October 31, 2014

Where Is the Best State to Incorporate Your Business?

What is the best state in which to incorporate your business?

Many questions invariably arise throughout the process of incorporating or forming an LLC for your business. By far, one of the most common questions is…where? And more often than not, the question is framed as, “Should I incorporate in Delaware or Nevada?”

These two states are hot choices for incorporation, and for good reason. Many larger corporations choose Delaware because it offers some of the most developed, flexible and pro-business statutes in the country. And Nevada is increasingly becoming a popular choice for businesses due to its low filing fees, as well as the lack of state corporate income, franchise and personal income taxes.

Nevada map

However, as a general rule of thumb, if your corporation or LLC will have fewer than five shareholders or members (a condition which applies to the bulk of small businesses), it’s best to incorporate or form an LLC in the state where your business has a physical presence. This means the state where your business is physically located, where any property owned is located, where your employees reside and where the shareholders reside.

In other words, unless your business has a physical office in Delaware or Nevada, it’s much easier and less expensive in the long run to incorporate or form an LLC in your home state.

Here’s one example that highlights the situation. Suppose Susan owns a soap-making business in Maryland and is considering incorporating in Delaware. However, what Susan doesn’t realize is that Maryland has rather strong rules pertaining to bank accounts. As an “out of state” business, she would need to get permission in order to open a business bank account in Maryland (even though she lives right down the road from the bank). And opening a bank account in Delaware won’t be so easy, either, without any kind of physical address in the state.

That’s just one particular (albeit very common) logistical challenge. There are countless other potential hurdles, not to mention added fees.

For example, when a business incorporates “Out of State” (for instance, in Delaware), there may be additional filings and fees in both the state of incorporation as well as the state where the entrepreneur lives and runs the business. These can include:

For the state where a business incorporates:

  • Appointing a Registered Agent in that state
  • Paying filing fees in that state
  • Filing annual reports in that state

And then, for the state of residence (where the business is physically located):

  • Appointing a Registered Agent in this state
  • Paying filing fees in this state
  • Filing annual reports in this state
  • Qualifying as a Foreign Corporation in this state
  • Paying taxes in this state

I can’t overemphasize that last point, as it is a common misconception among many small business owners that I talk to. When you’re just starting out, the tax burden can seem overwhelming. It’s only natural to be concerned about your taxes, and certainly those tax laws in Nevada are incredibly appealing.

However, just because you incorporate your business in Nevada does not mean those are the only state tax laws that apply to your business. While Nevada may not charge state income taxes for your corporation, the state where your business is physically located will come after you for those taxes sooner or later. Adding insult to injury, your tax liability may actually increase because you’re viewed as a foreign entity operating in the state.

Pretty soon, any benefits from incorporating in Delaware or Nevada are diluted when you add in all the extra fees and paperwork of operating out of state. Don’t fall prey to the hype over these business-friendly states. The benefits are really limited to larger businesses (ones with more than five shareholders).

As a small business owner, you’re already contending with enough paperwork and fees as it is. Don’t add more to your workload by trying to operate out of state. In this case, the simplest route of incorporating in your home state turns out to be best.

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Nellie Akalp


Nellie Akalp Nellie Akalp is CEO of CorpNet, her second incorporation filing service based on her strong passion to assist small business owners and entrepreneurs in starting their business. Free guides, advice and videos on small business legal topics are available at her Small Biz Corner.

80 Reactions

  1. It was definitely easiest for me to incorporate in Utah. They let you do most everything online and until I get bigger this will be just fine.

  2. Nellie

    Great article as Delaware and Nevada (for which I currently live) tout the advantages of filing here however they never seem to mention the disadvantages, especially for a small business. On the surface it seems like a great idea as filing fees are low, the tax structure is incredibly inviting until you delve into this and realize all that is involved with the paperwork for Nevada, the taxes as well as the local paperwork for the state in which you live.

    It may cost more in the beginning to file in your own state but in the long run, adding in the time and the taxes, it is much more economical and just plain smart to file where you live.

  3. @Robert – Congrats and I am happy to hear the process was easy for you and you did not run into any glitches; please feel free to reach out with any questions or if I can be of any assistance to you in any way and Good luck with your new company!
    @Suzanne – Thank you so much for reading my post and you are on the money!!!! Reach with any questions at any time and let me know if I can assist in any way!

  4. I organized my LLC in my home state of Indiana, and it was a snap. I could do it all online, and the costs were minimal. And just like Nellie said, I would advise that everyone check out what their state has to offer for small businesses before automatically going out of state.

  5. Thank you for the article. We are an informal partnership right now, but we are starting to see sales and investments increase. So I am sure we could use some advice pretty soon ! Thanks again, b/c I had not thought about the hidden difficulties in incorporating in a different state.

  6. Nellie,

    Thanks for explaining the popularity of companies wanting to incorporate in Nevada, and Delaware.

    I figured it was about the tax benefits, but you went even further into the reasons that some companies do it.

    Of course, you can help those companies do just that, right?

    The Franchise King®

    • It also has to do with filing fees. In Nevada I have to pay about $200 a year, Wyoming it is closer to $100. In California where I live it is $800 per year.

      So if I want to create a company with no presence in CA – I could incorporate in Nevada and have the Nevada company pay me salary. I still have to pay my California Income taxes – but I would avoid the exorbitant California fees. Many people do this when they are contractors and want to have a Corp – To – Corp arrangement with the agency that hires them. The benefits of CTC vs W2 contracting are that I am able to write off my private health insurance (I purchase it through the company) and I can write off remote living expenses beyond the 1 year allowed by per Diem. I can also write off travel expenses for working at a remote job.

      So there are define advantages to having an LLC in another state if you live in an obnoxious state like CA, and don’t plan to have a physical presence (no property or sales in the state you reside).

  7. @Henry – Thank you for reading my post and congrats on your new Indiana entity. Feel free to reach out with any questions or if I can help you out with your new business in any way!
    @Todd – It’s my pleasure. Let me know if I can help out in any way when you’re ready to take the next step in legalizing your partnership; generally partnerships consider placing their partnership into an LLC when ready to take the next step; I would love to assist you in forming the LLC for you when and if you decided to go that route.
    @Joel – HI Joel! How are you my friend?…You are absolutely correct, I can absolutely help :)

    xo
    Nellie

  8. Nellie Akalp: I see from your Twitter profile that @CorpNetNellie is located in Westlake Village, CA. How is it to incorporate a business in California?

  9. @Martin: That is correct! Its super easy to incorporate a business in CA. Where are you located? And how can I help?

    • Hi Nelly,
      I am in process of forming an LLC with my 2 brothers (one lives in Atlanta and one in Singapore) for software related consulting and training business.
      After reading your article, we have abandon the idea of leveraging Delaware or Nevada. As we have residencies in NY,NJ and Georgia, which state would you recommend for us to register and operate an LLC which is less than 5 share holders and just getting started. Thanks

  10. I see you’ve covered the paperwork and taxes component, but why did you ignore the asset protection aspect? This makes your argument for filing in your home state incomplete, yes?

  11. @Pete – thanks for reading and commenting on my post! I have covered asset protection in a few other posts for Small Biz trends, so wanted to add some fresh content. You are very right though that asset protection is very important aspect of filing a Corporation or LLC. Thanks again for your comment and if I can ever assist in any way, do touch base! – Nellie

  12. But what about privacy? I do not like the idea of someone looking up my name in a State’s Division of Corporations and finding out my business. If I run a business from my home, then everyone in the world will know this. Delaware and Nevada, I believe, are private. Are there any others?

  13. @Sher – I understand your concern however, if you file in a state other than the state where the business is located; you will be forced to foreign qualify your business in the state where you are transacting business and hence now subject to two states laws and regs…Here’s a quick video about the topic: http://www.youtube.com/corpnet#p/u/3/0SSZQV9Buog

  14. Hi Nelly,
    I am a non US resident from Sri Lanka. Recently I have come up with a requirement to set up a company in a foreign soil, due to the fact that my buyers in sri lanka want to invoice them directly in USD. So I thought of forming a LLC in Delaware after some research. But however there are still some questions unanswered.

    01 Can I use the registered agent address as business address to open the bank accounts ?
    02 Can I provide communication address as my local address in Sri Lanka for the bank account / my cousin’s address in Maryland (where he is a US resident) ?
    03 Can I use my cousin’s address in Maryland for my company letterheads and invoices after forming the company ?

    Please note that my company will not do business inside US , and 100% international business.

  15. Hi Padmanath –

    Here are answers to your questions above:

    01 Can I use the registered agent address as business address to open the bank accounts ? No, the bank will not allow you to use the RA address as the biz address for the corp/LLC
    02 Can I provide communication address as my local address in Sri Lanka for the bank account / my cousin’s address in Maryland (where he is a US resident) ? I do not see this as a problemJ
    03 Can I use my cousin’s address in Maryland for my company letterheads and invoices after forming the company ? As long as it is ok with your cousin

    – Nellie

  16. Dear Nelly,
    01 What would be your suggestion for the business address ? to use an additional address in Delaware state provided by the registered agent?/ To use my cousin’s Maryland Address ?/ my home address in Sri Lanka ?

    02 Since I will be a non US resident, will I have to file the annual report for the Delaware LLC/ just pay the flat annual tax due by June ?

    03 I have a partnership in Sri Lanka for my business, but going to open a single member LLC in US for the same operation. Do i have to reveal the local partnership details to form the Delaware LLC / can I directly open the fresh LLC and still qualify for the flat annual tax rate due by June ?

    Thanks a lot for your previous answers :)

  17. Hi Padmanath – Unfortunately I cannot give you legal advice so cannot answer your questions in detail. However, I can tell you that generally all all DE LLC’s are required to file annual reports in an annual basis for their LLC.
    Hope that helps!
    -Nellie

  18. Wonderful Article Nellie. Is it better to incorporate in Wyoming than Nevada or Delaware? Thanks!

  19. Thanks Jason for your kinds works and for reading my article Incorporating in Delaware. Forming a Nevada LLC, or Incorporating in Wyoming may make sense for large corporations or some small business owners concerned about “hiding assets.” For most small business owners, however, incorporating in your Home State usually makes the most sense…Please look at this link for more info and view my video: http://www.corpnet.com/incorporate/where-to-incorporate/ and then reach out to me if you are still unclear. – Nellie

  20. Nellie,
    Good article and some valuable information. My question is similar however, circumstances are different. I am transitioning from Georgia where I have my primary residence. Unfortunately, the economy is not favorable for a sell of our home so we are leasing it out. I am in New Mexico working on Govt Contract but want to become my own LLC, possibly to California. Where should I incorporate in this scenario if I need to get started (while still employed). Thanks… keep up the good work?

  21. Hi Jeff – Where will you be residing and where will your principal place of business be located? Please provide me with the answers to my questions and I can provide you with some general guidelines as to what the state recommends… Thanks! – Nellie

  22. Hi Nellie,

    Currently, I live in Illinois and will be starting an Internet Marketing Company. I will be working from a virtual office in Chicago.

    Right now, I am trying to figure if I should incorporate in Delaware on Nevada (offer the best protection?). As you know Illinois is not a pro busines state. Also, I will be moving within five years. These are some of the reasons why I am incorporating in Delaware and Nevada

    Given the information above, do you have any suggestions or guidelines that I should follow.

    Thanks,

    Chuck

  23. Hi Chuck –

    Thank you for reading my article! As you may be aware, I cannot provide you with legal advice and providing you with a rec on which state to set up your company within would be considered legal advice.

    That being said, I can offer some guidelines and options for you to consider in coming up with your decision. Both DE and NV are considered favorites in setting up a company; DE will have the greatest anonymity and few filing requirement and reneweal requirements. Also, please note, that if you do ultimately choose to proceed with DE, you may have to foreign qualify the company ion the state of IL if you decide to set up the bank account in IL…let me know if I can assist any further and possible help you in setting up the company or you.

    Thanks!
    Nellie

  24. I already have a couple of corporations in my home state (NC). However, the business that I want to start can’t be done in my state. Peer -to-Peer lending is not legal in NC. I want to purchase loans from one of the companies that do peer-to-peer lending. I think that the only way to get involved is to open a corporation in one of the states where it is legal. Delaware is such a state. Every operational transaction can be done online. I’m still thinking about how to do the banking. Tell me some of the pitfalls that you see in my thinking. Maybe I missed something.

  25. Hi Nellie!
    Interesting article. What about the following scenario?

    I am a US citizen living in Europe and am co-owner of a Swedish based company. For a variety of reasons, we need to have an American company registered (3PL and webshop requirements). I am originally from NC, but have not lived there or maintained a residence there for many years.

    Would not Nevada (or Wyoming?) be the best choice for us? Again, we will be doing business via the web, with our company based in (and paying taxes in) Sweden.

    Frnak

  26. Hi Frank – Thanks so much for reading my post and commenting! I cannot give you specific legal advice for your situation, but you can find more information here about where you should incorporate your new business: http://bit.ly/MB8DwY – Nellie

  27. I am currently weighing the benefits of opening a LLC in Wyoming or Nevada. The main reason is to avoid the tax burden of my state of residence. If all goes well, my annual income would be in the high six figures. I am just starting my research into the overall consequecies of incorporating in Nevada or Wyoming and want to be sure I have accounted for both the pro’s and con’s. It seems that each state tells you why you should choose their state but no one mentions the down side, such as requiring a Register Agent,or how to open a bank account in the state of LLC incorpation that your state of residence can’t tax. Can you provide a website that goes into detail on how to avoid costly mistakes related to these subject matters?

    • Hi Jim –

      Thank you for reading my post and commenting!

      I’d love to help you with your question! Every state does require you to have a RA to form a LLC or incorporate and each state has a variety of other needs to comply with. I’m happy to chat with you about this issue and walk you through your options via my free business consultation.

      Please call : 805.449.2638. Ask for myself or Amanda Beren directly and we will help you out!

      Thanks again, Jim!
      -Nellie Akalp

  28. Delaware hold 50% of the worlds fortune 500 companies. It has some of the best tax treatments towards Corporations and is easy to get a bank account without ever stepping foot in the state. For me Delaware is the obvious answer. I incorporated my first business through this state and am more than happy with the results. The only complaint I have being a Delaware Resident I have to pay State Corporate Income tax as if I resided outside of the state I would not have to pay this.

  29. ran across this durring research where I should form an LLC, I already have a corporation but starting a new small business with a new partner and our problem is, we live in Seattle, however our services take place a few times a year in California and we are paid for those services from a company in Boston.
    So if we license in Seattle we would end up paying B&O tax here even though the work is not performed here.
    any ideas?

    • Hi Richard – Thank you for reading and commenting on my post! :) Generally speaking one should set up the company in the state where the majority of the business will take place, the office is located or the transactions take place. If you have additional questions, please feel free to call my co, Corpnet.com, for a free biz consult! Ask for Amanda and she will help you! 1.888.449.2638 – Nellie

  30. Really helped to clarify options and the hype about Delaware and Nevada. Thanks!

  31. Hi Nellie,

    Great article and great insights. I have a few questions, I hope you can help with.

    Started my own business this year with a friend. We incorporate in NJ, just because that is where we are from. We have operations in Maryland and Pennsylvania. We are looking to continually expand business into multiple states.

    In your opinion, does it make sense to do Nevada or Delaware because we are in multiple states? Or should we re-incorporate to either MD or PA?

    Thanks and I look forward to hearing from you.

    • Thank YOU for reading the post. In response to your inquiry:

      Since your original state of incorporation and the headquarters are in NJ and you will be doing business in other states, generally speaking the process that you have to go by is called a Foreign Qualification whereby you FQ the business in the states that you will be transacting business within…in your case MD and PA. I would be more than happy to assist you the filing process. Please feel free to reach out to personally to Nakalp@corpnet.com and I will see to it that your filing gets taken care of and assist you with any further inquiries you may have.

      I have also written an article on SMBT on this particular subject; here is the link: http://smallbiztrends.com/2012/06/small-business-properly-operate-out-of-state.html

  32. This is the best advise I even seen so far. Wow, you saved me a lot of headaches and money. Everyone is saying come to Nevada, even Armando, the real estate guy is telling all of us to incorporate there and make millions? Well if you have millions, then you would not care. but I see that it make sense to incorporate in your state where you reside. Thanks for the Heads up. Can I call you for help in NY?

    • I am so glad that I was able to help and I am really happy to you get it. You will end up paying more in filing fees if you set up the business in any state other than where you are actually conducting your business. Definitely reach out to me as we can assist you in NY and in any other state. You can reach out to me directly at Nakalp@corpnet.com or simply to info@corpnet.com or can call direct to: 888-449-2638.

      Best of luck and looking forward to assisting you!

  33. Thanks for the information. I am forming an LLC and reside in California but we have a minimum tax rather we make income or not. Should I consider Nevada or Delaware?

    • Hi Mia – Thanks for reading and commenting on my post! I understand about the min tax requirements of a CA LLC, I have a CA LLC myself in CA. Unless you will be conducting business in NV or DE and will have a physical business location in any of those states, you should consider CA as if you file elsewhere, CA law will still apply and you will be required to pay taxes in CA. Feel free to reach out to me at info@corpnet.com for a free business consultation. – Nellie

  34. Nellie – Great post, as always and particularly timely for me. One of the main reasons I always wanted to open my own web-based company was for the ability to be a bit nomadic and be able to retain employment no matter where I lived. However, this question of where and how to incorporate has challenged me. This is a great read as was your article on setting up shop in multiple states.

  35. purshottam parwal

    Hi Nellie,

    what an article. Really loved your article and thorough knowledge you have provided by answering most of the obvious questions of readers.However, my questions are little bit more different:
    1) Currently, I am a US (VA) resident and planning to leave the country in 2 months. I am planning to form an LLC in Nevada due to no tax filing benefit. I am planning to hire a company to do the formation and help me with RA etc. I will be working from my home country. My questions are as follows:- a) Can I work for my company being a non-resident in USA?
    b) I have my personal Bank accounts in VA, Can I use them for my company transactions? If yes, will I be considered as doing business in VA?
    c) Can I open an account in VA for my LLC?
    d) Do you suggest opening the bank accounts in Nevada? If yes how can I open the account for my LLC when I am not a Nevada resident
    e) If I do bank transaction using my personal or LLC bank account in VA, will I be liable to file taxes in VA?

    Please let me know if you need more information

  36. Thanks for the post. I was living in Maryland and had a corporation there, but it was difficult to attract customers and deal with the banks. The banks had no idea about international trade.
    So I moved to New Jersey near New York City and incorporated in New Jersey. It has worked out great, but the idea of incorporating in Delaware always fascinated me. After reading your article, the answer became clear that there is no need for me to incorporate in Delaware.

    • Hi Suraj – Thank you for reading my post and commenting!! Appreciate the support and if you need assistance incorporating any new ventures, feel free to reach out! – Nellie

  37. I have purchased a Corp in nevada, and now have a LLC in Md. how do I merge the two so thatI only have the LLC?

  38. Hi there

    Bumped in to your article while doing my research. I have a web business idea that will hopefully generate revenue solely based on internet advertising. I am talking about google adsense etc. It has no physical presence in any state. I live in Kansas. Wondering about tax issues if I form an LLC in Wyoming/Nevada – will I be required to file in KS still eventhough the LLC won’t have any presence there – other than me living in KS as the sole employee?

    Great post and the whole field of opening a business sounds scary! Hoping things go well.

    Thanks for your time’

    • Hi Sean! Thanks for reading my post and glad you found it informative. Cannot give you tax advice as I am not a tax expert. Generally speaking, even when operating online, one should form an LLC where the member resides; forming the LLC in any other state will not only subject you to those states fees and filing requirements, but also you will be subject to state and tax filings in the state where you reside as well. Reach out to us at info@corpnet.com if we can assist you with any other inquiries or if you would like a free business consultation.

  39. Nathaniel Gardner

    I’m looking at starting a business helping other companies start or increase their exports. I currently work for another company that I travel 100% of the time. My current address is whatever hotel my employer puts me in. I need to start up the export company as a LLC for insurance and legal requirements. Most of the business will transpire by phone, online and/or in the state of my client’s company location. Because of the multi-state transactions and no real physical location, what state should incorporate? The last state I lived in and work was Florida. My son still resides in Florida.

    • Hi Nathaniel –
      Apologies about my late reply to your comment! Unfortunately I cannot advise you as to what would be best to incorporate in. The general rule of thumb is to form the company in the state where the business is physically located in. Please see the Where to Incorporate page of my website to see the upsides and downsides to forming outside the state (http://www.corpnet.com/where-to-incorporate/). Alternatively, Amanda Beren on my team would love to give you a business consultation. Amanda Beren 888.752.0363 Ext. 105.
      Thank you!
      -Nellie

  40. I am in the Houston Texas area. I am trying to start up either a HF

  41. Hi Nellie,

    Firstly, thanks for publishing these articles. I know they obviosuly don’t constitute to be legal advice but they definitely allow us to think about and frame important questions.

    Anyways, in my opinion, the basic take away from your article is this section: “it’s best to incorporate or form an LLC in the state where your business has a physical presence. This means the state where your business is physically located, where any property owned is located, where your employees reside and where the shareholders reside.”

    Having said that, what is your take on a strictly Holding LLC? Firstly, such an entity does not do business with anybody, only invests, maintains stake and receives distributions. Also assume that it does not have a physical presence, just an entity with a mailing address and bank account? In addition, Nevada’s strict privacy laws are always a plus for holding company. Given this scenario, would you agree that for a person(s) resident in CA (love living here but $800/year?!), it makes all the sense to incorporate one’s holding entity in Nevada? If not, what may be some of the downsides?

    Thanks in advance for your response.
    – Supandi

    • Hi Supandi,

      Thank you for reading and commenting on my post!

      Unfortunately I cannot advise you as to what would be the best state to incorporate your holding company in. Please see the Where to Incorporate page of my website to see the upsides and downsides to forming outside the state (http://www.corpnet.com/where-to-incorporate/). Alternatively, Amanda Beren on my team would love to give you a business consultation. Amanda Beren 888.752.0363 Ext. 105.
      Thank you!
      -Nellie

  42. Hi again Nellie!

    Another related question popped up, a clarification actually, that I thought I ask.

    Could you please clarify what “doing business in a state” exactly means?

    I ask this in the context of a couple of scenarios.

    1. In the past, I worked as a software consultant for a small yet niche software services company (incorporated in CA). I don’t recall there ever being more than 10 consultants. However, a consultant could get assigned to a client/project (through a Master Service Agreement + Statement of Work) in any of the 50 US states. And I am pretty sure that the company did not have to “qualify as a foreign corporation” in each state before taking up the project. So, how does this actually work? How does “doing business in a state” in the context of (software) services/consulting work?

    2. Another related scenario is selling software or services through a web-site. Does somebody like SalesForce.com, who offer their software services online, have to get licenses from each state to take on clients from anywhere in the US?

    If you think these are very basic questions that I can find answers in any state or IRS documentation, I would highly appreciate if you could point me to them.

    Regards.
    Supandi

    • Hi Supandi,
      Thank you for reaching out again. You have some really good questions. Doing business in other state means that the business either has a physical location in multiple states or that the business has employees on its payroll that are residents of other states. Just because a business “does business” in other states does not necessarily mean they need to foreign qualify there. It all boils down to state taxes. If the business is doing something that would require state taxes to be paid (i.e. paying employees, collecting sales tax) then most likely the business would need to be qualified to operate in that state. Hopefully this helps. If you would like to contact my office, Amanda Beren at Ext. 105 would be happy to explain more in depth.
      Thanks!
      -Nellie

  43. Hello,

    Id like to start by saying Iv run 3 successful businesses. So I agree for the most part with this article- but some key issues have been missed like some states will keep your records “non-public” this is important to a lot of people. I for one am not interested in solicitors or snoopy folks peeking into my personal informaion- how would you feel if they were to make banking public ? so people could see where you bank and also see how often ?

    DId you know some people think it doesnt matter where you get married? (you could loose everything or loose nothing) it does if you need a divorce ! State laws are very important !

    I do know that there are foreign fees involved but that small fee that most states charge might be minimal in the bigger picture also remember 90% of all big names are incorporated in one of 4 states – with all their high powered attorneys and CPA’s dont you think if it made no difference they would want to save that small “foreign Corporation fee”, but nope they pay the fee and goto those states… there is more involved here (legal state business laws) than one would think. Be careful

    Anee

  44. Nellie-
    We are a technology solutions and services company servicing clients across multiple states in the US. Until now all our contracts were written with our off-shore entity directly. We are now planning to incorporate in the US. We will have sellers in various states- CA, NJ, GA, TX to name a few. However, all the delivery would be from offshore locations.

    In such circumstances, where should we incorporate and do we have to file taxes in multiple states if all payments are being received in the state of incorporation?

    • Hi Raj,
      Thank you for reading my post and commenting.

      Generally, the corporation is formed where the business is physically located. Depending on the specific business and how it is operating in each state the business may have to foreign qualify in all the states that sales are being made. I’d love to to discuss these different circumstance. Please give me a call directly so I can get more information. 888.752.0363

      Thank you!
      -Nellie

  45. Hi Nellie, thanks for taking the time to answer questions on this site.

    I’ll be moving to Minnesota from Canada shortly (through marriage). My Canadian employer wants to retain my services (my field is internet-based so I can work remotely), but because of all the hoops and hassles involved with foreign employees, we think it’s probably better to have me set up a US business and simply invoice them. I also do some freelance work with a handful of clients who would likely want me to continue the ongoing work I do for them. In total we’re talking $50-$100K annually.

    There are a few factors that make my situation a little different than most…

    1) My wife-to-be makes more than enough for us to live on. My income isn’t required for day-to-day expenses.
    2) My business dealings would all be with out-of-country entities – no business would be done in the state where I actually reside.

    My thinking is that by creating an LLC and having it taxed as a corporation in a more tax-friendly state such as Nevada, this income could basically stay inside the company and subject to a lower tax rate. These “savings” could then be used for larger purchases (vehicles, property, etc.), which would be owned by the business.

    Does this make any sense? Or would it be more hassle and cost than it’s worth, and instead go with the usual in-state sole proprietorship?

    • Hi Jeff! Thank you for reading my post. Unfortunately, I’m not able to give you legal advice, but we see a lot of business owners in your situation lean toward the LLC. An LLC offers liability protection like a corporation does, but it’s much easier to maintain as LLCs do not require annual meetings, stock, etc. If you have any additional questions, please feel free to reach out to my CorpNet.com team at 888-449-2638. -Nellie

  46. Myself and two partners currently operate an online business. We’re in a quandary whether and where we should incorporate. I live in CA, one partner in NJ and one in England. Our actual servers are in Colorado and Pennsylvania. Where do we incorporate?

    Also, while we do some for-profit activity, a large part of our business has been operating websites for community service organizations and we think we might be able to organize that as a non-profit so we could accept donations to operate instead of charging fees. Can you offer any advice?

    • Hi Joyce,

      Thanks for reading and commenting on my post!

      Technically, a business can be filed in any state (even if the owners are not located there), though it’s generally recommended to file your business where you have a physical presence (to avoid having to foreign qualify, additional fees, etc.). Since you have owners in multiple states it sounds like you have quite a few options. As far as what type of business entity to file, I would recommend speaking to an attorney.

      I hope that helps!
      Nellie

  47. I am at the cross roads as to should I do an LLC or Corp.. S or C? I had a C Corp for about 14 years in FL
    Then opened a not for profit corp in FL and am now concerned that there are rules when collecting donations that I cannot find out about from the IRS or an accountant who tried for months to contact the IRS on this situation. I will call Nellie and talk with her tomorrow, any ideas till then?

    • Hi Connie,

      How you structure your business is also up to you, but I can absolutely outline the differences between the entity types for you. The LLC is typically preferred amongst smaller based businesses that only have one or two owners typically prefer the LLC. The LLC offers liability protection, just like a corporation, but it avoids several formalities that corporations face. For example, corporations are required to have regular meetings, stock, shareholders, etc. LLCs tend to be a little simpler, as they do not have these requirement. S-Corporations are sort of like a hybrid between C-Corporations and LLCs. They have all the same formalities as C-Corporations, but they have the pass-through tax status like the LLC.

      Please do call in tomorrow 888.752.0363. I’m not sure my availability as of now, but when you ring please ask directly for Katie Hendrix and she will gladly assist!

      -Nellie

  48. Hello, I am foreigner trying to open a trade business in USA. I am going to start doing business in California, but eventually will be doing business in Maryland, New York, Texas and Florida. Where do you recomend establish my LLC? Or do I have to open one in every state I do business?

    Gerardo.

    • Hi Gerardo,

      Generally it is required to file foreign qualifications when a company will be doing business in multiple states. The LLC will be filed in a particular state first (it’s home state) and then once it’s ready to expand, it will file foreign qualifications in the other state to also be qualified to do business there. As far as where to first register the LLC, it is ultimately up to you. The state of Delaware is particularly popular for business owners outside the United States for tax and privacy reasons.

      -Nellie

  49. Hi Nellie,

    Thank you for the very informative article. I noticed it was written a few years ago and since things tend to change, I have a question. I”m willing to move at least for most of the year to any state that has a very law or no tax laws and where my company may be protected.
    My line of business is mostly online service oriented, so my clients will be paying mostly by credit cards and checks. I may have some independent sales or referral agents in different states, but he clients will make payment directly to us. With that said, how hurt would I be if i leave a state like NY or NY to someone whee like FL, DL, NV or SD?

    Thanks again for your article and answers.

    Ray

    • Hi Ray,

      Unfortunately, I cannot advise as to how this would impact your business. However the general rule of thumb is that the business is filed in the state where the business is physically located, even for online companies like CorpNet.com. Most states make it very difficult for business owners to operate business if organized outside the home state. If you’d like to chat more or have other questions, feel free to g’ve us a call for a Free Business Consultation at 888.329.1141 and ask to speak directly with Amanda Beren.

      Thanks!
      -Nellie

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