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Can I set up an LLC in any State?

Asked by: Bo - 29 March, 2011 Can I set set up an LLC in any state I choose, even though I would not be doing business in that state? Which state is cheapest or more beneficial tax wise?
Answered by: Alec Green - 3 April, 2011 Dear Bo

This is a great question. The short answer is, yes, you can, and in some cases you should, set up an LLC in a state other than the one that you live in. A great example is if you live in California. Setting up an LLC in California can take over two months. If you need a company registered quickly, your only choice is to go out of state.

There is one thing you need to know, however. No matter which state your LLC is formed in, it must register with each and every state in which it does business. This registration is sometimes called "authority to do business" in another state, and sometime "forming a foreign entity." Formation of a foreign entity involves additional fees, and sometimes additional requirements. For example, an LLC applying for authority to do business in New York, must publish a legal notice in two New York newspapers.

As for your second question, the state in which it is best to form an LLC generally depends both on the type of business you will engage in and on your goals with respect to your company.

For example, if you are opening a brick-and-mortar store it is generally most convenient to form your company in the state where the store is located, but if you are opening an online business, the world is your oyster, as they say. Similarly, if you are anticipating attracting venture capital to your company, then Delaware offers you the advantage of the friendliest and most developed business laws. If you would like to stay anonymous as the owner New Mexico is the way to go. If you would like to take advantage of great liability protection and avoid high costs and a lot of hassle - Wyoming;is a great state to start an LLC.


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