6 Reasons Why You Shouldn’t Form an LLC in Delaware (for U.S. residents)
HTML-код
- Опубликовано: 5 сен 2024
- ➡ Full article: www.llcunivers...
NOTE: If you live in Delaware, or do business in the state, then this information does not apply to you. You should form an LLC in Delaware. This information does also not apply to you if you are a non-US citizen or a non-US resident.
If you don’t live in Delaware or do business in Delaware, and you’ve heard that you should form an LLC in Delaware, let me save you a lot of money and headaches: you should not form an LLC in Delaware. The disadvantages of forming an LLC in Delaware far outweigh any “advantages” you may have read.
Domestic LLC vs. Foreign LLC: If you form an LLC in the state where you reside (aka your “home state”), this is known as a Domestic LLC. If you form an LLC outside of your home state (for example: Delaware), you’ll be required to register that out-of-state Delaware LLC as a Foreign LLC in your home state.
You now have 2 LLCs (one in Delaware and one in your home state), you have to pay 2 State filing fees, you will be required to pay for a Registered Agent in order to use their address for your Delaware LLC, and you have to pay 2 Annual Report fees.
This defeats the whole purpose and ends up being a big headache.
Delaware is better suited for publicly traded companies that sell shares on the stock market (like Microsoft, Apple, IBM, Chase, Coca-Cola), or companies that have multiple investors or need to raise venture capital.
Continue reading: www.llcunivers...
/---------------------------------------/
-- QUESTIONS --
Ask any LLC question here: www.llcunivers...
-- DISCLAIMER --
This information is provided for educational purposes only and in no way constitutes legal, tax, or financial advice. For legal, tax, or financial advice specific to your business needs, we encourage you to consult with a licensed attorney and/or CPA in your state.
LLC University® is a registered trademark.
© LLCU IP1, LLC. All rights reserved.
www.llcunivers...
[=================================]
Hey folks, make sure to check the site for most up-to-date information: www.llcuniversity.com/delaware-llc/why-you-shouldnt-form-an-llc-in-delaware/. Or select your state and start forming your LLC with our free guides: www.llcuniversity.com/
JOE BIDEN SAYS HOLD MY BEER N WATCH THIS! MOVE OVER FOR THE GROPER PEDO JOE
This was EXTREmELY helpful!!!! Someone was pushing us that delaware was easier and told me straight up that you didn’t have yo file annually there. Omg.
Thanks for the fact check and examples.
You're very welcome!!
Thanks Matt for this great information. I had a company in my home state that I closed down and dissolved a few years ago. I am now in the process of forming another LLC for a new business venture and everyone was advising me to form an LLC in Delaware for all the great advantages. Your tutorial here bears out what I learned while exploring all I could find on the matter. Foreign Entity LLC plus the expenses incurred for DE is as you explained double taxation and fees. Thank you for this informative video.
Hey Beboboy Mann, you're very welcome. Happy to hear that this video was helpful :) Check out our website for free LLC guides for all states. Hope that helps.
Thanks! I almost just made the mistake, and you spared me from it!! 👍🏻
You're very welcome. It's a common one far too many people fall for.
Thank you for this video! You saved me money and lots of headache.
You're very welcome Joseph!
I find this video on the "Delaware Loophole" as another form of misinformation and completely misleading. Your statement of: "The disadvantages of forming an LLC in Delaware far outweighs the perceived advantages" is totally incorrect and truly shows your level of expertise in this area. You're missing the whole point of why any company would register in Delaware. The general structure is for asset protection and security, not for avoiding taxes. Individuals who utilize offshore accounts are avoiding taxes and the uninformed individuals seem to always accuse others when they're uneducated on subjects such as these. You register an S-Corp or LLC as the holding company in the state of Delaware for protection of your logos, trademarks, and slogans. It doesn't matter if you're a small company or a big corporation, this formation makes smart business sense. You failed to mention two key things here... Consult with your CPA and/or an attorney who specialize in these areas. Also, you failed to prove your case in why you shouldn't form an LLC in Delaware - because you're apart of the uninformed.
I appreciate your comment. And you're correct. This video is missing a lot. The video was made for people starting out and we tried to keep it simple. However, I didn't make that clear in the video.
Finally a civilised debate on RUclips... Crypto Driven is correct, the advantages of an LLC in Delaware lie as part of a corporate structure not as a primary LLC for business. LLCs has valid points in regards to is cost associated with running it as a foreign LLC.
I totally agree. Even though he says it's for people just starting out it clearly sounds like he is speaking about a sole proprietorship and not a corporation.
Thanks for your comment dude. Im really scratching my head here trying to figure out if I should go the Delaware LLC route or not. On one hand I have people I personally know recommending I do so as well as people (I don't know personally) online saying as well that forming an LLC in Delaware is a good idea. And then I find this video and now I'm not hesitant because I don't want to pay extra taxes like this guy mentions. My friends that formed in LLC in Delaware never had some double taxation problem so I don't know what he means. I'm looking to start an online clothing retail store here in america, but I would like the supposed benefits forming an LLC in Delaware. For this kind of business do you think I should go for forming an LLC for the benefits or not?
Crypto makes some good points, but what do I know. I'm just an attorney.
Fckn love you man. Good thing I did research and stumbled upon your video. I would've been in a world of trouble if I didn't. YOU THE MAN.
Rubinson, thanks for the love man!! So happy we could help :-)
he is missing the whole point, Delaware gives Anonymity.
Thanks for your comment. I'll make sure to dive into this in the updated version of this video. Delaware does offer anonymity as compared to a handful of other states.
Ha! The IRS is gonna find you no matter how invisible you think you are. So is the tax office of the state you live in if you do as required and pass the earnings thru your personal tax returns. He is right. For a one man operation small company its better just to set up one's company in one's home state.
Thanks Mann, appreciate you're comment. And you're right about the apportioned state-level tax returns.
great place to 'park' assets for the above mentioned reason (Covencraft)
@@beboboymann3823 Anonymity is not for the IRS but rather for people who may want to sue you personally because your business is successful. LLCs don't protect you the same in every state.
Thank you abundantly for sharing, months of research and i am glad i didn't take the plunge to register. The more you know the more you grow.
You're very welcome! Happy to help!
Thanks man! My team found this very helpful.
You're very welcome man!
States have no authority to regulate interstate commerce, therefore, if you run an online business, theoretically, you can. Not even theoretically for my state, it explicitily states for the purposes of transacting business in this state that transacting business on interstate commerce does not constitute transacting business in the state. As long as you don't have a brick and mortar setup and all of your business affairs is conducted through the internet, you do not need a certificate of authority.
Hi Michael, correct. However, if you're running the business from your home within a state, that's considered doing business in that state.
I always thought the point of opening a Delaware company is to declare "intangible assets" like TM, logo, motto. You pay a fee for using these assets to your Delaware subsidiary and you claim it as expense in your state (lowering your taxable income) and that fee you paid in Delaware is not taxed. Yes there are fees to incorporate etc, but they seem minor in comparison to the savings you may get....a small business making $100k or less shouldn't go this route. You should not register trucks or tangible assets in Delaware.
Hi Gabriel, great points. There are many reasons for more "advanced" setups, not just in Delaware. Intangibles can be handled and setup in a multitude of ways. We aimed to keep this video on the simpler side. Thanks for your comment!
This absolutely makes sense if you are only transacting in one or two states that are not Delaware. If, however, you transact business in multiple states, each situation is unique, but forming your LLC in Delaware might still be your best bet.
That is a fair point!
Good advice & straight to the point. Thank you!
You're welcome Latisha!
Many years later this video is still a goody. Thanks Matt
You know it ;) Thanks Mike & Zack!
THANKS SO MUCH FOR SHARING. GREAT INFORMATION !!! BLESSINGS
You're very welcome Michael!
Ok you answered my question. Thanks goodness I didn't press the button for my LLC to registered in Delaware. Registered in MA! Good Looking out!
You're very welcome THulk! You avoided an annual penalty in Massachusetts. Check out Section 54 [ malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter156C/Section54 ] of the Massachusetts LLC Act if you're curious. You avoided this potential headache ;)
Great video! I've been advised to not worry about incorporation in Delaware unless you've got investors who are insistent upon it. Even then, it's your company, you decide how you want things to run. Who wants to be flying to Delaware if they get sued?
Thanks. Appreciate the comment. DE Corporations are common for venture capital and high-growth startups. Most people are best to form an LLC in their home state.
Exactly this! Been told by attorneys that investors prefer Delaware. That incorporating in FL would be terrible to get investors.
You forgot about real foreign companies. European person will not have to pay personal taxes or any taxes in the US if their Delaware company does all the business outside of the US. Just franchise fee $300 in DE.
You're correct. Apologies for the confusion. We'll have new videos for non-US residents soon. In the meantime, we've written a number of articles on our website for non-US residents. For example, after your LLC is approved, this is how to get an EIN for your LLC without an SSN (www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/). Hope that helps.
if you are selling without an american citizen, would you please send me a message? I want to ask something, Thanks. My instagram account: omrfrknylmz
Kind of funny I came across this video after reading some articles about incorporation advantages and disadvantages. From my research you are correct as I read filing is more expensive than other states, franchise taxes are required based on our share's value, we have to meet our own state's requirements, legal disputes require traveling, and a Delaware registered agent is required. And lastly, although Delaware doesn't tax companies that are incorporated in the state that don't do business there, our home state will still tax our company - thus dismissing the notion of avoiding taxation.
You are correct! And you are well read! ;)
Matt: Thanks for your great work and the helpful information. Regarding the privacy of my LLC. I understand that initially registering it in Wyoming(parent LLC) and obtaining foreign registration in Maryland, where I live, might be a good way to ensure extra layer of privacy. This means my single LLC would have to undergo annual filings in both states. From what I know, the annual filing and registered agent costs in Wyoming are reasonable, around $200 with no corporate and income taxes. Here I'm okay with the extra effort and cost if it provides more privacy. Maryland LLCs, even with a registered agent in MD, don't seem to offer the same level of privacy. So
1-Would it be correct to assume that, despite the additional expenses and paperwork, Wyoming is a better option for privacy to register the parent LLC?
2-If the LLC is foreign-registered in MD, does it mean it's owned by the main LLC in Wyoming? This setup would still provide some level of privacy beign a resident of MD, right?
What if the Wyoming-registered LLC obtains a DBA in Maryland with the same name? Would this prevent me from engaging in improper business activities in MD?
Here my concern is not about taxes saving in MD but having more layer of privacy what I am looking for.
You're very welcome. The Annual Report in Wyoming is $60 (not $200). You'll need to look at the Maryland Foreign LLC paperwork (as I don't have the details in front of me). It might require certain information that could impact your privacy (aka, look at what info they are asking for). If the privacy isn't good, you could consider having your Wyoming LLC own a Maryland LLC (so this would be two domestic LLCs)... as opposed to a Wyoming LLC registered to do business in Maryland (one domestic LLC with one foreign LLC registration). And no, having a Wyoming LLC registered to do business in Maryland (aka a foreign LLC) doesn't mean they Wyoming LLC owns a Maryland LLC. It's just just one LLC. It's a Wyoming LLC that's allowed to do business in Maryland. And while there is the need for two Registered Agent, and two Annual Report filings, it's still just at its core, one LLC. And no, you wouldn't have any issues if you had a foreign Maryland LLC that has a DBA in Maryland. Hope that helps.
I fell under the "...but I sell everything online." category. Thanks for crushing my dreams Matt.
LOL ;-)
Are there not stupid quirks and disadvantages for forming an LLC in New York? Seems like NY requirements are absurd, like publishing ads in newspapers over extended periods, and the like. Can't a computer designer living in NY be better off with a Delaware LLC?
You're right, NY is full of quirks. However, you're still doing business in the state. If you form an LLC in Delaware, you'll need to to file a Foreign LLC registration in NY, therefore, defeating the purpose.
This is a good channel. He explains his points well and in layman’s terms. Add some self effacing humour and this is really good.
Thanks Pete! Awesome feedback :) Thank you.
@@llcuniversity You bet. BTW are you from Connecticut? I found it interesting you used a Connecticut LLC as an example. I am from CT as well
@@PGar58 - No, I'm not from Connecticut. Not sure why we used Connecticut as the example. Sometimes random states pop into my head ;)
@@llcuniversity and Connecticut is about as random a state as you can come up with. 😎
@@PGar58 - Haha ;) It's a nice place though. I like the Northeast.
Thank You for all your Info.
You're welcome Roy. Thank you for the kind words!
Thanks for the video. I have a question about my situation I am an international student and I am not allowed to work in the USA but I formed an LLC before I came to the US and right now I live in California but as I mentioned before I'm not allowed to work here. so there is no reason for me to pay tax here I think because my business is online and most of transaction done out of the California State
Hey Aziz, not allowed to work usually means being an "employee". Owning an LLC just means you own an LLC/business... it doesn't mean that you are an employee. Regarding taxes, that is likely not true. I highly recommend having a few conversations with some accountants. We have some recommendations here: www.llcuniversity.com/how-to-find-an-accountant-for-your-llc/. Hope that helps :)
Mr. Aziz
Kindly can I get your feedback as Arab person from GCC did you have any issue in forming LLC and paying taxes and have you paid any taxes as foreign non US resident
Question, I live in California - and my business is buying laptops online and shipping item to another country (Ghana) and selling it there. So i'm not really conducting business in the US but just abroad. Will it be wise to set up LLC in Delaware?
Hi there, you are actually conducting business in California. You'll likely run into a lot of issues going out of state. We have more details here: www.llcuniversity.com/california-llc/doing-business-in-california/. Hope that helps.
very very very GOOD and to the point !!!!
Thank you Hassan!
Thank you for the informations. Could you please make a video for non-residents, non-citizens and who lives in another country and wants to have a llc in USA, which state ll be best. if possibe i have 1 more question. If lived in USA in past, should i pay the taxes on that state or past is past? i also have ssn but not citizen and dont live in usa.
You're welcome. If you don't have a physical presence/location in the US (and no US employees), you can pick any state you'd like. Many people are looking for low fees and simplicity. If that's the case, I recommend Ohio. It's very simple and straight-forward, state fee to create the LLC is $99, and there's no Annual Report. In terms of any outstanding tax filing obligations, we can't comment (we're not tax specialists), so I recommend you reach out to an accountant or two to double-check. Thank you for your understanding and I hope that helps.
I'm from Accra. And I wanted to form a foreign LLC in Delaware. Going to be for my trading business. (financial Services)
This would simple be a "domestic LLC" in Delaware. Technically a foreign-owned LLC. The word "foreign LLC" in the US has a different meaning... confusing, I know! A foreign LLC in the US is an LLC formed in one state, that is registered to do business in another state. In your case, you'd have a foreign-owned Delaware LLC :)
Does the same apply for corporations? Specifically S corps? As I know companies such as Apple have incorporated in Delaware. Makes total sense for small starting out LLC's to not do this but for larger organizations would you still recommend against it?
Large corporations have vastly more complex legal structures. It's not something we specialize in, so don't have a comment on this. There are dozens of factors. Thank you for your understanding.
Interesting points in the video. thank you.
Thanks Jon, appreciate the comment.
U FORGOT THAT DELAWARE IS POPULAR BECAUSE OF FOREIGNERS OUTSIDE US OPERATING ONLINE ON USA MARKET SPACE. I wish you came out with list of States with higher advantages.....than to tell us not to go there without solutions.....starting it from where we are is impossible or very very hard to start with.......if u r outside USA or has limited resource
Thanks for your comment. This video is older and was made for U.S. persons, but apologies that I forgot to make that clear. We'll have new content coming out specifically for non-US residents/citizens forming LLCs in the U.S. In the meantime, we have new info on how to get an EIN without an SSN, for after the LLC is approved (www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/) and info on opening a bank account (www.llcuniversity.com/foreigners/open-us-bank-account-llc-non-resident/). Hope that helps. Thanks for your understanding and support.
Also Delaware law favors investors over creators (who filed the LLC or Corp.) which goes against the purpose of having an LLC in the first place
Do you have more specifics this? Thanks.
your videos are helpful please do one for Illinois
Thanks Diego! We'll have a lot more coming out this year. Illinois is definitely on the list :-)
Thank you my man!
You're welcome :)
Thanks for the great info, much appreciated. Quick question, I live in Colombia but am a US citizen, want to open an LLC that will only be used for day trading on apps like robinhood. I was a PA resident before I cane here but Ive been living in Colombia for 9 years now. I guess my best option would be to open the LLC in PA?
You're very welcome. It will likely be easiest, especially if you want to use your PA address as the Registered Office address: www.llcuniversity.com/pennsylvania-llc/registered-agent/ (it will save you money instead of hiring a Commercial Registered Office Provider, aka CROP).
Really appreciate the info. But it still leaves me with the dilemma of where to form my LLC. I own rental property in Michigan but I live in Texas. I just moved from Michigan to Texas and I don't think I'm going back. But it's where I want to grow my business. Rental property, grocery store, and possibly a laundry mat or bar. Which state is best for my situation? Any help or advice is greatly appreciated!
Hey DeMario, for real estate, you want to form the LLCs where the properties are located since that is where you are legally doing business.
For Holding Corporations delware is good; but its redundant to make an LLC there
Delaware can certainly be a good state for an LLC which owns other companies.
@@llcuniversity LLCs are for holding assets directly; how many assets are in Delware
Hi Karim, I don't understand your comment/question. Feel free to rephrase. Thanks.
Thinking about rental properties in multi-state...still form llc in home state, even though property rentals are in other states?
Hi Alberto, it's best practice to form the LLC where you're doing business. For most small business owners, that's their home state. For real estate purposes, that's where the properties are. There's a handful of ways to structure it in your situation.... multiple LLCs each owning property or a holding LLC, which owns all LLCs. Best to chat with a tax attorney to optimize.
@@llcuniversity Thanks for the info, will look into more detail. Glad that I found your videos..
@@albertovillamar27 - You're very welcome. Feel free to do any google searches with "llc university" in the search for more detailed articles.
Thank you for the video! How do things look like for a non-citizen? Does it make sense to form an delaware llc in this case? Greetings from Germany!
Hey Kunduka! If you don't have a physical presence in the US or employees in the US, you can pick any state you'd like. Check out Ohio. It's a state I like a lot. Great for non-US residents. LLC formation is really easy (and affordable). And there are no annual fees :)
Great Information
Thanks Fahim!
Thanks . your videos are great and helpful and amazingly explained. I have few questions :
1. We are based outside US (non-resident) And are planning to form a Company in US and our major clientele will be present in Midwest States. So could you please suggest which State to form LLC in ?
2. Could we form LLC in Wyoming & have Warehouse in Wyoming & sell goods in Midwest then take benefit of Low Taxation of Wyoming Or when we sell goods in say Michigan / Illinois we have to register LLC in those states as well to sell our Goods in those States vide Agents / Online ?
Hi Abhinav, thank you very much :) We're unable to say where someone should form an LLC. We recommend talking to a tax attorney in this case... one who specializes in taxation for non-US residents. You may have to report (and pay) income taxes in the states where income is earned. And you'll also have state sales tax... which needs to be paid where there is nexus. In short, there isn't a quick answer like "Do this and it'll be the best for taxes all around." Corporate taxes and personal taxes depend on a multitude of factors like your personal residency, how the income is earned, where the income is earned, who owns the LLC, and more. An LLC needs to be formed (or registered as a foreign LLC: www.llcuniversity.com/what-is-a-foreign-llc/) in the states where it is transacting business. Simply selling goods to customers in one state doesn't mean you're LLC is transacting business in that state (however, your LLC still may need to pay sales tax). Hope that helps.
How does this apply if you are a RUclipsr who does business 100% online?
Where do you run and operate the business from? That is usually the state where you're doing business.
I’m not great at this but I think you should have word this different and said “Why you shouldn’t have your operating business in Delaware “
Hi Lu Lu, excellent point and great feedback. This video is due for a refresher soon. Thank you for your understanding.
Does the dual LLC set up that you describe applies to Texas?
Yes, it applies to all states. However, not all enforce it, and some states have penalties and some don't. We don't have a list of this at this time, but maybe in the future. Hope that helps.
This is a very good video, with very helpful information, thank you!!
You're welcome!
You're great. I very much appreciate your time and shared knowledge. Thank you.
You're welcome! Happy to hear I could help :)
So I live in Delaware currently; however, I will for sure be relocating next year. What would be your advise. I have applied for my LLC to get formed today but I can try to call and cancel it. What’s your advise please.
Hey Precious, do you know what state you'd be moving to? Where an LLC should be formed/registered comes down to where you'll legally be transacting business. What type of business is it? Will it be ran from home or will there be an office or physical location in Delaware?
LLC University God bless you for replying. But more than likely I will be moving to Texas but it all depends on where I will be able to get a job. Texas is my top pick and what I’m hoping for.
My business is an online wig making business.
I’ll buy hair from China and resale in USA online.
I plan on holding all my inventory and shipping orders from my apartment now and when I move.
I’ll use a P.O. Box for my return address, however the order will get labeled and shipped out from my home office.
Should I cancel my Delaware llc and just run the business without a llc until when I move but still pay my taxes through my personal ss#. Also I was told an LLC is not required to do business as long as you pay taxes and don’t get sued you can hold off on getting a LLC when certain.
@@PreciousOlocha hey Queen hows texas
What if it's an e-commerce company that sells worldwide? I am personally based out of California for reference.
Hi Jules, the rules of transacting business have to do with where you're running operations from, not where your customers are. And online vs offline doesn't matter. More info re: CA here: www.llcuniversity.com/california-llc/doing-business-in-california/
If someone does not live in USA and would like to start a concierge company based in the USA (Delaware), would you consider it a good idea?
Yes, this video doesn't apply to non-US residents. As a non-US resident, you can form an LLC in any state you'd like. Delaware, Wyoming, and New Mexico are pretty popular among non-US residents.
@@llcuniversity thanx. Do you have a link?
Sure, you can find info on all states at our website: llcuniversity.com/
@@llcuniversity thanx
I wish i knew this before I wasted 179 on getting an llc where they wanted to charge even more for the EIN(99) when they are free. The process is horrible! Then i found out i had to pay 125 more just to operate in my state then the taxes is still 300 in del and annual filling like you said. great video!!1 you were spot on. I guess i just took a loss. if any ne want to buy and llc for 179 let me know.
Hey Lolo, I feel you. It's a crappy customer experience when you're surprised like that. If I can offer some encouraging words: it's so great you found out this early. Some people find out after a year or more of putting in work on a structure/setup they may not like.
LLC University yes luckily it only cost me 50.00 in the end I was able to get a Refund!
@@Keepitpriceless - Oh sweet! That's good news Lolo :) And if you want to DIY (for the correct state), make sure to check out our website (just select your state from the homepage). We have step-by-step instructions. Hope that helps.
LLC University awesome thanks and will do!
@@Keepitpriceless - You're welcome!
Great video, now I’m having second thoughts. I live on the MD/DE line. MD resident that will be doing more business in DE than MD. Would your opinion change in my situation?
Hmmmm... hard to say for sure. What kind of work will you be doing with your LLC?
Bro I live in Delaware I'm from Delaware. So are you telling me I shouldn't start a LLC in my own state bro?
LOL... woops. Doesn't apply for you ;)
@@llcuniversity great. Started my llc yesterday 👍
Awesome! Congrats :)
Hi, I'm an Indian. I want to start my own Cosmetic company in US. For foreign citizens how much minimum amount is mandatory to start LLC ?
What would be annually organisational expenses including Annual Registration Fee, Business Privilege Tax Return, HR, Account etc ?
Other Terms & conditions as per US government norms. Please suggest....
I wanna invest in Foreign.
💯
Hi Ayushi, there is no minimum financial amount you need to put in an LLC to form an LLC in the US. The state LLC annual fees depend on the state (see here: www.llcuniversity.com/llc-filing-fees-by-state/). Taxes depend on numerous factors. You'll need to speak to an accountant about that.
Here is more information for non-US residents:
www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/
www.llcuniversity.com/foreigners/open-us-bank-account-llc-non-resident/
www.llcuniversity.com/irs/form-5472-foreign-owned-llc/
Hope that helps :)
@@llcuniversity Thank you for your great generosity!
Your support helps to take further decision..... 👍💯
@@Entertainment_Chilli - You're welcome Ayushi :)
@@llcuniversity My pleasure 🙂. May I've ur contact details please, if I've any query....
@@Entertainment_Chilli - Hi Ayushi, we're not able to provide that here (we get too many questions). However, feel free to go through any of our videos or website and leave a comment. We'll get back to you that way (and the answer may help other people). And you only need to leave one comment ;) No need to place the question on multiple videos. We see all comments that come in. Thank you for your understanding.
The Examples above are reasons why you need to do your research, speak with lawyers, speak with CPAs and anyone else as your setting up an LLC. States have different legal standings with asset protection. Does the state have inside protection or outside protection or both? If you get sued or your business get sued will you lose everything or are things setup in such a way where it's a legal headache for the other guy to get your money? Suggest watching: ruclips.net/video/XdSp5GXbiE4/видео.html
Hi Brandon, thanks for your feedback. This video was initially made for the bulk of the market setting up LLCs out of state and then dealing with headaches and issues later, but video doesn't really state that. Instead, it takes a wider sweep and doesn't mention charging order protection of more advanced setups. All will be included in our updated videos. Thank you.
E-commerce in California. LLC with S-corp election. Thinking of switching to Delaware to avoid CA sales tax since we are under economic nexus $500k. I know you mentioned foreign LLC but is that for online only businesses below the economic nexus? My CA sales tax is in the thousands, what do you think?
Hey Chris, the laws of transacting business don't have to do with the economic nexus for sales tax. Said another, you'd still be doing business in California, regardless of where your LLC is formed, and regardless of what your sales tax nexus is.
Hello if someone is operating a real estate rental business and establishes a llc in the state where they live though would be engaging in business outside of there domestic state though would like like to have llc protection as soon as they go under contract in another state how could one set that up so that there's no delay in the process of having legal coverage in case someone gets hurt or negligence stuff like that ?
Hi Davion, you can either register your existing LLC as a foreign LLC in the new state. Or you could form a new LLC.
don't read off of a paper... if this information is what you 'teach', you should know it by heart...
LOL - you should try teaching LLC formation in all 50 states + tax information + everything else. We've written nearly a million words. Try memorizing that "by heart" ;-)
That's a valid point. :)
Thanks for understanding Mahdi :-) Also, the "read off the paper" trick makes for less video editing and we can produce more helpful videos!
What about LLCs registered by non non-US citizens or non-US companies?
For example a Moldavian citizen or a company from Uzbekistan registering an LLC.
I know you'd still have to pay taxes locally, but if you ware making business with non-Delaware companies and operate from your country,
you basically have a US law-backed company for around $75+90+300+120=$585 per year (excluding fees for creating/submitting tax reports and stuff)
Am I right?
Hey Salaros, yes, you're right. Apologies for the confusion in this video. We'll have more content coming out on our website specifically for non-US residents. I see $90 as the state fee and $300 as the annual franchise tax. What is the $75 and the $120?
LLC University $75 for name reservation for 120 days (at least in Delaware) and 120 more bucks for local agent or how is it called (I'm pretty new to US business terms and I'm not a native English speaker)
So the situation I've described above is more or less what I'm facing right now. I just need a lawyer or some sort of representative in US in order to get EIN without SSN. The only thing I have in the US is my personal bank account. Currently I'm watching videos like this yours (great job BTW, your criticism makes perfect sense for US residents) and I'm trying to figure out where to start. Please, feel free to contact me via email (salaros at salaros dot com) if you think your company can help me out with starting a US-based company.
Ah, I see. The name reservation isn't needed. I wouldn't worry about that. You can just file after doing some searches (see here: www.llcuniversity.com/delaware-llc/search/). $125 would be for the Registered Agent (www.llcuniversity.com/delaware-llc/registered-agent/). You can get your own EIN for your LLC without SSN... you don't need a lawyer. Do this after your LLC is approved (www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/). Here's info on banking in US for LLC (www.llcuniversity.com/foreigners/open-us-bank-account-llc-non-resident/) and info on Form 5472 if you LLC is Single-Member LLC (www.llcuniversity.com/irs/form-5472-foreign-owned-llc/).
So, what do I do if I already took the "guru's" advice and started an LLC in Deleware? How do I get out of it and start an LLC in the state where I live? Blessings.
Hey J. Mark, you can dissolve the Delaware LLC (www.llcuniversity.com/delaware-llc/dissolution/) and then form an LLC in your home state. All state guides listed here: www.llcuniversity.com/50-state-llc-guides/. Hope that helps.
I'm in the same boat, but I'm wondering if it's worth the hassle of dissolving the LLC and restarting it in my home state or just continuing to operate in Delaware.
Does this apply when your business is selling an app? People from any state can download/buy your app. Does this count as doing business in your state of residence?
Yes, it still applies. If you run the business from your home, you are conducting business in that state.
Hi matt! I have to change my commercial registered agent. Which kind of form I gonna a fill to the state of new Mexico.
Hi Zubair, you can change this online: portal.sos.state.nm.us/BFS/online/OnlineDashboard - After logging in, click on Corporations > Registered Agent Change. If you have any questions, you can call the NM Secretary of State at 505-827-4508.
So what do you do if you already formed an LLC in Delaware?
In my case, the LLC was formed just to hold some patents, and to pay the patent fees it gets income from treasury bills interest. (Just enough to balance out the expenses).
So if I'm paying the taxes in my home state California, does it really matter? Should I dissolve the Delaware LLC and make a new LLC just to fix this?
No need to change things up if it's working.
Your example is only problematic because the individual in the example happens to live in Connecticut, which is one of the highest possible tax states in the Union.
Hi Nicole, I see your point. However, the issue is also problematic because most states have penalties for failure to file as a foreign LLC.
@@llcuniversity Indeed, foreign LLC filing is a must. I quite enjoy your videos, and just wanted to comment on what I saw as a glaring issue, but, again... keep up the great work
@@nicoleroesler1451 - Thanks so much Nicole! :)
thanks for the video. What about if you are a foreigner, living abroad and want to open LLC in the US, does it make sense to open one in Delaware?
Hi Algirdas, apologies for not being clear in the video. The video is really speaking to US residents. Non-US residents can pretty much pick any state they'd like, unless they are actually "transacting business" in a particular state. Then it would usually make the most sense to form there. Hope that helps.
You think if that Trucker had set up his trucking administrative office in Delaware... he would have avoided being denied his application and got to keep his 20,000 dollars?
I think there were more issues than that, but no, he should have formed the LLC in Pennsylvania since that's where he was legally doing business.
Mya G. Good the example with trucker is not clear at all and he didn’t explain the situation.
Thanks for the feedback Kirill. I'll make things more clear when I record an updated version of this video. Thanks for your comment.
Question, I'm a foreinger wanting to open an online store to target the US market. I read online that a foreinger not living in the US could create an LLC in delaware. Since I don't live in that country, can I create it there so i can sell in the US? I'm not a resident of any other state, so i won't have that problem you were mentioned.
Hey Danny, you are correct. You can form an LLC in Delaware, or in any state you like.
I filed LLC in Delaware in 2010 before I get married and moved to NJ in 2012 so end up with NJ foreign LLC. How do I change NJ foreign LLC to NJ LLC and dissolve my Delaware LLC? These Covid 2 yeas! I try to save money on franchise tax so I can pay more small bank loans, any suggestions appreciated
New Jersey has a process called domestication. You can file Articles of Domestication to change the jurisdiction from Delaware to New Jersey. It's a bit of a complicated process though, so we recommend hiring an attorney familiar with the process, both in NJ and DE.
...what about online businesses with no physical offices..?
Hey Chris, we've covered those details on this page: www.llcuniversity.com/best-state-to-form-an-llc/. Please look towards the bottom of the article. Hope that helps!
I'm a freelancer who works online. Would it be better to form LLC in Delaware since I don't have a physical location?
What state are you a resident of? Where do you work from? What state do you pay taxes in? It's likely your home state, which is where you would legally be doing business. That's the best state to form an LLC in. We have another video on our channel about this: ruclips.net/video/0fybY3s2Lkc/видео.html
@@llcuniversity ok so online business an turo, Oregon residency, drivers license. But I want to get a domestic llc setup in delaware. Is it possible if I pay my taxes to Delaware?
@@Gunterforever - Taxes will be paid in your home state, not the state where the LLC is formed. Hope that helps.
@@llcuniversity ok so the only way around it is actually having a delaware license an place of residency. But you can stay anywhere, an if asked why you are in a different state, you are just there visiting 🤷♂️
@@Gunterforever It comes down to actually be a resident... not just looking like one. If you are audited, just saying you are visiting isn't going to work.
What if your home state is a state where there is no state taxes eg. Texas and business is done online?
If you are running your business out of Texas, it's considered to be doing business there. Hope that helps.
What if I want to do create a LLC from delawareinc for a creating a Striping account? I'm from Europe. What do you suggest?
Hi Tracy, Delaware and Wyoming are the two most popular states for non-US citizens/non-US residents. Also keep in mind, if you're visiting the US to open a bank account for your LLC, Delaware is a cheaper flight... however, the the annual fees in Wyoming are cheaper... so it's something to consider.
Thank you for answer! What are the Delaware and Wyoming annual fees differences?
You're welcome Tracy :) Instead of listing the fees in the comments (since they do change from time to time), check out this page (which we can more easily keep updated). It shows the filing fees and annual fees for all 50 states: www.llcuniversity.com/llc-filing-fees-by-state/. Hope that helps.
Thank you very much! You helped me a lot!
Awesome! You're welcome :)
Hey man, great video! I live in Virginia, and would like to provide a car key cutting service online. It's complicated to get a locksmith license in VA, so my idea is forming an LLC in another state where it's easier, and using that to gain access to the tools that require a locksmith license. I would have to ship and receive key packages in VA. Would this legally work?
I'm not sure and cannot answer legal questions. There are too many nuances re: the industry and your license that I know nothing about. Apologies I couldn't be more helpful man. If you form an LLC out of state though, you'll be required to register that LLC in VA since that's where you're doing business. Although getting your license is tedious, it might actually be less work in the long run to just do it all properly in VA.
If plan to do business in multiple states, including my home state, recommend Delaware LLC?
What type of activities are done in the home state vs the other states?
Both Legal Services and commercial business consulting in home state and other states
@@afnuff1284 - That probably doesn't warrant "transacting business" in the other states. However, if you are primarily running things from home/home state, very likely to be considered to be transacting business there. You could also form an LLC in Delaware and foreign qualify it in your home state.
Never doing that again.
LOL!
Thanks very much for the video! However, what about non-US residents?
You're welcome Sasha. Yes, this video only applies to US residents. Non-US residents can pick any state. We recommend picking a state where you'll actually be doing business (if you'll be in the US doing business physically). If not, Delaware and Wyoming are the most popular choices. Hope that helps!
Thanks for that. You say an LLC is a pass-through entity but this only applies if it's a S-corp?
You're welcome. An LLC has pass-through taxes in the following scenarios: Default Single-Member LLC (LLC taxed as Sole Proprietorship), Default Multi-Member LLC (LLC taxed as Partnership), and LLC taxed as S-Corporation (regardless of # of owners). An LLC is not pass-through if it elects to be taxed as a C-Corporation. Hope that helps.
is this applied on hedge funds, i'm not us resident, and I want to open a hedge fund in the us. any advice for me thanks ^^
Hi Otman, as a non-US resident, you can likely create your entity(ies) in any state you'd like. We don't specialize in hedge funds, but hedge funds are often structure using multiple entities. For example, a Limited Partnership (or a Limited Liability Partnership) and an LLC.
i live in Europe and i do e-com in the U.S market. Should i stick with llc in Delaware or open it in Europe ?
the videos does not cover this topic.
Hey there, you can pick any state you'd like. Although, it may be helpful to "work backwards" from the bank account. More banking details for foreigners here: www.llcuniversity.com/foreigners/open-us-bank-account-llc-non-resident/. Hope that helps.
What if I live abroad?
Hey Deilur, apologies that we didn't mention non-US residents/citizens in this video. In this case, you can pick any state. Keep in mind though, that if you're going to open an LLC bank account, you'll need to physically visit the state where the LLC was formed and open a bank account there. We have some tips on LLC baking here: www.llcuniversity.com/business-bank-account-for-llc/. Hope that helps!
@@llcuniversity very helpful! i was crying while i was watching the video and you make me smile again after read this comment, i live in algeria and i want to register an LLC in delaware! thank you so much for the video
@@newthinking5850 - You're welcome! We'll soon have videos specifically for non-US residents. After your Delaware LLC is approved, you can get an EIN from the IRS (without an SSN) following these instructions: www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/. And here is info on getting a U.S. bank account for your LLC: www.llcuniversity.com/foreigners/open-us-bank-account-llc-non-resident/. Hope that helps!
U don't have to open a bank account in the same state.
@@togoni - Most of the time you do. Did you work with a bank that let you open up an account in a state where your LLC wasn't registered? If so, which bank and in what state was it?
What if I'm from a neighboring state (MD) and I don't have any LLC? If I wanted to start a LLC in DE, could it become more beneficial or legit?
Your LLC would still be doing business in Maryland it would need to be registered as a Foreign LLC in Maryland: www.llcuniversity.com/what-is-a-foreign-llc/
I think my comment got deleted or something. I was asking what if you have a car rental company? If the cars are outside Delaware you can just say that the renters traveled there and not really *are* there.
Hi Dan, you'll want to look into what it means to be doing business. Having cars and a physical presence it certainly doing business in those states.
I'm not sure if anyone will reply, but I'll try. I have an e-commerce business, and operate make
my income primarily from Affiliate marketing through video and website
links. I do not hold or sell any physical products, and I do not receive
money for those products directly from the consumer. I live in
Pennsylvania. In addition to potential tax breaks, I am having problems
selling photography supplies (ex. B&H) because they do not accept
affiliates from Pennsylvania due to the Nexus Tax (which I don't fully
understand). My parents have a home in Delaware. Would it be legal and
beneficial to post their address as my business address? Thank you!
Hey there, would be a good idea to have a conversation with a tax attorney on this. If you form an LLC in DE, you'll likely end up apportioning your income and paying PA tax anyway. You'll need to dive into the details with someone.
@@llcuniversity Sounds good. Thank you for replying.
Hey what should i do of i actually do businesses in other states
Depending on the level of activities in those states, you may need to register your current LLC as a "Foreign LLC" in those states.
As non-US residence, which state please you advice me to create a single membership LLC, and which state is low taxes for single membership llc?
Hi Kareem, if you don't have physical activities in a particular state, then you can pick any state you'd like. We're not able to tell people "this is the best state" because that can vary depending on the details. You can find the costs of each state here: www.llcuniversity.com/llc-annual-fees-by-state/
@@llcuniversity Thanks a lot man.
So if you're foreign to the U.S. where should you set up your entity at? and Do you have to set up an entity in each state you're going business in?
Hi Barukh, we don't have a "this is the best state" answer for non-US residents. If you don't have a physical location or employees in the US, you can choose any state you'd like. "Doing business" or "transacting business" doesn't mean it's where your customers are located (it sounds like that's how you're interpreting it).
We have more info for non-US residents here:
www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/
www.llcuniversity.com/foreigners/open-us-bank-account-llc-non-resident/
www.llcuniversity.com/irs/form-5472-foreign-owned-llc/
@@llcuniversity Thank you. If I live in one state and my initial setup is in that state; What is the process for expanding that business to other states? Also... Do you know anything about setting up Indigenous businesses?
@@KingBlessed1 - Hi Barukh, what do you mean by an indigenous business? I don't think I'm familiar with the term. And what do you mean by "expand"? What kind of business is this/will this be?
Question: what do i do if i live in nyc but i do real estate investing in florida? I do remote real estate investing. Does this mean i am restricted to just do business in ny?. What are your thoughts?.
An LLC is supposed to be formed and/or registered in the state(s) where it is transacting business. This sounds like you are doing business in NY and FL. There are many ways to go about this. Speaking with an attorney and/or accountant may help you decide. You can form an LLC in New York and register it as a Foreign LLC in Florida. Inversely, you can form an LLC in Florida and register it as a Foreign LLC in New York. You could also form an LLC in New York (owned by you) and then form an LLC in Florida (owned by your New York LLC). Hope that helps.
@@llcuniversityUniversity wow that's awesome. thank you for that! I will definitely take that into consideration. Do you have any videos or any information on LLC formation on foreign entities or LLC formation without using a social security number? thanks in advance
@@reklessevilkid - We don't have videos on foreign LLCs (not to be confused with foreign-owned LLCs), but we do have information on our website: www.llcuniversity.com/what-is-a-foreign-llc/. And you don't need an SSN to form an LLC. Are you referring to getting an EIN from the IRS for your LLC without an SSN? If so, that can be done. We have information on that here: www.llcuniversity.com/irs/how-to-apply-for-ein-without-ssn/. Hope that helps :)
I don’t live in Delaware so how would I form llc there with no address?
One could hire a Registered Agent in Delaware and list their address.
@@llcuniversity i got a virtual address
@@x.Zialogy That's okay. You can just enter that address. The process is the same as if it were a home or an office.
Am I able to dissolve the original LLC in Delaware after I open the foreign LLC In another state?
No, that won't work. A foreign qualification just qualifies the original LLC to do business in the 2nd state. Said another way, there is only just 1 LLC. When you foreign qualify, you register that LLC to do business in another state. If you dissolve your domestic LLC, then there is no LLC anywhere.
@@llcuniversity Good to know, thank you for the reply!
@@jakethomas8864 - Sure thing, you're welcome :)
what happens with people outside of the US who create an LLC in Delaware?
Hi Xavier, non-US residents have more flexibility, especially if they don't have a physical presence in the US. They can form an LLC in any state they'd like. Hope that helps.
excellent
Thanks!
Hi , I am from Tunisia , and I want to know more about the relation between Stripe Atlas and Delaware , why they promote so much this state , does Stripe make a long-term scam?
Stripe Atlas is mostly geared towards high-growth technology companies with an intent to raise outside funding. They typically form a Delaware Corporation which then registers to as a Foreign Corporation in California.
LLC University thank you so much , from tunisia 🙏🏻
It's still cheaper to form a LLC in some state other than Florida, which basically requires ppl to have office space if ppl do not own homes. Stupid.
Hi Teisa, which Florida requirement are you speaking of? I haven't heard of this.
Hi what about if you live in Canada and meet open a company in the US?
Hi Alexandre, it's best to discuss this with a tax attorney. Typically, Canadians that directly own US LLCs are "double taxed"; once by the IRS and again by the CRA. Hope that helps.
But what if I'm a non U.S resident?
Hi Sam, as a non-US resident, if you don't have employees, physical presence, or physical activities in a particular state, then you can choose whichever state you'd like.
How about if you operate your business from abroad?
If you're a non-US resident, don't have a physical presence in the US, and don't have employees in the US, then you can pick any state you'd like.
@@llcuniversity thank you for your reply, I'm a US citizen but I don't reside in the USA but I have an address there for my mail and driver's license.
@@wombbliss - I see. If you'd like, you can form your LLC in the state where you have an address or you could pick another state.
Thank YOU so much for THIS! Just curious about the anonymity when it comes to forming an LLC. That was the main reason we were looking at possibly forming an LLC in another state (not for tax purposes). An anonymous LLC in Ohio was formed, but not sure if that is sufficient for anonymity. Can you further explain on how to go about anonymity?
Hey Angela, there's a lot to unpack here. Too much for a comment reply. If you want to zip a message through our website contact form, might be able to offer a bit more there. Please make to explain your intent and your why in that message. There's many ways to go about structuring these things.
For anonymity yes its a great way to do it. Most celebrities have Delaware LLC for that reason.
@@buffchickadee - Thanks for your comment Kristal. After making this video, I realize I could have done a better job discussing this. We have more content planned to address things like that. Thank you.
@@llcuniversity I think for reasons you may have stated it wouldn't be worth doing an LLC in Delaware. Asset protection is great for Delaware LLC. For privacy and unpenetrateable LLC can be a huge benefit as protection. Looking forward to other ways you may find this Delaware LLC is beneficial.
@@buffchickadee - This video was a bit rushed, to be honest. It didn't cover all use cases. There are many "lenses" to look through. It was initially just meant for average small business owners who usually get led to form an LLC in the wrong state without understanding the big picture... like foreign LLC registration, apportioning state returns, and more. As a company grows, if it takes payroll, that needs to be done where employees are. There's also non-US residents, which is a whole different case. Then there's more advanced real estate investors looking to setup parent/child LLCs. We're doing a better job with content on the site, but "where should I form an LLC" is just a complex matter. We're getting there though. Again, this video was a bit rushed, only speaks to one audiences (but I didn't do a good job explaining that), and there's more to the picture. It's challenging from the producers view. Thanks for listening :)
Hello my lawyer told me to file a LLC in Delaware. She is a entertainment attorney. I manage artists and producers.
What state do you reside in and where do you mostly work from? Please see the "best state" video for more information: www.llcuniversity.com/best-state-to-form-an-llc/
LLC University I’ve already formed the LLC. But I live and work mostly in New York although all my transactions are done via Instagram, PayPal, cash app etc. I haven’t had any meeting or done any deals in New York yet just online transactions with artists from all over even in London. All I do is manage producers and shop their beats and handle their publishing.
I see. Well you are technically transacting business in New York and if you have a Delaware LLC, it's supposed to be registered as a "foreign LLC" in New York (www.llcuniversity.com/what-is-a-foreign-llc/). Doing business online doesn't affect this. The states don't care. You are running everything from New York and are therefore transacting business in New York. I'm saying you'll get caught. There is a chance. But it's technically not correct. Hope that helps.
LLC University thank you I will make sure I register my management company as a foreign llc in New York.
You're welcome :)
What if I’m just across the river in PA?
Hi Sean, if you're doing business in PA, the Delaware LLC would still need to be registered as a foreign LLC in PA: www.llcuniversity.com/what-is-a-foreign-llc/