What’s the Best State to Form Your Company?

There’s a ton of confusing information out there on what is the best state to form your LLC in, and if you’ve gotten here you’ve probably done some research on your own and encountered a sea of information. Delaware, Wyoming, New York, Florida – the options seem endless, and it’s easy to feel overwhelmed.

In this article, we’ll cover:

• what the best state is if you are a US resident vs. a non-resident;

• the pros and cons of choosing different states;

• give you a recommendation on what the best choice is.

For Non-US Residents: Delaware vs. Wyoming

For those residing outside the United States, the good news is that you have the flexibility to form an LLC in any of the 50 states. However, when it comes to making the best choice, Delaware and Wyoming are the most popular choices.

Choosing between Delaware and Wyoming depends on a few things, such as the cost and the level of anonymity they offer. Anonymity is particularly crucial, as certain states make your personal information a part of the public record upon LLC formation.

Both Delaware and Wyoming offer anonymous LLC filings, allowing you to protect your personal information by using the registered agent’s details on the state listing.

Delaware

Delaware has lots of prestige, housing the majority of Fortune 500 companies in the US and being the home to the most LLCs in the US. However, it comes with an annual franchise fee of $300.

Wyoming

On the other hand, Wyoming, often termed the “Swiss Alps of the Rockies,” pioneered the first LLC and offers a proactive legislative environment. This makes it particularly attractive for e-commerce and online businesses. Moreover, Wyoming’s annual fee to the state is a budget-friendly $62.

The bottom line: optimize costs vs. prestige

In short, when you’re starting a business, every dollar matters, so if you’re truly looking to optimize costs you can’t go wrong with Wyoming as a non-US resident. However, if prestige does matter and saying you have a Delaware LLC can make a difference in your business, then you can form an LLC in Delaware.

For US Residents: Should You Form an LLC in Your Home State?

Contrary to the choices available to non-US residents, US residents are advised to form their LLC in the state where they physically reside. The reason behind this is straightforward – your home state is, by default, the state where you conduct business.

Two states = double the tax

Opting to form an LLC in a state other than your residence can lead to a financial disadvantage. For instance, if you reside in New York City but decide to form an LLC in Delaware, you end up paying fees in both states – the annual Delaware franchise tax and the state fee in New York.

If your business operations extend beyond your home state, you can file for what’s called a “foreign qualification,” which effectively allows your LLC to do business in that state.

Overview

In summary, for non-US residents, Delaware and Wyoming are top picks, with Wyoming being more cost-effective.

US residents, however, are encouraged to form their LLC in their home state to avoid unnecessary fees, and they can also file for a foreign qualification to be compliant to do business in other states.

Whether you’re filing in Wyoming, Delaware, or any other state, always check for the option of anonymous filings to protect your privacy.

Ultimately, the decision depends on your specific business needs and circumstances. After all, when starting a business, every dollar matters, and making informed choices can set you on the path to success.

Get Started With doola

Your success is doola’s success, and we’re here to support you every step of the way.

If you have any lingering questions or need more guidance, feel free to reach out – we’re committed to helping you form your company and stay compliant in the easiest way possible, so you can focus on building your business.

Thank you for joining us on this exciting mission to empower founders worldwide. Let’s turn dreams into successful businesses together!