A limited liability company, or LLC, is the same no matter the state. Once an LLC has been registered, the way it operates and handles taxes follows similar general guidelines. However, the exact way an LLC operates, and the details of its financing, differ from one state to the next. This means that details like specific tax regulations and requiring annual reports can make some states better than others if you’re considering an LLC. Here are some of the more beneficial states to consider for those that wish to register an LLC outside their own state of residence.
It should surprise no one that Nevada is a business-friendly state. However, the state does bring those wishing to register an LLC an annual filing and license fee. An upside that often outshines the annual fee is that there are no personal income, corporate income, or franchise taxes.
The amounts saved by not paying these taxes greatly outweigh the nominal annual fees paid out to the state to maintain an operating license. This is an ideal place to operate for those who don’t mind a desert location and remembering to file each year. LLC owners have the option to remain anonymous, and no annual meetings are required.
Wyoming shares some similarities with Nevada: no franchise, corporate, or personal income taxes exist for LLCs. However, in addition to this, Wyoming has one of the lowest sales tax rates in the country, rated 44th in the USA.
This makes it an excellent choice, especially for Wyoming residents. There are minimal reporting requirements for business owners compared to other states, and, if there’s a wish to remain anonymous, a lifetime proxy can be appointed for a Wyoming LLC.
Just like Nevada and Wyoming, South Dakota has no state income tax. It also has a zero percent corporate tax rate for LLCs that register as corporations, making it an attractive choice for this business class. Unlike other states, South Dakota does not require businesses that sell physical products to pay a business inventory tax. This makes South Dakota a wise choice for those businesses where the sales of actual goods, rather than services, make up most of their operations.
To register an LLC in South Dakota can be done entirely online on the secretary of state’s website, making the process easier and more accessible than in other states. There is no property or inheritance tax for residents, which only sweetens the pot for local entrepreneurs.
Delaware is a popular state for LLC formation for several reasons, with over 67% of America’s Fortune 500 businesses incorporated here. It has one the lowest filing fees and franchise taxes of any state in the country, and the filing process is fast and simple compared to other states, allowing businesses to get up and running quickly. For people with digital preferences, online filing of taxes and reports is also supported to make things faster, more convenient, and more efficient.
However, the biggest advantage of Delaware is the Chancery Court, a legal circuit devoted specifically to resolving business issues. The judges are also experienced in business, so rulings are fast and knowledgeable. Delaware also doesn’t require shareholders, directors, or officers to be state residents, making it one of the friendliest states in the country for out-of-state businesses.