Why (not) form an LLC in Nevada (or Wyoming)?
Questions about forming a limited liability company (LLC) in Nevada (or, increasingly, Wyoming) come up so frequently – the last time, yesterday – that I feel compelled to write about this topic.
There is something approaching the status of urban legend about the wisdom of forming LLCs in a state that does not have an income tax. The problem is that lack of an income tax will benefit you only to the extent that you do business in in that state!
Let’s say that you live, and intend to do business (in the legal sense – see Doing Business in CA? Be Sure to Register), in California, but you form your LLC in Nevada or Wyoming. Guess what: Because you are doing business in California, you will have to pay income tax in California. Furthermore, you will have to register your LLC in California as a foreign LLC. The result: You will not have escaped paying income tax, and will have to pay the two states’ annual business fees!
The bottom line:
- Form your LLC in Nevada or Wyoming only if that is where you will be doing business.
- If you will be doing business in another state, that is where you probably should form your LLC.
- If you will be doing business in multiple states, work with a knowledgeable tax adviser – multi-state tax issues can be tricky.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.