1. How to Choose Which State to Register In
2. LLC Registration in Non-Resident State Disadvantages

Where to register an LLC should be the first item on your agenda before registering your business as an LLC. While there isn’t a lot of work involved when registering your LLC, you’ll still need to determine where to register, as some states provide added benefits over other states. Furthermore, some states have additional requirements for LLCs, i.e., publishing a notice of intent in your local newspaper. Either way, you’ll have to determine whether you want to register your LLC in the state where you live or in another state.

How to Choose Which State to Register In

Some states provide financial advantages over others, and such benefits might be important for you and your business. However, other new business owners simply choose to register in the state where they live, since they feel as though there is less hassle involved, and the owner can act as his or her own registered agent. In fact, some people choose to register in the state where they reside.

If you own a boutique clothing store in your hometown and conduct a majority of your business within the state where you reside, then registering your LLC where you live makes the most sense. However, if your store is located where you live but you do a lot of business in another state, then you might want to register your LLC in that other state, at which point you will also have to form a foreign LLC in the state where you reside.

Before registering your LLC, you should ask yourself these questions:

  1. What state do you live in?
  2. Where will your employees be located?
  3. Where do you want to pay state taxes?
  4. If you intend on owning property, where will it be located?
  5. If you have more than one office, where are they all located?
  6. Do you work primarily from home?
  7. Where is your principal office located?
  8. Where do the other LLC members live?
  9. Where will you conduct the most business?

If you form an LLC in the state you live in, it will be referred to as a domestic LLC. If you form an LLC outside the state where you reside, then you’ll have to register as a foreign LLC in that state.

If you are unsure as to which avenue to go down, it could be helpful to write down a list of the pros and cons of forming your LLC where you live. Keep in mind that there are certain states, such as Delaware, Wyoming, and Nevada, that offer favorable business laws. Therefore, if you don’t live in any of these states, you should take a look at the advantages of forming an LLC in those states before registering in the state where you live. With that said, there are some disadvantages too.

LLC Registration in Non-Resident State Disadvantages

Forming an LLC outside of the state you live in will undoubtedly cause you additional time and money. Some of these disadvantages include the following:

  1. Forming an LLC outside of your state requires you to file a foreign qualification in your registered state, which will permit you to do business in other states.
  2. If you establish a Nevada LLC but don’t live there, you’ll have to register your business as a foreign LLC where you live in order to conduct business in your state. Therefore, you’ll have two LLCs – twice the cost, twice the paperwork, twice the time.
  3. While you might think you can save on taxes by forming a business in one of the tax-friendly states, you’ll still have to pay taxes on any business profits. Furthermore, if you have to register as a foreign LLC in the state where you reside, you might also be required to pay taxes in that state even though a majority of your business is being conducted in a state where you don’t live.

Regarding the last point, if you transact business in any way in the state where you reside, then you will be required to pay additional taxes in that state, along with the state in which you register your LLC. An example of “transacting business” includes leasing office space or hiring employees in the state where you reside.

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