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Can you form an LLC in a state you don't live in? The answer is yes. Companies have flexibility when choosing where to establish their domicile. An LLC formed out-of-state is also known as a foreign entity.
Several states actively compete for new business formations; in particular, limited liability company (LLC) formation. The most popular, in no particular order, are New Mexico, Nevada, Delaware and Wyoming. Each state competes for a different part of the market. Unfortunately, there are many misconceptions about the benefits of registering legal entities in each.
Yes. That said, each state's corporation law differs in how you're protected, and the way state income tax is applied, so the goal is to find the state which works for you and form your legal entity there. Below is a guide to how the states differ when it comes to LLC price, privacy and asset protection.
Every state is different and you can form LLC in the state where you reside, but we find the low cost and simplicity of a New Mexico LLC often make the difference for business owners.
Here is a brief overview of your options with a lengthier analysis further down:
Navigating the LLC registration process requires careful consideration of business licenses and legal frameworks that vary by state. If you're seeking to establish an LLC outside your home state, it’s prudent to engage with qualified business attorneys who can guide you through out-of-state business requirements and ensure compliance with both federal law and local state laws.
With New Mexico, you enjoy all the benefits of an LLC at a fraction of the usual cost. New Mexico acknowledges the corporate veil and provides the same limited liability as other jurisdictions. There are no annual fees or annual reports. In other states, periodic reporting is really just an excuse to collect fees on businesses. New Mexico skips this step, saving you time and money.
Establishing an LLC in New Mexico is not only affordable, but it also streamlines the process by eliminating the need for annual fees and reports, which can burden businesses in other states. The pro-business environment and the flexible business regulations make New Mexico a favorable choice for those looking to form an LLC out-of-state, while ensuring that the corporation's veil is respected for maximum liability protection.
Delaware is most famous for its Corporations. The Delaware General Corporation Law offers hundreds of years of well-defined corporate case law to act as precedent.
For large corporations, such formalities are important. This is why many Fortune 500 companies are incorporated in Delaware. Small businesses do not benefit from these corporate laws, however. The only difference most owners will notice are the significantly higher fees that Delaware levies on its companies. Delaware LLCs offer privacy, too, but are simply not worth the extra cost versus the other three states we cover. See Why Do Startups Incorporate in Delaware?
While Delaware is a prominent choice for many corporations due to its established legal structure, small business owners may find that states with lower LLC formation costs provide a more advantageous environment for forming LLCs. By opting for an LLC in one of the other states suggested here, even if not a domestic LLC, business owners can benefit from lower fees and a straightforward business entity structure while still ensuring effective liability defense against potential lawsuits.
Wyoming is a haven for asset protection. If personal liability is a top concern, Wyoming's business entities offer a number of debtor friendly laws for those seeking protection from personal creditors. These protections come at a price, however. Wyoming’s filing fee is twice that of New Mexico’s, plus there is a $50 annual report which must be signed by someone. This means if you want true anonymity, then you are stuck paying for an additional nominee service to handle the filing each year.
Wyoming offers unique protections for LLC members, primarily shield individuals from pursuing personal liabilities. While considering out-of-state LLC formation, it's vital to evaluate how the state's legal framework, including court structures and regulations, may affect your business operation and asset protection strategy.
Nevada is similar to Wyoming in being a haven for asset protection. They have a well-developed brand and their Secretary spends considerable sums on advertising the benefits of moving your company to Nevada. They have leveraged this brand value by increasing fees for eight straight years. This makes Nevada’s LLC one of the nation’s most expensive to start and maintain, just behind California. The Secretary also requires a list of members and managers which they do not publish… yet. In short, Nevada is not the best state for LLC privacy; it is the worst among these four.
Which of the above states appeals to you will depend on your situation. You may even select different states for different companies and operations. Large corporations will enjoy the familiarity of Delaware, asset protection specialists will utilize Wyoming, and those wanting a simple and inexpensive solution should choose to form an LLC in New Mexico.
Establishing an LLC involves understanding various complexities, including initial filing procedures and ongoing compliance requirements in different states. For business owners contemplating the question, "can I form an LLC in any state," it’s pivotal to consider the associated benefits of low LLC formation costs and the legal protections provided by each jurisdiction, including how home state court systems may influence business operations.
New Mexico is best suited for small businesses, cost conscious investors and privacy minded individuals. They are a good fit for internet businesses, consulting, real estate and other location independent businesses.
New Mexico's favorable conditions for business formation include the absence of annual fees and a lack of extensive regulatory requirements, making it a prime location for new LLC entities. Business owners seeking privacy protection for LLC owners, benefit from the pro-business state’s advantages can streamline their LLC formation process, ensuring compliance while safeguarding their business assets effectively against potential legal action.
New Mexico LLCs are the cheapest anonymous LLC in the USA. There are no annual reports which saves hundreds of dollars over the life the company. You only need to maintain a registered agent in New Mexico.
Members and Managers are not listed. Only the Organizer (us) has to list their name. With no additional annual reports, there are also no additional chances for your name to be exposed or nominee services to pay for.
Online business formation services like Lloyd & Mousilli streamline this filing process, help you maintain and enforce your privacy, and navigate state regulations.
New Mexico companies offer the same corporate veil as other states. This means you are not personally liable for the company’s debt - hence the “limited liability” in limited liability company.
With New Mexico, you enjoy all the benefits of an LLC at a fraction of the usual cost. In other states, periodic reporting is really just an excuse to collect fees from businesses. New Mexico skips this step, saving you time and money.
New Mexico LLCs are suitable for small-business owners most of all due to the lower entry fees and protections—plus, your ownership is protected and private if you desire privacy. The state is not well suited for large corporations, however. If you are a large company, then you should consider Delaware or Wyoming.
Establishing an LLC in New Mexico provides a straightforward path to enjoy the advantages of a traditional limited liability company while benefiting from low entry costs and privacy. And if you are in New Mexico and considering in-state LLC formation, you may find the absence of annual fees appealing, alongside the strong business asset protection that helps mitigate exposure to creditors and lawsuits.
Delaware offers over a hundred years of well-defined corporate case law to act as precedent. They also have a dedicated court system for hearing business disputes called the Court of Chancery. This court system which ensures cases are heard quickly. However, if your creditor is pursuing you, then the last thing you generally want is a fast track trial, let alone constant litigation. They also do not have as favorable of asset protection laws. This combination makes Delaware ideal for large corporations, but not for small business.
For large corporations such formalities are important. It is also important to have a dedicated court system for complex matters. The only difference most small business owners will notice are the significantly higher fees that Delaware levies on its companies.
If a Delaware entity is a fit for your company, engaging with an LLC formation service can ensure that all necessary legal documents, such as operating agreements, are correctly prepared. Unsure? Lloyd & Mousilli attorneys determine what's best fit for your LLC size.
Delaware LLCs command several hundred dollars in fees, including a $300 annual franchise tax. The Secretary fee to change registered agents is $50. Again, large companies may not notice these register fees, but small companies certainly will.
Delaware allows anonymity and nominee officers. There are cheaper ways to obtain anonymity, though, like New Mexico.
Delaware companies offer the same corporate veil as other states.
You can obtain the benefits above for a much lower price elsewhere. Delaware has obtained a certain mystique because of the large corporations which reside there. However, you should not believe that Bank of America has the same needs as an entrepreneur. Find out more on Delaware Post Incorporation and Checklist here.
Overall, forming an LLC in Delaware might appear advantageous due to its established corporate system, specifically its Chancery Court; however, small business owners may find that business-enabling states with simpler regulations offer comparable benefits.
Nevada limited liability companies are among the nation’s most popular. This is due to their great asset protection features and even better marketing. Nevada remains one of the most popular states, but their sky-high fees have many second guessing—turning to other states offering similar LLC benefits.
There are several fees to start an LLC, not all of which the Nevada Secretary of State is up front about. You may be mistaken into thinking they only charge $75, but within 30 days of filing you must pay additional fee, e.g. members/managers list and a business license tax.
Hidden fees do complicate foreign LLC registration somewhat for the unaware. That's why an out-of-state LLC attorney can advise you on any hidden fees before they ever appear, starting with a free consultation. We deal with such matters all the time.
Just like the other states, Nevada allows anonymity. However, the Nevada Secretary of State still requires a list of Members and Managers in your LLC filing.
Because they will have your Members and Managers on record, there's nothing to stop the State of Nevada from later releasing this information if legally required to do so. And if the state suffers a data breach or hack, your Members and Managers may be disclosed inadvertently.
Therefore, if you really need to register your LLC in the State of Nevada, be careful. Your information is not truly anonymous.
When establishing an LLC, maintaining anonymity is an attractive feature for many business owners, though it requires some disclosure of LLC members and managers. It is crucial to utilize an online filing system that can facilitate the necessary legal documents and ensure compliance with various licensing and initial LLC filing requirements to avoid unwanted public LLC information exposure.
Nevada became popular state because of its asset protection. They provide the same corporate veil as other states, but also provide asset protection from personal creditors. Assets inside the LLC are not as easily accessible to creditors as personal assets.
The Nevada LLC certainly earned its popularity early on. Years of continual price increases have eroded its value however. Having to spend money before registered agent fees is an expensive pill to swallow. With Nevada's history of rising fees, those needing personal asset protection are often advised to consider Wyoming.
Wyoming companies have become popular as Nevada became less competitive. Wyoming does not market as extensively and is less well known. They also have a less developed financial system which can make establishing a bank account difficult, especially for cash-strapped new business owners.
Wyoming charges $100, twice New Mexico, to form an LLC. They also charge $50 each year after and there has been talk of raising it. Plus, there is a tax on annual reporting variable on the company's assets located and employed in the state of Wyoming.
When forming your LLC in a different state, you should carefully consider the long-term implications of these costs and how they compare to the other states, especially those offering more favorable financial conditions for LLCs.
Wyoming does not list owners, managers, directors, etc. There is an annual report which asks the name of the filer, thus necessitating the use of a nominee – further raising costs.
Business owners must be mindful that while Wyoming offers advantages like privacy, it also requires navigating its annual report requirements, which can add to costs through the need for nominees.
Wyoming offers asset protection similar to Nevada.
While the choice of which state to form your LLC in is personal, you can always seek advice from an attorney experienced in LLC registration.
Book a 15-minute strategy call here with the Lloyd & Mousilli team to discuss your situation and we'll recommend the business structure & state legislations best fit to your business. As a client, you'll get help with drafting & filing LLC formation documents and an operating agreement specific to your company.
Our corporate lawyers have counseled numerous clients, from startups to the Fortune 500, on business entity structuring matters, including foreign entity formation when necessary. We also specialize in other categories of legal advice for startups including securing funding and protecting intellectual property.
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