the states themselves and the companies promoting those states stand to gain financially by LLCs being created within THAT state's borders.
For example, if 40,000 LLCs are formed each year in Nevada, that's approximately $3 million dollars in annual revenue for the state.
And that is just for the state of Nevada alone.
It doesn't include the tens of millions of dollars made by the companies promoting Nevada as "the" place to form your LLC.
The funny thing is, compared to how much Nevada is "hyped up", there really aren't that many LLCs formed there each year.
There are far more LLCs formed states that aren't "hyped-up".
Furthermore, Nevada companies rank the highest in fraudulent activity.
Look - don't get us wrong, if you live in Nevada and you're forming your LLC in Nevada, there is nothing wrong with that.
But if you don't live in Nevada, again, it is much better to form your LLC in your home state.
So what about Wyoming?
[=================================]
More videos at: http://llcuniversity.com
[=================================]
It's best to form your LLC in your home state.
The disadvantages of forming an LLC outside of your home state far outweigh the perceived "advantages".
[=================================]
-- DOMESTIC LLC vs. FOREIGN LLC --
If you form an LLC in the state where you reside (aka your "home state"), this is known as a Domestic LLC.
If you form an LLC outside of your home state, you'll be required to register that out-of-state LLC as a Foreign LLC in your home state.
For example, if you form an LLC in Nevada (but you don't live there), then you'll be required to register that Nevada LLC in your home state (as a Foreign LLC) in order to do business in your home state.
This means:
- you now have 2 LLCs (one in Nevada and one in your home state)
- you have to pay 2 State filing fees
- you will be required to pay for a Registered Agent in order to use their address for your Nevada LLC
- You have to pay 2 Annual Report fees
(Note: we used Nevada above as an example, but the same applies to any out-of-state LLC.)
In short, this can easily add up to DOUBLE the cost and DOUBLE the headaches since you have to maintain 2 LLCs.
Now, we know the reason that most people become interested in Nevada LLCs is because they think they are going to save money on taxes.
[=================================]
-- TAXES ARE PAID WHERE MONEY IS MADE --
Many people are misled into forming LLCs in other States to take advantage of "tax savings".
This is simply not true.
In this example, if you formed a Nevada LLC and that LLC is doing business in your home state (not in Nevada), you'll still need to pay taxes in your home state because that is where you are making money.
A helpful saying to remember is:
"Taxes are paid where money is made."
Again, your Foreign LLC will need to pay taxes in your home state since that is where you are operating and doing business.
Even worse, you may owe additional taxes and fees in Nevada.
So why do so many websites talk about Nevada?
Great question.
[=================================]
-- NEVADA --
Again, most of the benefits of forming an LLC outside your "home state" are a far stretch from the truth.
Both the states themselves and the companies promoting those states stand to gain financially by LLCs being created within THAT state's borders.
For example, if 40,000 LLCs are formed each year in Nevada, that's approximately $3 million dollars in annual revenue for the state.
And that is just for the state of Nevada alone.
It doesn't include the tens of millions of dollars made by the companies promoting Nevada as "the" place to form your LLC.
The funny thing is, compared to how much Nevada is "hyped up", there really aren't that many LLCs formed there each year.
There are far more LLCs formed states that aren't "hyped-up".
Furthermore, Nevada companies rank the highest in fraudulent activity.
Look - don't get us wrong, if you live in Nevada and you're forming your LLC in Nevada, there is nothing wrong with that.
But if you don't live in Nevada, again, it is much better to form your LLC in your home state.
So what about Wyoming?
[=================================]
More videos at: http://llcuniversity.com
[=================================]
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