How to Form an LLC in a Different State
Audio Transcription
Forming an LLC in a different state? America’s number one business coach will walk you though the process and reveal the best states to form an LLC.
SHOW NOTES:
1. You do have a choice – Many people form LLCs in their home state because it’s the most obvious choice, or they didn’t know they had a choice.
2. You must meet the state requirements – Filing in your home state can be a good option for many entrepreneurs, particularly those who have a home, physical office or store, and conduct the vast majority or all of their business in their home state. If your business meets all of these criteria, you may have no other choice but to file in your home state.
3. You must understand if you meet the state guidelines for “doing business” – Moreover, filing in your home state could save you money on fees at the outset as well as annually—an LLC does not have to register as a “foreign LLC” if it conducts business in that state. Note, though, that “doing business” generally requires an active business presence if not a physical office. Also, an LLC that does business in its state of filing does not need to find and pay a registered agent to represent its interests within that state. However, it’s important to consider the fees and state income taxes your business may be required to pay if you file in your home state.
4. Consultants and Non-Storefront Businesses Are Ideal – For that reason, if your business has no physical facility or storefront—a consulting business, for example—or if you plan on conducting the majority of your business out of state, you should consider starting an LLC in a state other than your home state.
5. Delaware LLC – The most popular choice for those forming an LLC continues to be Delaware. Why? Delaware has a solid reputation as one of the most business-friendly jurisdictions in the country. Notably, Delaware doesn’t tax out-of-state income, which can mean an enormous tax savings for Delaware LLCs who do very little or no business in the state itself. In addition, its initial filing fees and franchise taxes are quite low.
6. Nevada LLC – As its own pro-business reputation rises, Nevada is a state with advantages for LLCs. Business owners especially appreciate that Nevada doesn’t tax business income, capital gains, or inheritance. In addition, it has no franchise taxes (although it does have nominal business license and annual fees). Moreover, Nevada doesn’t require annual meetings or operating agreements in order to stay compliant with state law.
7. Wyoming LLC Although not as well-known as Delaware and Nevada in the world of LLC formation, Wyoming is gaining ground fast. Similar to Nevada, Wyoming does not have business income or franchise taxes. It also has a “lifetime proxy,” which allows even more anonymity than Nevada, in a sense. Through this proxy, an individual can privately express his or her vote through a selected person who holds the stock or shares.
Welcome into the man-cave. It’s a Thrive Time Podcast. Josh Merrill here with business coach, Clay Clark. Clay, what are we talking about today on the podcast. Well we have a thriver who asks the question that I think a lot of people want to know. He says, “Hey. How do you form an LLC in a different state? Can I form an LLC in a different state?” He has a lot of different questions about this. We’re going to go ahead and go straight to the mailbag and read you his specific questions. But if you’ve ever wanted to form an LLC in a different state or wanted to know if you could do it, we’re going to be talking you through it. This is from Shane. Shane says, “Hey. I have a question. If you form an LLC, do you have to reside in the state in it is formed?” Great question. Well, not to be political, we can’t give you a straight answer. I’m going to go ahead and walk you through the 7 factors that you want to think about. The 7 factors to marinate on before you make this decision.
So, one, you do have a choice. Yes you do have a choice. Many people form an LLC in their home states because it’s the most obvious choice or because they think they don’t have a choice. But you actually do have a choice in many cases. So what i’m going to do here, Josh, is I’m going to have you read a definition of what a limited liability company is. That way anybody who is not aware of a limited liability company, an LLC is will at least all be kind of coached up to that same level of learning. Just call me the definition magician. “A limited liability company, an LLC, is a limited structure where by the members of the company cannot be held personally reliable for the company’s debt or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation, a partnership or a sole proprietorship.” So I’m going to try and break that down. So let’s go again here. So it says “A limited liability company is a corporate structure.” So it’s how you organize the company. “Where the members of the company.” That would be you, Shane. “Cannot be held personally liable.” So you screw something up, they can’t take your stuff. That’s basically what it is. So limited liabilities are essentially a hybrid entity that combine the ciharacterteristics of a corporation, like a big corporation, with a partnership. You definitely need to form one of these to protect yourself. You got to check yourself, before you wreck yourself.
Now number two here, this is kind of factor number 2. You must meet the states requirements. Filing in your home state could be a good option for many entrepreneurs, particularly if you have a home or physical office, or a store or you conduct a vast majority of your business in your home state, than that might be something to think about, But if your business meets all these criteria, you may have no other choice but to file in your home state. So work with me here. If you do a ton of work in your state. You know for Thrive15.com, we actually have more people not in Oklahoma, than we have in Oklahoma. So for us, hypothetically, we could be registered in any state we wanted to be. Why are we registered in Oklahoma? I like the laws here, my attorney is here, it made sense for me, but could we have set up in a different state? Absolutely. Now which state? We’ll get into it. But before we do that, we have a fun factoid for you because there is actually a major company, there’s major companies that have realized that we can set up in any country. We don’t have to set up in any state, we could be in any country. However, if you do it wrong, that’s a bad deal for you. So we’re just being careful here. Shane, hypothetically if you’re going to move a multi billion dollar company, you might want to make sure that you do the research first. But, Josh, can you read us our fun factoid? I’ve got a fun factoid here, Facebook disclosed on Thursday that it could owe billions due to an IRS investigation into the way that it moved assets into an IRS subsidiary to avoid higher taxes. The IRS tax penalty could total 3 billion to 5 billion dollars, plus interest according to a Facebook filing with the securities and exchange commission. If so, Facebook says the penalty could have a material adverse impact on its’ financial position. The tax issue was first disclosed publicly 3 weeks ago when the U.S. justice filed a lawsuit forcing Facebook to comply with the ongoing IRS investigation. No figures were provided at the time for possible penalties. The investigation dates back to 2010 when Facebook shifted it’s rights for its’ world wide business excluding the U.S. and Canada to Facebook Ireland as part of a complex maneuver to reduce its’ tax payments. Wow. So any way all I’m saying is that people do this all the time. Big companies do this all the time. Yes it is possible to operate internationally, it’s possible to operate in a different state, but you just want to know what you’re doing. But yes. The answer Shane is yes. You can open an LLC in a state that’s different than the state in which you reside.
Josh, can you read off step number 3? Step number 3 from the business coach is, you must understand if you meet the states guidelines for doing business. So more over when you’re filing in your home state, it could save you money on fees because on the offset, when you’re setting up in a different state, there’s all sorts of foreign LLC fees that many states charge. So let’s say your company was founded in Oklahoma, but you want to do business in a different state, you can do that, but a lot of times states will charge you a foreign LLC fee. Also, an LLC that does business in its’ state of filing does not find and a pay a registered agent to represent its’ interest within that state. However, if that’s not the case, say you’re in a different state, you’ve got to go out there and find an agent to represent you in that state and that does cost money. So it’s very important that you consider the fees, and the state income taxes your business may be required to pay if you file in your home state or a different state. Just think about it. Which state is going to charge you the most taxes and which ones are you even eligible to be in, to able to operate in.
Josh, let’s move on to step number 4. Number 4 from the business coach is, consultants and non store front businesses are ideal. Yeah, so if you own a business, like Thrive15.com where it’s online, all over the planet, that’s probably ideal to have your business in a different state if you wanted it to be. But really, I don’t want to just give you vague ideas. The best thing you want to do is you want to talk to an attorney that’s going to help you figure out which state is right for you. And the company that I personally use is called Winters and King. They represent some major major people like the famous televangelist, they represent Joyce Myers, they represent some mega mega people and jerks like me. You can give them a call or you can visit them online at Wintersking.com. Their phone number is 918-494-6868. They’ll walk you through all of the intricacies of filing and getting set up in the right state. it’s very very important that you don’t just jump into this without really thinking about it. Making the right decision for you and your business, both short term and long term.
Number 5 from the business coach is, Delaware LLC. The most popular choice for those forming an LLC continues to be Delaware. Well, why? Delaware has a very very solid reputation as being one of the most friendly jurisdictions in the country for business. So there’s some states where if you do something weird as a business owner, or you make a mistake or you make an accident, they almost rule in favor of the person suing you, but in Delaware, they almost always protect the company and to really make sure that they are a very friendly business state. So notably, Delaware as an example doesn’t tax out of state income. Which can be an enormous tax savings for Delaware LLC’s who do very little or no business within the state itself. In addition, it’s initial filing fees and state taxes are very very super super low.
Number 6 from the business coach is, Nevada LLC. As it’s own pro business reputation rises, Nevada is a state with advantages for an LLC. So as an example, business owners who are looking at different states, they really appreciate that Nevada doesn’t tax business income. So you can go there and you’re not paying business income tax. How cool is that? Now also, there’s no capital gains or inheritance. In addition, it has no franchise tickets. So there’s a lot of businesses moving there to the Nevada area. They absolutely love it out there. Nevada doesn’t require annual meetings or operating agreements in order to stay compliant with the state law. So Nevada is very super business friendly. It is the place to be if you’re trying to set up your LLC in a place with a lot of freedom.
Number 7 from the business coach is, Wyoming LLC. Although, not as well known as Delaware or Nevada in the world of LLC formation, Wyoming is gaining ground fast. Wyoming has decided that they’re not going to give you guys any business income or franchise taxes. “On behalf of the state of Wyoming, we’re already known for such things as. And now we’re going to be known for not having things such as business income and franchise taxes too.” I think Delaware did that too. The Delaware tourism committee, “Well, guys, what do you think we should be known for?” “Well we’re already known for sap. Let’s throw in some great LLC advantages too.” You’re going to start seeing on the license plates, “Come to Wyoming. The state known for not having business income or franchise taxes.” These are states that are trying to get businesses to come to them by setting up these very pro business tax laws and systems and things to make it very pro business friendly. Either way, no matter what you decide to do here, it’s super important that you know what you’re doing and you work with a lawyer who can help you. I recommend going to wintersking.com. That’s who I use and their phone number is 918-494-6868. Ask for Mr. Wes Carter. He is my attorney. He should be yours too. Okay, I’ve got a question for you. If there was a place online that could train us and teach us all about how to do everything that we have ever wanted to know about an LLC, where would that be? Thrive15.com, my friend. It is the worlds best business education platform. The worlds best business coaching platform, the worlds best business school. Now I’m going to tell you what you can find on there, Josh. You have access to thousands of the worlds best business trainings and training videos, you have proven templates, you have downloadable, and exclusive access to in person workshops and you can click the “Ask us anything” button. as our main man and thrive just did. And who know, we might turn it into a podcast. Either way, it is going to be a life changer and a game changer for you. It is thrive15.com. Hey, if you want to rule the world, get on thrive15.com. We’ll help you. We can all rule the world together, with Tears For Fears by our side. Thanks for listening to the Thrive Time Podcast. Thrive on. We’ll see you next time.
