Best State to Form LLC for Online Business
By Bazal Razzaq
Chief Editor
Updated: November 21, 2023
Editorial Note: We earn a commission if you use the services recommended on this page. Commissions do not affect our opinions or recommendations.
- How to change your LLC name in 2023?
- How to set up an LLC as a Non-US resident
- What Is A Foreign LLC?
- Mastering the Art of Maintenance: Things To Do After Setting Up An LLC
- Exploring the Basics: What is a Single Member LLC?
- The Power of Partnership: Unleashing The Potential of A Multi Member LLC
- C Corp vs LLC – Which Business Structure is Right for You?
- A Guide to Business License: Everything you need to know
- Unlocking the Benefits of an LLC (Limited Liability Company)
- Which is the best state to form an LLC in?
- Operating Agreement 101: A Key To A Successful LLC
- One LLC, Multiple Streams of Income: can you have multiple businesses under one LLC?
- Articles of Organization Made Easy: Everything You Need to Know
- What Is A LLC Annual Report: A Comprehensive Guide for Business Owners
- Exploring Eligibility: Who Can Be LLC Members?
- What Is A Domestic Limited Liability Company?
- What is An EIN, and Do You Need One?
- What is a Series LLC?
- Member Managed vs Manager Managed LLC – Which Structure Fits Your Business?
- How to start your dog walking business
- Entrepreneurship Has No Age Limits: Can Minors Form an LLC?
- How to Open A Flower Shop
- Will Social Security Number Work As An EIN For An LLC
- How to Start a Nail Salon Business: The Only Guide You Need
- How to Start a House Flipping Business
- How to start a Laundry and Dry Cleaning Business
- Annual Fee for every state in US (Part-1)
- Annual Fee for every state in US (Part-2)
- Annual Fee for every state in US (Part-3)
- How to Start a Home Rental Business
- How to start a Pharmacy Business
- What are the Benefits of 1099 Contractor in an LLC
- How to file LLC Taxes
- How To Dissolve An LLC In 6 Steps
- How to Open a Tanning Salon
- What is a DBA
- How to File a DBA
- How to get an Alabama DBA
- How to file an Alaska DBA
- 10 Steps to Start a Catering Business
- How to file an Arizona DBA
- How to file an Arkansas DBA
- How to file a California DBA
- How to file a Colorado DBA
- How to file a Delaware DBA
- How to file a DBA in Florida
- How to file a DBA in Georgia
- How to file a DBA in Hawaii
- How to file a DBA in Idaho
You must be wondering what is the best state to form LLC for Online Business. Don’t worry, we have got you covered. An entrepreneur starts a limited Liability Company to protect the business against any liability and provides tax benefits.
Why should you form an LLC for your online business?
Formation of an LLC for your online business comes with many benefits. It is a quick and easy process. Many states permit you to apply for an Online LLC. Following is an overview of the best state to form LLC for Online Business.
- Easy Formation
- Low cost
- Flexibility in Taxation
- Personal liability protection
- Flexibility in Ownership
- Flexibility in Management
- Flexibility in Distribution
- Protect owners privacy
- Improves Business Credibility
What is the best state to form LLC for Online Business?
The best state to form LLC for online business depends upon two things:
- Business Goals
- Specific Needs
Following is an overview of why you should first consider your home state and then a few other states.
Home State-
Your home state is always the best state to form an LLC for your online business because it simplifies administration. It allows you to act as a registered agent if you are free to work during regular business hours. Forming an LLC in the home state is actually the best option for most of the entrepreneurs. It provides dual benefits; cost-effective and simple to set up.
For example:
If you register an LLC in Wyoming but don’t live there, you will be required to register that Limited Liability Company in your home state as a Foreign LLC to do business in the home state. The state that promotes the formation other than your home state stands to benefit financially from the LLC formation.
Delaware-
Since Delaware is a Business-friendly state, some business owners choose to form an LLC in Delaware if they wish to convert the LLC into a C-corp. It doesn’t tax out-of-state income and provides an option for online businesses.
Online business owners choose Delaware to form an LLC because they receive the benefit of increased privacy protection and better legal protection as compared to other states. The Delaware Court of Chancery was established to deal with business legal and corporate issues. Delaware LLC state allows business owners to protect their identity.
Wyoming-
Wyoming’s lower tax rates are an attractive option to form a limited liability company for your online business. It includes no income tax or franchise tax. Even sales tax is lower than the national average at 4%. You will be required to pay $60 annual reporting fees.
One more benefit of forming an LLC in Wyoming is that the state permits LLC owners to be anonymous on the public record. This is a relief for those business owners who want to remain private and don’t want to relate their business with their names.
Nevada-
If you are someone who values privacy, Nevada is the best state to form an LLC and remain anonymous during public filings. There is no need to have an information-sharing agreement with the IRS to protect your privacy.
Nevada doesn’t impose any capital gains tax, inheritance tax, income tax, or franchise tax. You don’t have to submit an LLC operating agreement. Nevada’s LLC is subjected to corporate veil laws to protect individuals from company liability.
New Mexico-
New Mexico has the lowest state filing fees in the country with no annual reporting requirements or annual renewal fees. All you need to do is pay $50 to form an LLC for your online business. It offers the same anonymous LLC state privileges such as allowing business owners to protect their privacy. If we consider low cost and privacy protection then New Mexico is the best state to form LLC for online business.
Things to consider while choosing the best state to form LLC for online business
The best state to form LLC for online business is your home state. If you are still considering forming an LLC outside your home state, there are some key factors you should consider to decide which state is the best fit for your business.
Domestic LLC or Foreign LLC:
Selection of the right type of LLC is tough when considering the best state to form a Limited Liability Company for your business. A domestic LLC is usually formed in the state of its operation while a foreign LLC is formed in one state and can do business in another. In case you have formed an LLC in one state that isn’t your home state, you will be required to register the online business in your home state as a Foreign LLC to run the business there. It involves additional cost and work which isn’t worth the benefits.
LLC Formation and Annual Filing Fees:
Fees are an important factor in considering the best state to form an LLC for your online business The annual filing fee is $800 (in California) or $300 to $350 in other states including Nevada and Delaware. This cost is considered while forming the business. In case you want to operate a foreign LLC in another state, you will have to pay an annual filing fee in both states.
Tax Rates and Regulations:
Tax rates and regulations play an important role in considering the best state to form LLC for online business. You must consider franchise tax, sales tax, corporate tax, and capital gains tax to have the best business climate for your company.
Legal and Liability Protection:
Most of the business owners form an LLC to have legal and liability protection. Many states offer different levels of protection to business owners. It is necessary to consider the liability protection structure and privacy protection while considering the best state to form LLC for online business.
Featured Best LLC Services
Northwest Registered Agent
On Northwest Registered Agent’ Website
Highlight
IncFile
On IncFile’ Website
Most Comprehensive
Business Rocket
On Business Rocket’ Website
Frequently Asked Questions (FAQs)
An LLC can be formed in a state where the business owner doesn’t reside. All you need is a registered agent and a registered office in the state where you establish the LLC. If you want to operate the LLC in your home state, you will be required to register as a foreign LLC in your home state.
The LLC can be legally transferred to another state after its formation if it is well established.
An LLC can be registered to perform business in several states at the same time, so you can run your online business in many states.
A physical address is needed which is often called a registered address in the state where you form the LLC. A registered agent can be hired to give the physical address in case you don’t have an office in the state.
Yes, you should meet state-specific regulations and licensing requirements for an online business. Some products like firearms, pharmaceuticals, alcohol, food, and professional services like medical or legal advice require a license. You may be required to have a home-based permit, professional license, sales tax license, or general business license. It must be checked with the Secretary of State to understand specific licensing requirements.