Choosing the Right State for Your LLC
When you decide to start a limited liability company (LLC), you can choose to form your company in any state, regardless of where you are based. But in most circumstances, your home state is going to be your most-effective option.
If I live and have an LLC in California but also work and do transactions in other states such as New York, Florida, Ohio, Texas, and Kansas, does that mean I need to get an LLC for each of those states as well? In general, you don’t have to form an LLC in every state in which you do business.
It sounds like you have an LLC in California, and I’m licensed here in Wisconsin, so I can only talk about Wisconsin law but talking about LLCs in general, each state has their own LLC law.
Some states offer LLCs more financial advantages than others, and that means you should carefully weigh your options before deciding which is the best state for your business needs.
LLC Recognition and Formation
Do all states recognize LLCs?
All 50 states in the United States recognize LLCs. Specific regulations and requirements for LLC formation vary by state. A single person can establish an LLC in most states.
The Advantages of LLCs
An LLC combines limited liability protection with pass-through taxation. It provides flexibility in management and has simplified compliance requirements compared to corporations. However, as LLC laws are less established than corporate laws, there can be greater legal uncertainty in some areas.
The first steps to forming an LLC are choosing a state to headquarters the business and choosing a name. Some states also recognize advanced LLC structures like Series LLCs, which allow for multiple businesses to be run under a single LLC.
LLCs allow members to protect personal assets from business-related liability. However, members are still liable for LLC debts, liabilities related to operating the business, and co-owner liabilities.
While most states do not restrict LLC ownership, some businesses like banks and insurance companies generally cannot be LLCs. There are special rules for foreign LLCs as well. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or part of the owner’s tax return.
Operating an LLC Across State Lines
Can a Florida LLC do business in other states?
Yes, you are allowed to operate a Florida LLC for any legal business in every state in the USA. Under the US Constitution, your Florida LLC is viewed as a legal “person” and other states cannot discriminate against it based on where it was born or incorporated.
If your company is conducting business in any other states than the state where you incorporated (or formed an LLC), then you need to register your business in those new states. This is often called “foreign qualification.”
When it comes to registering your Series LLC to do business in another state, also called foreign registration or cross-registration, you will face some challenges that other LLCs and business structures don’t.