Are you interested creating your own LLC online, but have some questions? That’s OK – many folks looking to form their own LLC online have a question or two before taking the plunge and forking over a couple hundred bucks.
I have helped hundreds of people start an LLC, and one of the biggest questions I get asked when folks are creating their LLC is: “can I form an LLC in another state?” The simple answer is YES you can form an LLC in another state. But, we need to look deeper to help you understand if forming an LLC in another state will be right for your business. Let’s get started with some questions!
Why Would I Want to Form an LLC in Another State?
Why would anyone want to form an LLC in another state? For instance if I live in Virginia, why would I ever consider forming an LLC in Delaware? There are a couple main reasons folks elect to form an LLC in another state than where they reside:
- High LLC filing fees at creation – some states can VERY expensive to create an LLC.
- High LLC state annual fees – other states can have VERY expensive annual fees.
- Sub-par state legal process for LLCs – some states have dedicated business courts with rulings provided by judges vs. juries. This is seen as advantageous to some.
- Moving soon – some folks know they are moving to another state soon, and cannot decide if they should create an LLC in their current state or create an LLC in the new state to which they are moving.
Whatever your reason for considering forming an LLC in another state, know that you can absolutely form an LLC in another state than where you currently reside.
Cost of Forming an LLC by State
Speaking of high LLC filing fees at creation and high LLC state annual fees, check out this table I compiled which outlines some of the differences between states when it comes to LLC fees and rules. If you are living in a state marked in red, you may want to consider forming an LLC in another state.
|State||Formation Fee||Annual Filing Fee||Foreign LLC Fee||Registered Agent Required?||State / Franchise Tax|
As you can see, some states have crazy high fees when it comes to creating and operating an LLC!
Where Will Your Business Have a Physical Presence?
You will need to register your LLC in each state in which you have a physical presence. You can register your LLC in any state that you choose, but this is a large caveat of which you need to be aware. If you register your LLC in one state and have a physical presence in another state, you may incur double the fees!
For example, if you have registered your LLC in one state (for example Delaware) and have physical presence in another state (for example California), then you would need to pay the fee to register your LLC in Delaware ($90) AND a foreign LLC fee of $70 to the state of California. That’s double the fees!
However, if you are running a business that does NOT have a physical presence, then you are free to select any state you want to register your LLC!!!
What Exactly is a Business Physical Presence?
This is the most important question to answer when trying to determine if you can form an LLC in another state without having to pay a foreign LLC fee. Most states’ LLC act (law) do not specifically define the phrase “physical presence” in relation to foreign registrations. Here are a couple of questions to help you understand if your business has a physical presence in a particular state:
- Does your company have a warehouse in the state?
- Does your company have a store in the state?
- Does your company have a sales representative in the state?
- Does your company have employees in the state?
- Does your company accept orders in the state?
- Does your company have a bank account in the state?
If you answered yes to any of these questions, then you will likely need to foreign qualify your business in the state.
Do Online Businesses Have a Physical Presence Anywhere?
The great news is that for many online businesses such as: running your own blog, online store, online freelancer, etc, your business will NOT have a physical presence in any one state. Therefore, you will be able to select the most business friendly state to create your LLC and save yourself a bunch of money.
Start Your Own LLC for Cheap
If you are ready to start your own online business, then head over to my article Start and Setup LLC On-line in Less Than 6 Minutes. In this article, I show you how you can save yourself hundreds of dollars when creating your LLC. If you are too busy to read that, below is a video where I walk you through all the steps to start your own LLC for cheap.
Can I Form an LLC in Another State? – Final Thoughts
The true path to financial freedom comes through starting and owning your own business. You will never get rich working for someone else :-).
If you have followed along with this entire article, I showed you how you can form an LLC in another state. This can be especially helpful to aid in saving hundreds of dollars a year if you will be creating an online business which does NOT strictly have a physical presence anywhere. If you are too lazy to read this whole article, then check out this video I made that covers the highlights 🙂
Obviously I am not a lawyer, but if you have any questions I would be more than happy to help you out as you create your own LLC. Just shoot me an email or comment on the video and I’ll be sure to give you the best help I can! Now that you’re ready to start your own LLC, check out my step-by-step guide here: Start and Setup LLC On-line in Less Than 6 Minutes. Good luck!