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  1. #1
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    Lightbulb What's the best state to form an LLC?

    Where are some of the best states to form an LLC in the US?

    I reside in California, here you must pay an annual $800.00 tax, I've heard that some other states are lower or even do not have a LLC franchise tax. As you can imagine I want to avoid this ridiculously high tax.

    If I'm not mistaken, anyone can form an LLC in any state of their liking. Is that right?

    Appreciate any advice. Thanks..

  2. #2
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    Quote Originally Posted by web2k6 View Post
    If I'm not mistaken, anyone can form an LLC in any state of their liking. Is that right?.
    Yes and no. In order to register an LLC you must have a physical presence in that state, meaning no PO boxes or anything of that sort. So if you do not reside in the state where you wish to form your LLC, you're going have to pay a Registered Agent fee. When I was doing research, it's generally $100+ per year.

    Also make sure you do your research on foreign LLCs for CA. When I was looking, it was cheaper to form in Delaware and have a few tax breaks. But if I wanted a bank account here, I would have to pay a very large foreign corporation fee, which pretty much negated all of the breaks and everything else.

    So be sure to take things into consideration like that as well, I'm sure it will vary greatly depending on the state(s) you choose, but just be careful with things like that. Sometimes lawyers or accountants will you give free advice on things like that, so try hitting them up as well. And as always, when in doubt, consult a lawyer/accountant for things like this.

  3. #3
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    California will make you pay $800 even for LLC you formed outside of California - this is fee for permission to do business in California (check State website) - so, if you don't want to pay double tax (CA and other state) - you either should form LLC in California alone or do your business in other state (e.g. Nevada) and live here as well.

    ALL States have franchise tax - in one way or another (some states call it "Annual Business Registration")

  4. #4
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    We opted to form our LLC in the state of New Hampshire. We do not live there but paid LegalZoom a $100-200 fee for an active resident in that state to represent us.

    We chose NH because they have no sale tax and only take income tax when we pay ourselves. I'm not sure of all the legal fine print but wanted to letyou know how we chose to operate our business.

  5. #5
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    Legalzoom can incorporate you anywhere - but I would HIGHLY advise to talk to CPA in order to get advise, otherwise you will end-up to paying both states (your home state and other state).

  6. #6
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    Thanks for the advice. I never thought of double taxation. Guess I need a CPA.

    I'm interested to find out why some people opt for other states, like redcoat. Or is California one of the states that imposes this double tax. ugh, impatient me...

  7. #7
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    Some peoples have strange belives like they can get away with incorporating in another state to avoid local state tax - but, sooner or later your State Tax Board will contact you say "Why you haven't pay the Franchise Tax in our state ? Right now you own us for all previous years + hefty penalty" - Is this what you looking for ?

  8. #8
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    My sugestion is Nevada
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  9. #9
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    The state in which you operate in.
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  10. #10
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    yes, but also because of all the tax brakets
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  11. #11
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    Most people say Delaware is the best since it's "tax free" but with all of the costs of everything and all the little stupid who-not's that come with forming an LLC, I don't think that's even the best case anymore.

    I guess anywhere you're screwed with ridiculous costs.

  12. #12
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    Quote Originally Posted by Trophimus View Post
    Most people say Delaware is the best since it's "tax free" but with all of the costs of everything and all the little stupid who-not's that come with forming an LLC, I don't think that's even the best case anymore.

    I guess anywhere you're screwed with ridiculous costs.
    No, they say nevada since the legal system is geared toward businesses... You still have to pay your state fees after you file the "DBA" in your state (in my case at least). Not "just about costs." Although, I generally agree it is best to do it in your own state, there can be some benefits of forming outside your state and going with a dba, if your business needs that setup.

    OP Talk to a lawyer or cpa... most people online don't know wtf they are talking about.
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  13. #13
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    Keep in mind that if you incorporate in another state, you may still have to pay a fee to the state that you actually do business in. In our case, we're a Delaware corporation, but since our office is in New York, we have to pay a fee to New York to be authorized to do business there as a foreign corporation.
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  14. #14
    if you are an online business do you still have to pay a fee in the state where you live?
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  15. #15
    Register a company in Panama, and then use that company to incorporate in Deleware.

    Bingo. Corporate tax avoidance at its best.

    Of course, you still have to pay personal taxes on whatever income tax you declare personally in whatever country you live in.
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  16. #16
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    Quote Originally Posted by mrzippy View Post
    Register a company in Panama, and then use that company to incorporate in Deleware.

    Bingo. Corporate tax avoidance at its best.

    Of course, you still have to pay personal taxes on whatever income tax you declare personally in whatever country you live in.
    Not true, any US citizen who owns a controlling stake in a foreign company is required to report it and probably pay taxes on it. Avoid this and talk to a CPA who will explain it.

  17. #17
    A Panamanian foundation can be started without any link whatsoever to the "US citizen" who runs it.

    The Panamanian foundation owns the Panamanian company, which owns the Deleware company.

    Even if someone traces back to the Panamanian company, the owners of this would be the foundation, which, by law in panama, can be unnamed.
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  18. #18
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    Quote Originally Posted by ServeByDesign View Post
    The state in which you operate in.
    Agree, why cheat the system? It will catch up to you and even out in the end anyway.
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  19. #19
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    Easy actually:

    Contact your DOL and SoS, typically what happens is:

    They cannot impose sales tax on your clients if your services (IE dedicated clients) are located elsewhere. If your services are out-of-state, and/or your clients are out of state, then you cannot impose local sales tax on them. With this, you will only be required to pay the annual renewal fee, income tax, and the other "necessities"
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  20. #20
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    I have a bit of an advantage as I'm a resident of nevada. Definitely helps there

  21. #21
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    Quote Originally Posted by mrzippy View Post
    A Panamanian foundation can be started without any link whatsoever to the "US citizen" who runs it.

    The Panamanian foundation owns the Panamanian company, which owns the Deleware company.

    Even if someone traces back to the Panamanian company, the owners of this would be the foundation, which, by law in panama, can be unnamed.
    That is illegal.
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  22. #22
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    Quote Originally Posted by mrzippy View Post
    A Panamanian foundation can be started without any link whatsoever to the "US citizen" who runs it.

    The Panamanian foundation owns the Panamanian company, which owns the Deleware company.

    Even if someone traces back to the Panamanian company, the owners of this would be the foundation, which, by law in panama, can be unnamed.
    I hope you didn't do that.

    Thanks to your post, you have probably helped another VaguHost pop up >.<
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  23. #23
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    Quote Originally Posted by mrzippy View Post
    A Panamanian foundation can be started without any link whatsoever to the "US citizen" who runs it.

    The Panamanian foundation owns the Panamanian company, which owns the Deleware company.

    Even if someone traces back to the Panamanian company, the owners of this would be the foundation, which, by law in panama, can be unnamed.

    Now why you saying stupid things like that on a public forum? *shakes head*. ILLEGAL doesn't describe it. Furthmore, you do have to claim that with your taxes to the IRS. If i recall right, they specifically ask if you own a business, and also ask about foreign businesses.

    I know one of the tax papers i fill out every year asks that.


    Just remember, the US govt always has ways to find people who cheats them. and the U.S.C has steep punishments *COUGH* Tax Evasion *COUGH* :p
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  24. #24
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    Quote Originally Posted by mrzippy View Post
    Register a company in Panama, and then use that company to incorporate in Deleware.

    Bingo. Corporate tax avoidance at its best.

    Of course, you still have to pay personal taxes on whatever income tax you declare personally in whatever country you live in.
    Things like this are generally a waste of time and not worth looking at unless your doing over 1mil+ yr in profits.

    For most of the lemonade stands around just form in DE, get a PO box, use that for your address everywhere and your set. When you start making a few hundred k+ in profits you can bounce things between various corps. Get a good accountant to take care of everything for you so you wont end up in trouble. Also another tip is to pay quarterly taxes instead of annual it lowers you on the radar scale.
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  25. #25
    Does anyone know what other states offer good tax benefits (no corporate tax OR low corporate tax)? I heard New Hampshire is a good choice, any thoughts on benefits over Delaware?

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