If your home state has a high corporate income tax or high state fees, and you will not “do business” in your home state, it may be wise to form your LLC in a tax-free state.
There are two main reasons people usually to organize in a state other than your home state: Taxes and Corporate Laws.
- Nevada and Wyoming do not have a corporate income tax.
- Delaware does not tax business activity conducted out of state.
- All three of these states have established corporate codes that have been tested by their State courts giving legal certainty.
For passive investment holdings, for example real estate, and other businesses in which you will not be "doing business" in your home state, Nevada, Wyoming and Delaware make excellent choices.
Additionally, Nevada, Wyoming and Delaware are known for their business friendly laws. Wyoming passed the first LLC statute in 1977 and has set the model that other states follow for operation of LLCs. Similarly, more publicly traded companies are registered in Delaware than anywhere else. Also, Nevada has a strong history of privacy rights. Many businesses are formed in one of these three states despite the extra expense and administrative burdens because of the consistency of application of corporate laws.
