When forming a Limited Liability Company (LLC), not all states will treat you kindly. What it comes down to is the restrictions and benefits they provide under their jurisdiction. Some states offer more legal protection for a limited liability company, while others offer operational benefits.
So what are the best states for LLCs? I have to tell you, there are plenty of advantages for forming an LLC within your home state. But they will likely pale in comparison to places like Nevada, Texas, or Delaware. You may also be interested in our article, Anonymity & The LLC: States Where Business Owners Love The Laws.
Certain states, like those mentioned above, optimize their internal legislation to be extremely business friendly. And why? Because the filing fees for establishing an LLC generate huge revenue for these states. It's almost like a contest since an LLC can be established in any state whether you live there or not.
Now then, let's go over the 3 best states to form a limited liability company, starting with Texas-—where everything really is bigger (especially the asset protection).
The main benefit of forming a Texas series LLC is the management fees. Or should I say, the lack of management fees.
LLCs are required to produce a significant amount of legal documentation to be fully covered from an operational standpoint, such as taking meeting minutes.
In Texas, companies can bypass this costly annoyance without losing their legal protection. This will make your life a thousand times easier and also improve your chance of beating a potential lawsuit. (Something you definitely want to make sure you do.)
You can read about Texas LLC laws directly on the state's website.
Next up is Nevada. The place nobody would visit if it wasn't for Las Vegas. (Just joking.)
Unlike Texas, companies formed in Nevada have two major benefits instead of one. These may seem more enticing than the benefit provided by Texas. However, they're merely operational benefits and do little in the way of fully covering you from lawsuits.
The best thing about forming an LLC in Nevada is the lack of taxes. Nevada LLC's don't have to pay any state level taxes, from corporate to personal.
There's also the privacy to consider. If you form your LLC in Nevada you won't have to disclose who the owners are. Needless to say, many shady individuals form an LLC in Nevada just for that reason alone.
So yeah, you might just want to move to Nevada to do business. You'll get over the year-round heat before you know it. And you might even pick up a gambling habit or two with Las Vegas being so close.
Learn more about forming an LLC in Nevada by speaking with Royal Legal. Anyway, enough talk about
glorified deserts Nevada. Next up is Delaware!
You may have heard about the excellent business terms provided by Delaware. When it comes to legal protection, the key benefit in Delaware is the Chancery Court.
The judges presiding over this court specialize in business law and are known to provide fair rulings. Just remember this won’t help you if you don’t have proper legal coverage or haven’t maintained your records correctly.
Also worth mentioning is that Delaware provides some of the same operational benefits as Nevada. You can learn more about forming an LLC in Delaware on the state's handy website.
So which state do you think is best for forming your LLC? Tell me in the comments below, I'm always interested in hearing your perspective!
Do you need personalized advice on the best state for forming an LLC? Get in touch with us! Or see my article on the Best States To Form LLCs for Real Estate on BiggerPockets.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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