My answer to I’m getting ready to form my business as an LLC. Where should I form given the factors below?
Answer by Raad Ahmed:
The rule of thumb for business formation (as others have indicated) is that it’s usually best to form in the state that you will be doing business. However, there are other factors to consider as well. Let’s take a look at a few.
- Formation fees—While this isn’t a huge consideration, it is a consideration nonetheless. When you decide to incorporate in a state, make sure that you know the bottom-line cost of the one-time formation fees. Some states have incredibly low fees while others have considerably higher ones. Again, not a huge deal, but something you should evaluate as you make your decision.
- Costs and complexity of annual fees-Most states require an annual filing fee to maintain your LLC or corporation and several also require an annual report. States vary on their requirements in the report as well as the annual cost. This is definitely something you will want to be aware of as you move forward.
- Franchise taxes—Some states require that you pay for the privilege of doing business in their state. Sometimes this is even in addition to the annual fees.
- Prime location for investors—Investors can be a much bigger deal than the state fees you will incur. Delaware is certainly an attractive location for investors, but it is not the only location that investors are willing to work with. However, it may be easier to attract an investor if you stick with a location that they are already drawn to.
Of course, there are many, many considerations when you think about the best location for formation. The best bet? Contact a business attorney to help guide you through the process.is happy to help you. We connect startups with quality attorneys. We provide cost-effective flat rates and flexible scheduling to better suit your need. I invite you to check out our website to learn more about our services. Let us know if we can help!