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Can I Register My LLC in a Different State?

Small business owners have increasingly become the backbone of the American economy. Entrepreneurs often confront a common question when setting up their business structure: can I register my LLC in a different state?

If you live in a state with high tax implications and are planning to start an LLC, registering it in a different state may save you money and resources. However, the procedure of registering a company out of state is not easy. There are several requirements and compliance issues that you need to consider. This article aims to clarify this question for small business owners and budding entrepreneurs.

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Can I Register My LLC in a Different State?

Yes. You can register your LLC in a different state if you comply with the laws and regulations of both states.

Understanding the Difference: Domestic LLCs vs. Foreign Entities

If your LLC is set up in your home state, it's known as a domestic LLC. However, if you wish to do business in a new state other than your home state, your LLC becomes a foreign entity in that new state. For instance, if you formed an LLC in Texas but want to do business in California, your LLC would be a domestic entity in Texas and a foreign entity in California.

Why Register in a Different State?

Some entrepreneurs may find a better business location or lucrative real estate opportunities in a different state. It may be strategically beneficial to have your LLC registered in such states. Different states have varying tax rates and regulations. States like Delaware or Nevada are popular for their friendly business income tax policies. 

Small business owners often consider the potential savings on state income tax, state tax, and other federal taxes overseen by the Internal Revenue Service (IRS) when deciding where to register.

If your desired business name is taken in your home state, registering in a new state might allow you to use that name. For this reason, some business owners choose to register their business in a different state.

What Are the Requirements of a Foreign LLC?

If you decide to register your LLC out of state, you should note that you will be considered a foreign LLC. As a foreign LLC, you must file for a certificate of authority and pay the required registration fees. Depending on the state, you may also need to pay state taxes like corporate and franchise taxes.

Registering Your Business in State vs. Out of State

The following table compares the implications of registering your business in-state versus out-of-state:

Incorporating in state

Incorporating out of state

  • Relatively straightforward process
  • Can be a complicated process
  • The company is incorporated and is conducting its business in one state. You only need to comply with the laws of that state.
  • You need to comply with the laws of both the state of incorporation and the state where the company conducts its primary business.
  • The registration process may be more expensive
  • The registration may cost less depending on where you incorporate the company
  • Pay taxes only in one state

 

How To Register an LLC in a Different State

Before forming an LLC, ensure your chosen business name is available in the new state. It should be unique and distinguishable from existing names in the secretary of state's database. State law often requires businesses to appoint a registered agent in the state where they're operating. This agent receives official papers and legal notifications on behalf of your LLC.

You must file the Articles of Organization with the secretary of state in the new state. There's typically a filing fee associated with this which may vary by state. You will also want to get an employer identification number (EIN) from the IRS. This number is crucial for tax purposes. It's akin to a social security number but for your business.

You will also need to get a business license, depending on the nature of your business and the state you register in. Most states require businesses to have a business license to operate legally. 

While not always mandatory, you might also consider drafting an operating agreement. An operating agreement outlines the internal operations of your LLC. It's beneficial for clarifying roles and responsibilities within your business. For more information, visit FindLaw's Checklist for Starting a Limited Liability Company (LLC).

States Considered Business-Friendly for Foreign LLCs

Most people consider the following states beneficial for out-of-state businesses to register:

  • Delaware: Over one million corporations are incorporated in Delaware. Companies choose Delaware as a haven for incorporation because Delaware has an advanced and flexible General Corporation Law. Delaware also has low initial filing and franchise fees, assistance for new business owners, and highly accommodating business entity laws.
  • Wyoming: Registering your business in Wyoming has a number of advantages including no state taxes, low start-up costs, and no U.S. citizenship requirements.
  • NevadaRegistering your business in Nevada has numerous advantages, including no franchise or corporate taxes, low registration fees, and strong privacy protection for business owners.

Consult an Attorney if You Are Planning To Register Your LLC Out of State

If you plan on registering your LLC outside of the state where the LLC conducts its business, you need to comply with the laws of both states. Therefore, it is important to consult a business law attorney in both states to ensure your LLC runs smoothly. They will understand your type of business and offer sound legal advice, especially if you plan to register in multiple states.

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