Should a business be formed in or out of state?

Forming your business out-of-state while doing business in your state leads not only to double-taxation. It leads to double-compliance too. If you register in another state but intend to do business where you live, then you will have to register your company in both states.

Is Delaware a business friendly state?

Delaware is particularly attractive financial companies, due to its business-friendly usury laws and light taxation. A Delaware corporation can base their headquarters in any U.S. state, where they are then exempt from state corporate income tax in many cases.

Why is Delaware law preferred?

The DGCL offers predictability and stability. It is shaped by corporate-law experts and protected from influence by special-interest groups. The Delaware legislature every year reviews the DGCL to ensure its ability to address current issues. The DGCL is also an enabling statute.

Why do companies domicile in Delaware?

There are two major reasons for Delaware’s dominance of the corporate incorporation business. The other major reason corporations choose to incorporate in Delaware is the quality of Delaware courts and judges. Delaware has a special court, the Court of Chancery, to rule on corporate law disputes without juries.

Can an LLC do business in other states?

An LLC or a corporation is “domestic” in the “state of organization,” or the state where it started. A foreign LLC or corporation may have to qualify to conduct business in another state if its business transactions meet certain requirements.

Where should I form my business?

To form a corporation in California, Articles of Incorporation must be filed with the California Secretary of State’s office.

Do LLC pay taxes in Delaware?

Delaware treats a single-member “disregarded entity” as a sole proprietorship for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the State of Delaware.

Why do startups incorporate in Delaware?

The primary reason that the tech startups I work with incorporate in Delaware is finance. Venture capital firms typically require companies to be structured as a Delaware corporation as a condition of funding the company. There are scenarios where a Delaware corporation is not the ideal entity type for a startup.

Can I live in California and have an LLC in another state?

Yes, a California resident can form a limited liability company in a different state.

Is your out of state LLC doing business in California?

The State can impose a penalty of $2,000 per taxable year if an out-of-state LLC is doing business in California and fails to file a tax return and pay the taxes and fees due. Such non-residents may owe taxes on pass-through income sourced from an LLC’s California activities despite their non-resident status.